The first thing you must understand about pitching your company to investors: A pitch is the equivalent of asking for a date, not asking for someone’s hand in marriage.

Too many entrepreneurs believe that, after their pitch is done, investors will whip out their checkbooks. But that’s not realistic. Instead, the goal should be getting your audience excited about your business, product, customers and team. You want investors to walk away thinking, “That is a business I would love to know more about.”

What’s the best way to pique their interest? A lot of first-timers think it’s enough to explain the science behind their product or service. Not true. Sure, investors will definitely want to understand the technology before they invest.

Before that can happen, investors must see three things:

»  A product or service that solves a problem

»  A big market for that new service or product

»  A team that can successfully run the business

Here’s how to deliver a pitch that successfully highlights all three.

The Essential Parts of a Pitch

The initial pitch should focus on the following:

Problem What problem does the product or service solve and for whom? Sometimes it is helpful to show an existing product or service, and then display your “new and improved” offering next to it.

Customer Who is your customer? Who has the biggest pain and is willing to pay to solve the pain? The pain can be ease of use, speed, functionality, price or availability.

Market How many potential customers are out there? That’s your total market. In addition to the total market, investors want to know: What is the No. 1 customer type within the market to target for sales? Why?

Help the investor understand how customers will be attracted in a cost-effective way. The days of launching a website or an app and hoping people find it are over. Show who and where the customer is and how to reach that customer at the lowest cost per unit possible.

Also, the sales strategy cannot be social media. Social media is akin to turning the lights on in the office—not worth mentioning. The business has to have a clear and defined strategy to find and convert customers.

Competition How does the product or service compare to competitors? Remember that sometimes the status quo is your competitor.

Management Team and Advisory Board  Make sure to focus on the management team’s accomplishments, not just titles. If your director of business development grew the sales at her last company from $4 million to $16 million in two years, highlight that fact!

An advisory board has no fiduciary obligations to the company and is basically a group of people who will serve as mentors. When a business is just starting out, though, the board’s members can lend credibility, especially if they’re leaders in their industries or communities.

Milestones Where is the business in its development cycle? Is the product in beta or alpha, or has it launched? How many customers? How much revenue is earned currently per month? When will these things change?

This section helps investors understand how “real” the business is, how long the investment will last and how their money would be put to use.

Financials The most important elements of the financials are volume and revenue. Investors need to understand how many customers are needed to drive what level of revenue. Don’t go overboard explaining your expenses; they should take only two to three lines of data.

Ask and Exit The ask is the total amount of the capital you need to raise. (You should also explain how you plan to put that money to work.) The exit is the estimate of when the investors will be able to sell their stake in your venture, i.e. when the company is purchased by another party.

Other Key Factors

Not only does your pitch need to serve up the right information, you need to observe other ground rules.

»  A typical pitch should run to eight to 15 minutes.

»  In many cases, you’ll be presenting the pitch as a slideshow, usually projected on a screen. On average, you should budget a minute per slide. Do not use too many slides, or there will not be time to talk about the important financial slides at the end. And do not include an appendix with detailed financials or other data.

»  Investors don’t read paragraphs. Keep it short.

»  You need to capture your investor’s attention in the first two to three minutes.

»  In a lot of cases, you’ll be in the same room as your audience, but there will be many times the pitch is presented over the phone or over the Internet. So don’t rely on props or brochures that an audience needs to see in person in order to appreciate. I recommend no handouts, and instead of props, include pictures on your slide deck.

»  Investors expect the business to have the potential to grow at least 30 times its current size to provide a return
that is attractive given the risk inherent in startups.

Remember, the pitch is just the first step in a much longer dating process. You’ll have more time to share the details of your business, technology and financials … if you can convince them to give you another date.

If you don’t get past the first date, you will never have a chance to show them everything you have accomplished and plan to accomplish. If you don’t get past the first date, the investor may have passed on a great opportunity for financial return.