What companies did they start or come from before becoming an investor? Your pitch should be no different. Your startup should already have a solid business plan in place, but don’t overlook the importance of including a succession plan in there. You’re meeting business people who probably spend a lot of time with people who dress for business. I looked good, but did it make me more successful? It makes money when websites pay for ads to show those users. It’s a very simple business model and it works well. The people you’re pitching to have their own success stories. Investors are looking for someone to believe in. Have you pitched an idea to investors before?
Pitching your idea to a group of investors is incredibly nerve-wracking.
Trust me, I’ve been there.
It’s like the feeling of making a presentation at the front of the class in elementary school magnified by about a million.
You wonder if they’ll like your idea.
You wonder if they’ll like you.
Most of all, you wonder if they’re going to fund you or not.
For many startups, not getting funding is a death sentence. 13% of failed founders cited running out of funding as the reason they had to shut down.
Even if you have money in the bank, there’s going to come a point when you simply have to get additional funding to grow your startup and start scaling up.
I tried to get funding for Crazy Egg soon after creating it. I thought I could get $10 million for it.
No one wanted it.
That taught me a lot about what investors did want and how to position my companies for successful pitches in the future.
The creation of KISSmetrics, which we were able to secure over $19 million in funding for.
Read on to learn my top tips for pitching your idea or product to investors.
Nail your elevator speech
You need an elevator speech.
Your elevator speech is a 30 second or less summary of what you do. It should explain everything someone would need to know when they first meet you.
This should tell them everything they need to know even if they have no background knowledge about your company.
The goals of your elevator speech are to be able to succinctly describe your idea or product and get the other person interested enough to ask follow-up questions.
Here are the three main things your elevator speech needs to cover:
What you do.
Keep it short! This could be as simple as, “FakeCompany creates state-of-the-art analytics for…”
What problem you solve.
Again, keep it short, but be descriptive about what problem your product solves for its target customer.
For Crazy Egg, that might sound something like, “Crazy Egg allows businesses to see what’s working on their website, and what’s not, by using heatmap technology to track where visitors are looking and what they’re interacting with.”
Why you’re different.
Why should the person you’re talking to use your product or service over your competition?
Your product may have a feature no one else does, or maybe it’s just easier to use. Whatever your key differentiator is, you need to know it.
After your speech, make sure to connect with the person listening.
Ask them a question, respond to their follow up questions, but most importantly, stay in touch.
Growing your professional network should always be your goal as a founder. You never know who will provide your next funding source or opportunity.
Research your audience
Before doing your pitch, do some research on who you’ll be presenting to.
You can also look for angel networks that focus on the region you live in. Angel Capital Association has a good directory for location specific angel groups.
Some investors may be public figures that you can find out a lot about online. Many others prefer anonymity and it’s hard to find out any information about them.
If you can, try and find out their patterns.
Do they like to be involved in their investments or not?
Some investors choose companies they want to be involved with and want a seat at the boardroom table in exchange for their money.
Other investors would rather be hands-off and receive quarterly reports on profitability, but otherwise not be involved.
Investor Dave Anderson says it depends on how much help the company needs.
If you’re pitching to a room full of investors Shark Tank style, find out as much as you can about each one of them.
At the minimum, you should be able to answer:
- Do they know your industry?
- Do they have any other investments in your industry?
- What’s their personality like? Quiet and careful, or loud and volatile?
- Are they a new or seasoned investor?
- Do they belong to an angel investment network, or are they an individual investor?
- What companies did they start or come from before becoming an investor?
And, if they’ve done an interview outlining exactly what they’d like to hear like Jason Calacanis has, you should probably listen to that, too.
Use realistic data (and be able to back it up)
When you’re pitching to investors, you need to provide solid data.
Investors care about what you’ve already accomplished and how that can make them a profit in the future.
There are many ways to calculate the value of a startup, some of them more controversial than others.
This is because the value of a startup is often created before they’ve even made a profit. The numbers behind it are driven by speculation of how good the company could perform, hypothetically.
Some startups have higher valuations than their publicly traded peers. WeWork has a 525% higher valuation than established brick and mortar competitor Regus!
Investors want to hear the reasoning behind your numbers.
Don’t just say you’re acquiring new customers every month, say exactly how many. It doesn’t matter if you’re attracting 10 or 10,000, the fact that you’re giving real data shows you’re transparent.
Remember: An investor isn’t just giving your company money, they’re giving it to you.
They’re investing because they believe in you.
Make them confident in their decision by making data a key part of your pitch.
Chance Barnett, CEO of CrowdFunder, put together a pitch presentation template.
He advises founders to include market statistics early in the presentation to hook investors right away.
These are things like the market opportunity, current users and profit margins, or facts that support your cause, as Innovative Solar’s pitch deck lists.
Tell an engaging story
It’s no secret that storytelling sells.
Brands who effectively use storytelling in their marketing consistently outperform those who don’t, sometimes by up to 64%!
Your pitch should be no different.
If you’re given five minutes to present your idea to…