At some point in our lives as an entrepreneur we have had to ask the question of “where am I going to get the money from to fund the business!” Whether you attempt to raise funds from a venture capitalist, a bank or (and we advise against this one) friends and family you need to be very clear about what you want and why, what the return on the investment will be and the timelines involved.
But, before you throw your pitch together you need to understand that unless your idea is so revolutionary the chances are it’s an innovation on a pre-existing product or service. Keep in mind investors have pretty much hard all the ideas in the book so don’t assume anything going into the pitch.
Tip #1: Never think you know the investor: just because someone is wealthy or invests in start-ups doesn’t mean to say that they will naturally back your idea. Often investors are comfortable with ideas and start-ups that fit their profile because they can offer so much more in terms of experience and knowledge during the crucial start-up phase. So, often an investor will see an opportunity that is in their comfort zone and may not want to go too far outside of what they know. Why? Because it’s in what they know already that leads them to see the financial benefit. So, the first thing you need to do is to identify potential investors that already have street cred when it comes to your market because you may very well end up pitching to 20 people who all say no only to discover that none of them saw the investment fit as opposed to the substance of a good idea. Research, research and more research – know as much as you can about the people you want to pitch to before you make the pitch – even the style of the pitch.
Tip #2: Don’t talk gobbledegook: It really is best that you don’t “talk in tounges” or leave the question of money until the end of a pitch. It’s as if you are forcing someone to sit down and watch a two hour movie where they only get to see the main thrust of the movie at the end. Never be afraid to start with the money question nearer to the front than the end and always try and have a script ready that you have rehearsed and understand. Added to the script is something few people do – get yourself a list of frequently asked questions and make sure you have answers for each of them. Ask yourself “if I was investing in this person what would I ask?”. Why is a script and an FAQ list so important? Because at the first sign of a stumble an investor can get nervous and if you don’t know your cash-flow forecasts and business plan from a pair of coloured socks you choose from a pile in your drawer in the dark then you can end up with a zero success rate.
Tip #3: Know what the money’s for honey: You’re making the pitch and the investor says “look just tell me how much you’re after” (after all we all arrive at that conversation sooner or later right?) and you come back with between $700k – 900K. The first thing the investor cottons on to is that you may not have a full grasp of how much is going to be required and there may come a time when they’ll be asked to put more in. Alternatively you may really need $900k but all the investor hears is $700k. You always need to be very clear when it comes to how much you need and why. Don’t confuse the potential investor by not being prepared and understanding chapter and verse about how much you need and by when and what the potential rate of return could be. Consider getting the money question on the table at the beginning by saying clearly and confidently “Thank you for time today. I have an exciting presentation but I want to let you know that I am here to raise $900K for our new business start-up – so I would like to begin by telling you all about it.” What this does is provide clear context that aligns the value of the potential investment with the concept in the minds of the investor during the presentation. This means the questions and answers can be more specific and often more strategic.
Tip #4: Don’t ramble about yourself – focus on the concept: Often (and this can be the case for investors especially) we tend to spend more time talking about ourselves than we do the business idea or concept. Yes, the investor wants to know that you have the ability to execute the proposed plan or strategy but they need to be confident in the actual product or idea that will be generating an income. Don’t force the investor to try and figure out what the business opportunity is. That said, you need to strike a balance between giving them the confidence they need in the opportunity versus your ability to implement.
Tip #5: Consider an investor can offer more than just money: The one thing I really enjoy when being pitched too is when someone asks for more than just money. Many investors have got to where they are because they have a suite of other skills and experience that you can tap into that can often be much more valuable than just an up-front injection of cash. Pitched correctly, and having understood the type of investor you are pitching too, it could be an opportunity to say “One of the additional benefits I think you can bring to the table are …. “ and then mention a few such as sales and marketing, communications or networking. Always try and mix the need for cash with the need for experience and other skills that can be equally valuable to your start-up.
Tip #6: Don’t solve problems, identify solutions: unless your business idea is a consulting company never come into the room and act as if you are solving the problems of the world in the opening statement of the pitch. Always, always focus on the business opportunities that come from the problems you have identified and in doing so show clearly what is so unique about your idea compared with others.
Tip #7: Don’t just play a video: I get it all the time at conferences and in one on one meeting’s where people think it’s a good idea to just watch some kind of inspirational video of the concept or business opportunity. If I wanted to watch a video with shopping music in the background I’d sit in a food court and watch advertising on the television. Yes snappy and short videos have a place but the real devil in investment lies in the detail – knowing that what is being presented on screen has substance behind it. Very few investors do things on the back of an envelope anymore and fewer still will go into something by watching a video presentation in and of itself.
The pitch is the most important thing you will do other than the development of the business plan, budgets and cash flow plans ahead of your business start-up getting off the ground. In fact, it will be practice makes perfect if you get the pitch right for a potential investor because chances are that elements of the pitch could also be your sales pitch.
If you have picked up anything about what makes a successful pitch it should be these even simpler bites:
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