What are the best tips on how to pitch to investors? For startups, raising capital is one of the most important aspects of your business survival.
Stepping in front of investors for your pitch can be nerve-wracking and difficult. Don’t fret. This article compiles a list of the best tips for entrepreneurs like you to follow to ensure your pitch lands with potential investors.
The Ultimate Guide To Pitch Decks
1. Keep your presentation short and sweet
A good practice before preparing your pitch is key to successfully nail your ‘elevator pitch’. Condense all you need to say about your business into a thirty-second explanation e. It should be enough to pique the interest of an angel investor.
Whilst in most pitches you’ll have much longer than 30 seconds, building proficiency in concisely selling your start-up can help cut down your presentation time.
Making your presentation any longer than it needs to be risks losing your investors’ attention. Investors are busy people and the longer your presentation is, the less likely they are to pay attention or even stay to listen to what you have to say.
A good length is 10 to 20 minutes, and using the ‘elevator pitch’ model will help you say the key information without prolonging your presentation.
A concise presentation will allow more time for investors to ask you questions directly about your business. It will give you the opportunity to answer your investor’s specific worries and intrigues.
2. Know your financials
Investors are in it to make money and so they want to know your business financials and fundamentals. They want to know how much profit you turned over. How many sales you’ve seen in the last year and your realistic growth potential are other criteria they’ll have.
How much profit do you make per unit sold? What sort of increases do you expect in the following year? What is the business doing to ensure continued growth?
They’ll also want to know how you turned that profit. Knowing your business model through and through and being able to articulate it concisely is useful in convincing investors to splash their cash for your start-up.
If your business is turning a loss, you’ll need to polish up your speech on why this is the case. If an initial loss is an inherent part of your business model, you must explain how your business expects to turn that around.
And when you expect the startup to make money.
Keep in mind that in fundraising storytelling is everything. In this regard for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
3. Know your market
Investors are looking for CEOs that truly understand the sector they’re in as that’s a key indicator of whether a startup will succeed. Prove you’ve done the market research and know exactly who will buy your product.
Demonstrate the market need for your business, prove you’ve spoken to focus groups, and done the homework to know what you’re up against.
What market does your company serve? How big is that market? What sort of demographics affect who you can realistically expect to sell to?
How does your business model tailor to these potential customers? Do you expect the market to grow in the coming years?
Use these questions to gather together tips on how to pitch to investors. In your pitch you’ll want to address your TAM SAM and SOM:
- TAM: What’s your total addressable market, everyone who could possibly buy your product?
- SAM: How does that translate into your serviceable available market, how much of the TAM you can realistically reach in the long-term?
- SOM: What’s the amount of the market you expect to be able to reach in the short-term, the Service Obtainable Market.
In-depth knowledge of the above metrics indicates a good understanding of your business’s position in the market.
4. Be honest about your competition
How is your business any different from the other businesses operating the market? This is an important question that must be answered if you have any chance of winning over investors.
The first step is to recognize and know who your competitors are and identify their key features and unique selling points. You’ve then got to demonstrate how your business compares to them. A great way of doing this is using a competition matrix.
This table should show how your business is similar to other competitors but how it has a strong advantage in some important selling points.
It’s best to know your competitor’s share of the market and more importantly, know how your business can expect to reach its heights.
Investors will appreciate the honesty here. Candid admissions about what your business will need to overcome to succeed are useful.
But don’t present any problem without following that up with your planned solution. This is one of the key tips on how to pitch to investors.
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5. Enter your pitch prepared
You must prepare your pitch beforehand. Even the most confident and charismatic presenters will need to spend time preparing their presentations before their investors arrive.
Come up with a good pitch script that has been rehearsed in front of an audience. Without a concrete structure, you risk your presentation unraveling into a mess.
Poorly planned pitches are often chaotic and lack the clarity and conciseness to wow investors. Spend some time to make sure your pitch deck looks professional and is pleasing to look at.
A well-designed pitch deck makes a good impression on investors. Spending the time to make sure the content is succinct will help your pitch land with your audience.
Gather the data you need to design useful graphs and present the key information visually. Investors have seen thousands of pitches and will instantly be able to recognize when someone hasn’t put the effort into preparing their pitch.
Polish your script and put in the hours to design a good pitch deck, the reward for your hard work will soon come.
6. Don’t read off your pitch deck
A phrase that has plagued presenters for years is the concept of “death by PowerPoint”. If you’ve ever had to sit through a presentation where the so-called speaker reads slides of text out loud for forty minutes, you know the dangers of death by PowerPoint.
Pitch decks shouldn’t be your script and you shouldn’t be reading off those slides. If you do this, your presentation will be dull and your investors will quickly lose interest.
