Nine out of ten startups fail, according to Fortune. For nearly a third of those, it’s because they don’t have enough capital, and for another 8 percent it’s because they don’t manage to attract any investor interest at all. Fundraising is one of the most important priorities for any startup founder. So, what can you do to secure the capital you need to successfully launch and grow your business?
A solid business plan, a differentiated product or service, a unique brand, and an engaged and experienced team are crucial to success of your business. But if you stumble in pitching this to your potential investors, you are throwing away all your hard work.
Here are our five top tips to deliver a convincing investor pitch.
It might sound obvious, but good preparation
involves a lot more than creating a nice Powerpoint presentation ahead of the
meeting. Getting in front of an investor to pitch your business is a big
opportunity, so you don’t want to waste it.
First, know your audience including the background and interests of your potential investors. Tweak your style and content to bridge the gap between the investors and your business.
Second, set out all the information about your business in a clear and concise manner. What are the key points you want to communicate to investors? And remember, product technical or market information may seem obvious, but might not be immediately clear to the investors you are pitching to. Find a way to say this in a way that is easily understood by a generalist audience.
Third, anticipate and prepare for any questions you might be asked. The answers you have must be bulletproof so you can inspire confidence in investors that you know your market and product back-to-front and front-to-back.
Ensure all your claims can be backed up by facts and stats. Investors will grill you on the specifics, so have them to hand. And you should know the main numbers (current revenue, costs, revenue projections, users, market size) off the top of your head.
Once you have all the information in place, practice. And then practice again. And again. Make sure everyone in the pitch meeting has a role, and knows what that role is.
Tell a story
Storytelling is the best way to illustrate the business case to your investors. An engaging story will tell the bigger picture, and ensure they remember what you have said once you leave the room.
You want to tell a story about how your product or service addresses a problem in the marketplace. Make sure you are aware of any potential competitors, and explain what makes your product or service unique.
Keep it to the point, delivering only the pieces of information that are fundamental to your business and how it will disrupt the status quo.
Use the right language
Some entrepreneurs think that using complicated, industry-specific language makes them look smarter. While a certain level of industry knowledge shows that you understand your business, there’s no point in making an argument if no one else can understand what you’re saying. Especially if you’re asking someone to invest in your business.
Avoid the use of jargon and buzzwords. Keep your language clear, concise and to the point. Some investors may need certain technical concepts explained, so try to do this in a way they will understand without sounding patronising. Remember that the language you use should be easy enough for the investor to be able to then explain it to other people.
For more insight about how to use language, read our guide: Talk Techy to Me: How to Explain Technical Things in Simple Terms
Don’t waste time
Time is a valuable asset, so don’t waste it. Avoid droning on about one subject or one single slide for more than two minutes. is imperative not to rush a pitch, but you must not fill the time with useless information either.
It is much stronger to deliver a powerful pitch in 10 minutes that gives all the relevant information about your project possible. A short pitch ensures investors will be engaged throughout.
Give your audience a chance to interject or ask questions, or leave plenty of time for investors to ask questions at the end of the pitch.
Deliver a solid financial strategy
The financial side of your plan is what can make or break your funding deal. What is more, the most important side of your financial plan to put forward is a clear exit strategy. Yes, you read that right, how are you going to deliver a big payoff for your investor?
Clearly set out how much has been invested so far, by whom, what are the percentages in ownership, how many rounds of fundraising will there be, and will there be an equity round.
However, the main interest the investor will have is in how you are going to deliver a strong return for her. Spell out your exit strategy. Is it through licensing, an IPO, or will you deliver a big payoff though an acquisition? You must remember that investors are not looking for marginal returns, but for a big chunk of money at the end of it all.
Keep front of mind that the main aim of the pitch is to convince investors to fund your business. Be enthusiastic, enjoy the pitch, and dress to impress. If you manage to instil your enthusiasm and excitement for your product or service on the investors, you may be one of the lucky 10% that make it!