In our last blog, we discussed a variety of ways of how to get in front of investors in order to make a pitch. Finding an audience is only the first step, though, and once you get the opportunity to meet with potential investors, you need to make sure you are prepared with a strong pitch. So what exactly are investors looking for when deciding whether or not to fund your company? There are many factors that go into consideration, but if you follow these guidelines, you’ll be on the fast track to getting the funds you need.
Entrepreneur.com speaks to the idea of “readiness” when looking for funding: being ready to accept funds rather than being in desperate need of them. What does this mean, exactly? Businesses that appear in need of funds gives the impression that they may have lost their own limited capital through poor management, or are unwilling to invest personal money. Basically, it looks like you need to be saved and the investor is the one to do it.
A pitch from a business that is ready to accept funding, however, communicates something different. They suggest an idea of a partnership that will grow the company and make it clear that the potential union between the company and the investor is an intentional one that provides a good match for all parties. Being ready includes seeking out investors who can provide supports that make up for small weaknesses in your business. Do your research and make sure you are looking for the best match in an investor. Social media expert and Tint founder Tim Sae Koo shares, “I would turn down a 100% guarantee deal from a non-relevant investor any day to try and secure a deal with the investor who has the connections I want and the expertise I need.” Make sure you are considering the benefits that go beyond the funds when pairing with investors.
Business development expert Annette Kramer shares another aspect of this readiness, “Investors are listening for whether or not you’re going to get their money back and whether or not you’re dependable to grow the business. They need to know that they can believe in you, that they can trust you as a business person, not just as a technologist or an idea person, and they need to understand that you know how to scale a business.” If you approach investors as if they were potential life raft to keep your company afloat in the midst of a crisis, they are not likely to partner with you. Presenting a well-developed pitch that demonstrates a strong plan for growth and clearly outlines the benefits of entering into a relationship with the company will inspire confidence and get you closer to the goal.
DESIGNING YOUR PITCH
There are several things to keep in mind when creating your pitch for investors. Two things you should strive for in a presentation are brevity and clarity. Make sure your listeners realize that you know their time is valuable by being concise and timely. You should be able to sum up your company’s mission in 1-2 sentences that make sense to the investor. Remember to use clear language and avoid jargon that could be confusing to people outside of your industry.
Most professionals will agree that there is a basic formula you can follow when creating your pitch. Though you may vary the details, following a format like the one outlined below is a good starting point when planning how to address investors.
Start with the most important information: outline the problem and how your product or service will solve it. This is where that brevity and clarity come into play. You only have a few minutes to capture the attention of your audience, so make sure you do it in the opening of your presentation.
Share the successes you’ve experienced. Investors want to know they are getting on board with a successful endeavor. Build credibility by showing what traction you already have. This is a good time to offer hard numbers in the areas of sales, contracts, product launches, etc.
To market, to market: Make sure you know who your target market is. One mistake businesses often make is to say their product is “for everyone.” No, it’s not. Who, specifically, will benefit from what you are providing? And, once you’ve got that figured out, how will you reach them? A strong marketing plan (including the costs of said plan) and awareness of whom you are selling to is something investors need to know early on. Along with this, don’t forget to acknowledge and identify your competition, and explain what sets you apart from them.
Run the numbers. Be ready to explain how you will make money. Offer hard numbers on product pricing and projected sales. What are you expecting over the next 3, 5, 10 years? Investors will examine this closely, so make sure your stats are realistic and make sense.
Share the spotlight. At this point, you’ll want to introduce your team and explain what talents they bring to the table. Explain how the varied expertise of your group is an asset, but be willing to consider what you may be lacking. A strong investor partnership should fill in those gaps.
Ask and you (hopefully) shall receive. Outline your funding needs at the end of your pitch. You’ll want to tell investors how much has already been invested in the company and by whom. Be transparent about equity stakeholders and the percentages of ownership of the business. Explain what you need to achieve the next level, and clearly state what that next level will be.
WHAT TO DITCH IN YOUR PITCH
Make sure you don’t send your entire presentation to your audience ahead of time. If they have already seen the information, they won’t want to sit through it again, regardless of how charming you are in person. Krista Morgan, COO of P2Binvestor, also advises to keep slides to a minimum, and limit the text on each slide. Specifically, don’t waste a lot of time on your team slide, which she calls “a time sink.” Instead, she advises to “have printouts of team bios and the executive summary to hand out to interested investors after the pitch.”
The bottom line is that even the best business plan can get shot down if you can’t create a connection with the investor. Energy and enthusiasm are no small part of convincing people to enter into a business relationship with you. Charm and charisma can be the one thing that separates you from another deal, so make sure you work hard to let your passion for your business shine during your presentation. Structure Capital founder Mike Walsh, an angel investor, explained to Forbes.com contributor Tanya Prive how he determines whether he will enter into a relationship with a business, “It’s probably too harsh, but if I don’t get a good vibe then I probably won’t invest… even if I think the company could be something really huge, if I can’t see myself having a beer with them or cup of coffee, then it’s a deal breaker.”
One way to make sure that your character shines through? Practice. If you know your pitch like the back of your hand, it will be much easier to be personable and relaxed while you deliver it. If you follow these tips, you’ll have a strong pitch that will win the attention of investors in no time. Then you can get back to doing what matters: growing your business, and maybe grabbing that beer with your new investor.