An all-star investor pitch could be your golden ticket. Unfortunately, it can also be what crushes your dreams and makes sure they never become a reality. Either way, the investor pitch is the crucial piece that determines the fate of your company. So how do you make sure to create a pitch that is exactly what your potential investors are looking for? Here we will share with you six tips to make your pitch irresistible to investors.
Before we dive into what those six tips are, let’s start with some of the basics. Unlike the world of finance and Wall Street investors, investors in early-stage companies do not spend a great deal of time gathering information prior to pitches. The first thing they look for is a connection. Was your company referred by someone the investor knows? If not, your chances of the investor opening your email are pretty slim.
If for one reason or another, the potential investor does decide to take a further look into your business plan, you’ve got about 30 seconds to wow him or her. The initial screening done by venture capitalists lasts about half a minute. Therefore, you'll need to make your company goals and benefits very clear and very impressive as quickly as possible. Show him or her that in the chance that your company or idea is a success, it will be well worth the investment.
Clearance past this initial screening phase means you will be brought in and given 20 minutes to present your company, and 15 minutes to answer questions. And from there a final decision will be made. In the television series Shark Tank, a slim 0.4% of entrepreneurs who apply to be on the show are chosen to appear. That is a fairly accurate representation of the venture capitalist world outside of television, as the average early-stage company investors will choose to invest in about 1% of all pitched companies.
With competition as fierce as it is in the world of early-stage company investing, there are a couple traps you want to ensure you don’t fall into: lack of an exit strategy for investors and asking the investors to sign an NDA.
Let’s be realistic—investors are investing money in your company not because they want you to be able to share a life-changing product or idea with the world. The investors are investing in you because they want to make money off of your product or idea. Therefore, it is crucial that you present to the potential investors a plan of how they will exit your company and make money from their investment. You will need to have mapped out how the investment will bring opportunity to enter into licensing agreements with larger companies or will bring opportunity to grow the company enough to eventually sell to someone else.
With all the pitches that come in and out of investors offices’, the chances are incredibly slim that they haven’t seen some form of your company or idea elsewhere, or that they won’t sometime in the future. Investors will not sign an NDA that can lead them to a lawsuit down the line. By asking them to sign an NDA, you are asking them to say “goodbye” to investing in your company.
Now that you know your pitch needs to be 100% solid and free of anything that could turn away potential investors, let’s get into the tips to make your pitch one they can’t say “no” to.
1. Construct An Air-Tight Agenda
It is a great idea to start with a simple agenda that summarizes what you are going to discuss in your presentation. By presenting your agenda, you are setting your audience’s expectations clearly so that you can exceed them. Since the time investors spend on each pitch is so limited and valuable, make every second count.
2. Timing is Everything
Time your pitch perfectly. The less time your pitch takes, the better. Don’t rush through your presentation, but don’t stay on one slide or topic for more than three minutes. If you state that your presentation is going to take “X” number of minutes, make sure it is less than that. You do not want people looking at their watches, wondering why you’re going over the amount of time you said you needed. This will make them unsure of whether you will stick to deadlines down the road.
Investors’ time is their most valuable asset. If you convey a respect for their time, they will interpret that respect as your ability to treat their funding with respect.
3. Paint Your Picture
Explain specifically what is unique about your product or service. Chances are the investors have seen some form of your idea somewhere else—let them know why yours is the best. Summarize what you do uniquely well for whom and how. And most importantly, keep it short.
Provide context and orient your audience to what is about to follow—make your audience feel the desire to learn more. A big piece of this is making sure that your audience completely understands the significance of the opportunity at hand.
Also crucial to your pitch is passion. You have to be truly passionate about your idea, otherwise investors will immediately shut you down. And this passion should exist long before the idea of making a business does. According to venture capitalist Marc Andreessen in an interview with Forbes, “products that become startups tend to do much better overall—[where you have] a founder that has built something, often in an academic setting or on nights and weekends, that is now working, and needs to be turned into a company to continue.” Trying to build a startup before you have a product is much more difficult.
4. Target Your Audience
Use demographic information to pinpoint your customers. Make sure you are arranging meetings with people that are looking to invest in your type of company. Once you have determined what this type of investor is, build your presentation so that it appeals specifically to the investors. Always keep in mind that you want to be presenting information that will be beneficial to the investors.
Show them a picture of a customer along with relevant data points and explain exactly how you intend to acquire these customers. Investors look for people who understand their market in a very granular way, right down to the persona of the buyer. Prove to them that you fully understand the target consumer and that you have created steps to acquire their business.
5. Know Your Competition
Investors want to know what competition is out there and how what you’re offering is better than what already exists. Therefore, it is key that you research your competitors and find their strengths and weaknesses. It looks very bad if investors know of competitors that you don’t, so avoid that situation and get investors’ attention by demonstrating an intricate understanding of each competitor in the market.
6. Deliver The Solution
The number one way to make an investor care about your pitch is if you are able to let them know your company will make them rich. The goal of their investment is that they will reap some serious benefits and see a substantial return on their investment. Show them the possible rewards of investment by explaining your revenue model as well as your sales and distribution models. Research shows that 80% of venture-funded startups fail, so show them how your company or idea will not be part of that 80%.
As you can see, there is a great deal of work that occurs between coming up with a great idea and selling your great idea to investors. That work should be summarized into a 10-minute pitch that will wow investors. However, your pitch needs to be perfectly researched, crafted and delivered in order to give your company or idea the best shot at potential success.
Having an agenda, the right timing, knowledge of your product or idea as well as your competitors, passion for your product or idea, an understanding of your target audience, and most importantly, how your product or idea will make the investor rich are the crucial pieces to a successful pitch. Spend the time necessary to cover all of the areas above and you will be on the road to success with people to invest.