Show them why your company is a compelling bet.
If you’re the head of a small but growing company, your to-do list is probably crammed with tasks: hiring employees, developing your product, winning over customers and on and on.
Securing investment dollars might seem like one more thing to do. But it’s not. Arguably, it’s the most important assignment you have. You can’t build your business if you don’t have the money to do so.
Approaching investors can be an intimidating step for some entrepreneurs, especially if they’ve never had to pitch to anyone outside their family or circle of friends.
The good news is that startup investors know that every investment is a bet, and against pretty long odds. To prove you’re worth investing in, you don’t have to prove you’re going to succeed, just that you’re a sufficiently good bet.
What makes a startup a good bet? You can answer that question by putting yourself in the investors’ shoes and answering the questions they have.
What Investors Want to See
» Do you have a strong management team? Talent makes a difference. A good idea with a stellar management team is more attractive than a stellar idea with just-OK management.
» Have you put your own money into your venture? What about friends, family or professional contacts? If the people who know you best haven’t invested, why would a random group of strangers?
» Does your business have the potential for rapid, scalable growth within a reasonable time frame—something along the lines of $10 million to $20 million in revenue within five years?
» Do you have a realistic path to owning a good chunk of your market? The market doesn’t necessarily have to be big now. A small market that’s destined to become larger is actually a better play.
» How will their money be used? (Hint: Anything that helps you hit $10 million to $20 million in revenue—beefed-up sales and marketing are a good start.)
» Do you have an edge—a proprietary technology, an early market lead or strong barriers to entry that will keep out competitors?
» Are you open to mentoring and coaching? Most investors will want to offer more than money.
» Can you present a credible exit strategy for investors? Your investors want to maximize their profits. This is their main expectation and primary interest.
Tips for an Excellent Pitch
If you’re lucky enough to secure a meeting with potential investors, you need to deliver an informative, compelling presentation to earn their continued interest. (You’ll almost always be delivering this in conjunction with a slideshow.)
» When you start, tell your story as simply as possible. (“We make a widget that costs 50 percent less than the current market leader.”) Then build on that foundation, gradually adding more detail. This lets your audience become acclimated to your ideas.
» Your pitch should focus on what you intend to do, how you plan to implement your idea, how you will make money from it, what your scale of aspiration is and why investors should bet on you and your team.
» But don’t get too deep into operational details. If investors are interested, there will be time for that later.
» Make sure your pitch is a good fit for the preferences and portfolios of the investors you’re addressing. Adjust accordingly.
» A lean, clean pitch works best. Don’t put a lot of words on any one slide. Avoid teeny tiny text or giant tables of numbers.
» Don’t present numbers unless you can explain how you arrived at them. Even if you aren’t the numbers person on your team, you need to understand them all if you’re delivering the pitch.
» Practice, practice, practice. A lack of practice is the most common, most preventable cause of terrible pitches.
What Comes Next
Congratulations, your pitch has captured the attention of a roomful of investors!
You need to be prepared for due diligence. Investors will want to know much more about your company before giving you money. (That giant chart you left out of your slideshow? Finally, this is its chance to shine!) Being organized will make the due diligence process go much more smoothly.
You should also be ready for the alternative—the investors decide to pass.
Just remember that building a new business is not a sprint. It’s a marathon. You will need to present your proposal many times before you can obtain support.
In this long process, the best sources of feedback are members of your audience—you know, the folks who just turned you down. In most cases, though, you’ll find them open to sharing useful advice for future presentations. Approach them with a positive attitude that shows your willingness to accept criticism and take some of their suggestions on board.
Who knows? The people saying “no” today might say “yes” at some point in the future.