If you stuff your pitch decks with text, you’re losing out on space for eye-catching graphics and useful data. Pitch deck slides should complement your pitch script, not replace it.
Crafting a sales script that uses your deck slides as a visual aid creates a much more engaging presentation. Add this factor to your list of tips on how to pitch to investors.
7. Focus on one product
Your business may have lots of extravagant plans for dozens of products and complete market domination. Whilst it’s great to have long-term ambitions and enter multiple markets, you usually don’t have enough time to cover more than one product in a pitch.
It’s extremely important to present your ‘core’ product to your investors. If you do win over investors and they decide to work with you, this should be the product they want to focus their money on to deliver to the market.
When presenting market data and competition information, this should relate to your core product. If your start-up is a service or tech company, focus on the key service you’re offering.
Whether this is the most popular service or the aspect of the business you believe has the great potential for growth, you’ve got to put forward the product most likely to earn your investors lots and lots of money.
8. Research your investors
If you know who you’ll be presenting to in advance, a great idea is to do your homework about them. You’re looking for what type of businesses they like to invest in and how involved they are in successful businesses.
Research the companies they’ve invested in previously and find out what has made them successful. You don’t want to be a carbon copy of the startups your investors are already working with.
But it would be a good idea to use what you’ve learned about your investors’ portfolio to tailor your presentation.
You’ll want to demonstrate how your business can succeed in a similar way and prove how your startup is stronger. In your research, you’ll want to find out key information to know whether they’re the right pick for you.
Investors can either take an active role in the businesses they invest in or are passive. Figure out whether you’re looking for an active or passive investor. And use this information when identifying tips on how to pitch to investors.
Does this particular investor usually limit who they give their money to? Perhaps they tend to only invest in a few industries/market sectors or perhaps limit their geographics.
Find out what their typical investing amount is and what stake they usually strive for. This will help you immensely with negotiating a better investment.
Even as you’re learning about the in-depth facets of creating a compelling presentation, you’ll need a comprehensive overview of how to proceed. Check out this video I have created explaining in detail how to create a pitch deck.
9. Don’t lie, be transparent
This is an important rule: be honest. When giving valuations, don’t inflate them to make your business seem larger than it actually is.
Make sure the sales figures you’re giving are accurate and make sure you’re honest about your business’s fundamentals. Don’t say you’ve got multiple high-street brands ready to stock your product if that’s not true, and certainly don’t lie about your product and what it can do.
Investors aren’t stupid and they can smell a liar from a mile away. These investors have seen hundreds or even thousands of businesses and can usually tell when something seems a little bit off.
They usually know where your business is likely to fail. Don’t forget, if your pitch is successful, they’ll be working with you and asking to see your business’s data.
Investors will quickly figure out whether you’ve been truthful with them, so there’s no point in being dishonest. Be transparent with investors. Present your profits in clear terms and metrics.
Metrics should be actionable and show how valuable your product is. These could be conversion rates, monthly recurring revenue gains, or daily active users.
In your pitch deck, make sure you’re using real numbers. Bad, dishonest graphs without scales or just plainly inaccurate information will seriously hurt your reputation and rapport with investors.
Remember, these people have seen plenty of pitch decks, and are looking for honest metrics in your visual data. This vague use of statistics will turn these investors away from your business, not convince them to part with their money.
If there are gaping holes in your business or if you need to identify weak spots, being honest about the steps you’re taking to remedy any bad aspects of your business is really helpful.
Investors will appreciate the honesty and may even be more willing to help you come up with solutions to where your startup currently falls short.
This may also help you come across as a hard-working and open-minded entrepreneur instead of an arrogant one.
Present an exit strategy
You must not forget the end goal of investors: to make money. Especially if you’re seeking large sums of capital, investors want to know how they’re going to get a return on the money you’re asking them to invest.
For anyone seeking venture capital funding or funds from angel investors, including a brief but clear exit strategy in your pitch is so critical. Here is a list of common exit strategies:
- Acquisition: Have larger corporations already expressed interest in acquiring your firm? What sort of businesses might want to take over? Would this be beneficial to your investor?
- Initial Public Offering: Can your business be tailored to the stock market? How is your business worth something to the public?
- Revenue Sharing: VC investment could have a return through a share of the company’s revenue and profit
You want to build a case for a high ROI (return on investment). An exit strategy is a plan and the section on this doesn’t have to be detailed.
Anything could happen, but revealing you have a rough idea of where your startup could be headed can help win over investors.
Here are ten great tips on how to pitch to investors. Investors are looking for people passionate about what you do, so have fun selling your product and enjoy your pitch.
If you’re unsuccessful on your first few tries, don’t worry. Just take the feedback you’re given and slowly improve and craft your perfect pitch.
You may find interesting as well our free library of business templates. There you will find every single template you will need when building and scaling your business completely for free. See it here.