Pitching an investor is one of the hardest tasks you will ever accomplish as an entrepreneur. It can be compared to a thousand times more than what you feel when you attend a job interview. A lot of thoughts will race through your mind. You will find yourself asking questions like, “Will my idea make sense?”, “Will they like me?”, “Will they agree to fund me?” - to no one but yourself.
Sealing the opportunity to pitch an investor is a milestone in the life of any entrepreneur. To some, it may be validation that their crazy idea is not so crazy after all. But you can still miss the mark, even with professional slides packed with well-researched information. Investors think uniquely, and you need to tune into their frequency to please them.
When you approach an investor, you only have one shot to make a good impression. It is imperative you prepare succinct and engaging information that describes your business. Your primary goal is to make potential investors reach for their checkbooks, rather than the doorknob. As important as this crucial meeting is, there are still myriads of startups who take it lightly, and here are some of the mistakes they make.
1. Coming without a demo
You should have a working prototype of the product or service, and use it to lure the investor. Have a paper backup in case there is a malfunction during the presentation. Sadly, only a handful of entrepreneurs meet with investors with anything more than their slides.
2. Talking about valuation
Some startups are quick to raise the topic of valuation to impress the investor, even when they have very few customers. They end up shooting themselves in the foot. Any topic that can be a potential source of concern to the investor should get shelved - unless they are the ones that bring it up.
3. Absence of exit strategy
Investors are risk-takers, and the main reason they take risks is to make money. The reason some entrepreneurs fail to woo investors is they don’t give them enough information about how much has already been invested, percentage ownership, and the rate at which they intend to spend money more than their income.
4. Not preparing for questions
No one would want to throw money around without asking questions, and being skeptical about it. Expect tough questions from your investor. Make preparations to answer them with clear and concise answers.
5. Concluding well
No matter what happens, never leave the room without having a clear understanding of the next step. Expecting immediate feedback may be too ambitious, but if the presentation has been a success, ask the investors if there are additional materials they may need. On the other hand, if your presentation has not been a success, try to find out what your mistakes were and use the feedback to move forward.
What funding means to investors
Beyond having a great idea, entrepreneurs rely on funds. A recent survey showed that thirteen percent of founders linked their failures to running out of money. There is a huge emphasis on savings, but regardless of the amount you have in the bank, there would come a time when you will need additional funds.
Getting a fund is important, but what is more important is retaining the uniqueness of your product. Focus on investors who reason with you. Be wary of investors that want you to change your product to suit their interest.
Know your audience
It is thrilling to land a meeting with an investor. Before going for the meeting, be sure to research your audience. There are some sources where you can find out about angel investors like Flashfunders, AngelList, and SeedInvest.
There are angel investors that focus on a particular region. You can find a list of location-specific angel investors at Angel Capital Association. If your investor is a public figure, you can probably find information about them online. There are those who prefer to remain anonymous, and it will be hard to find information about them. You can scrape up information about anonymous investors by trying to find businesses they have previously invested in.
The type of investor you are dealing with should determine the content of your presentation. Venture capitalists have their eyes on data concerning your product. They want to see the graphs and tables, and the market trends which prove you have a deep knowledge of your area. Angel investors, on the other hand, are more concerned with you. They want to connect with you more than they connect with the product. If you fail to make this connection, you may not get their nod even with the best product.
When you are dealing with angel investors, telling stories is acceptable. For example, if you own a salon, you can talk about its history, how it has stayed in the family for years, etc. Feel free to talk about the innovations your grandparents have made in the salon business. Cap it with your own experiences, and how you want to drive the business to the next level. Stories are evocative and powerful, but it is not acceptable in all business presentations. Know when it is accepted, and use it to your advantage.
Express yourself with pictures
There is a saying that pictures are worth more than a thousand words. Instead of crowding your slides with words, crowd them with pictures. Not all the investors will bother to read everything on the slide. When you use pictures, the message sinks and stays longer. Pictures can be used to break up a stream of words to give the eyes and brain a break.
Angel investors are more interested in building relationships with entrepreneurs who have a passion for their career. Your choice of words can tell if you are passionate about your business. Similarly, if your product is waiting for some fluke to be a success, your choice of words will make it evident to angel investors. In your presentation, portray the problem as the villain while your product is the hero that saves the day. Let the investors visualize how your product will ease the pain of your customers.
Showcase your team
Nobody will be confident to invest in a business that depends solely on one person. What if the person is ill, or dies? Will the business stall or move on? These are some of the questions that will plague the mind of your investors.
Investors are more confident when there is a team involved. Avoid making the entire presentation alone. Entrepreneurs who introduce different team members to handle different sectors of their business are more likely to get the approval of investors.
Whenever the word "investor" gets mentioned, venture capitalists win the day. Dileep Rao, a Forbes.com contributor, has made it clear that many entrepreneurs never get to see the office of venture capitalists. This makes angel investors the primary source of funding.
The first step in pitching to an investor is to come up with powerful slides. You can find freelancers who will do this for you for a reasonable fee when you post the project on Freelancer.com. If you are an entrepreneur, tell us what plans you have to pitch your investor in the comment box. Found this article interesting? Feel free to share with your friends.