Pitching to investors – the right things to talk about to get results
There are many more options for raising the money you need to start up your new business now than there were just a few years ago. For the lucky few entrepreneurs, start up capital can be found using personal finance alone (bootstrapping), but for most of us raising the money we need to get started can be a long process – from choosing what type of investment you’d prefer right through to the type of investors you wish to attract.
In fact, if you need investment in order to get going, you need to make that your business until you’ve gained the funds you need.
So when you’re ready to start pitching to investors – whether angels or venture capitalists – what are the right things to talk about to get the results you need? We talked to two successful entrepreneurs to find out what they take into the room with them when pitching.
Ian, in London, has several successful businesses and has pitched to high profile investors to get them off the ground.
“There’s nothing like solid preparation when you’re going into a pitch situation. Okay, you don’t know every scenario that’s likely to play out, but if you do your research well, you can work out a lot of what might be asked. Before pitching I spend time researching the investor I’m seeing, working out what other investments they’ve made and trying to piece together any patterns. I’ve even been known to call up the directors involved in the businesses they’ve invested in to find out what they’re likely to ask.
“Then you need to hone your business plan to their tastes, and make sure you know it inside and out. You should anyway, since you’re the one who wrote it, but it needs to be water tight.”
David, in Suffolk runs a successful online music business.
“If you’re not sure about something – your figures or how to project financial information – get help. I have spent hours with my accountant in the past, getting to grips with how it all works, just so I can’t get caught out. Just have a watch of some episodes of Dragon’s Den and even though you’re only seeing snippets, you’ll see just how clever investors are. They know their game inside and out, and so should you. For me, that time with my accountant was invaluable. I’ll never have to do it again, but I made sure I spent quality time getting it straight in my head.
“Again on the figures side, be prepared for the negotiations, and make sure you have thought out some of the possibilities that might play out, so that you don’t get bamboozled into accepting an offer that doesn’t give you the flexibility you need. Investors aren’t there to trip you up, they’re there to make sure you have a great model that’s going to give them a return, so once you get to the point where they’re negotiating with you, you’re in a fairly strong position to negotiate back…to an extent. You should always know when to stop bartering and get on with the deal though.”
Our ten point ticklist for the things you need to know:
1. What’s your story? Get the engagement straight away when you explain the gap in the market you’ve discovered, and how you’re going to fill it.
2. The perfect solution Leading straight on from your story, here’s your chance to sell in your product or service. Make it interactive if you can. You can also talk about any successes you’ve already had.
3. Who’s your customer? You’ve done the research, now show you know it. Be realistic about who fits the bill immediately and who may join your target as your business grows.
4. Your sales strategy How will you reach your customers and what will it cost? You’ll also need to consider how you can prove this, with identifiable measurement. You should have researched marketing as a part of your business plan, so include the detail here.
5. Who’s in competition? Know who your competition is and explain why your company is different. Try presenting a comparison table that really highlights your USP – the one that the competition doesn’t offer.
6. How will you make money? Your revenue model is the really important bit in your pitch, so be specific about how your product or service will sell and how much you’re planning to sell it for. Remember the investor will want to know ‘why’ too.
7. Your financial projections What are you expecting to achieve over the next three, five and ten years? Remember to be realistic and to take all finance into account here. You’ll need to have the facts and figures to back up your claims too.
8. What do you need? Here you need to show how much has already been invested in your company (and how and by whom), what you need the new money for, when you need the money and for how long, and what your investor will get in return.
9. Who are you working with? It’s not just about the product or service and whether that’s viable, you also need to show that you have the right team in place to get that out to market. If you know that there’s a key skill that’s missing from your business, acknowledge that and show how you’re going to address it.
What’s your exit strategy? You may not be intending to sell your business at any point right now, but you may be asked the question and it’s a good idea to show that you’ve considered your options and that you know where you wish to take the business they’re investing in.
Published Monday January 14, 2013