Pitch Perfect: Delivering a Pitch Investors will Love

30/09/2014
Pitch perfect. Entrepreneur. Lead Investor.

You’ve decided to start your own company and completed all the first steps.  As your startup begins to gain a little traction, you start to think you might want to raise some money to build the team and product that will take your business to the next level.

Funding can help scale your business at a faster pace than bootstrapping and can open up many doors for network opportunities. The best indicators of whether you should go out and fundraise are in your pitch itself:

  • Do you believe your story?
  • Does it excite you?
  • Do you believe you can build this regardless of whether you raise or not (money will just help you get there faster)?

If you answered no to any of these questions, you need to keep working hard on your idea or adjust it until you can say an honest and emphatic “yes!” to these questions.

If you are ready to say yes at this very moment, then go for it, but be honest with yourself.  Funding “rounds” have become descriptors for companies, and the amount of money people raise is too often used as the metric by which to measure someone’s success. They’re far too often false signifiers of what’s actually happening within the business.

Smart people know better. Your users know better.  And most importantly, you (should) know better.  Funding stats are not much more than Crunchbase’s version of Foursquare badges. What matters is how, why and where you spend the funding, and most importantly, the value that those dollars drive. So don’t get caught up in the fundraising vanity game, and instead set out to build the best business you can.

Having said all that, what makes a pitch perfect? Pitching is one of the most important skills an entrepreneur can have. Whether you are pitching your Uncle Joe for a startup loan or appearing in front of smug, seen-it-all venture capitalists, you should try to cover a few fundamental points. There is no one-size-fits-all, but here is a list of the five most important things that an investor wants to know before sinking money in a company.

Pitch Perfect #1 Financial performance. 

You need to know your numbers. Prove to potential investors that your company has excellent financial performance, especially if you are seeking funding from a bank. Venture capitalists will look for a potential of high returns and a clear exit opportunity.

Prepare to answer questions about the financial stability of your company. Investors will ask if your company shows signs of growth and if you have plans such as issuing shares or borrowing money to stimulate growth. Your debt repayment plan should also be properly presented. Prove your business is capable of handling its financial obligations.

When pitching to investors based on your company’s financial performance, it’s advisable to show proof that your current assets are enough to cover current or short-term liabilities. Expect investors to evaluate your revenue streams, acquisition cost and turnover rates.

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Pitch Perfect #2 Background and experience in the industry. 

Investors don’t want entrepreneurs to make mistakes on their dime. Investors look for experienced entrepreneurs and management teams with a track record of high performance and leadership in the company’s industry or in prior ventures. Most investors will research your business experience and your background in the industry. Passion and commitment should be evident to inspire confidence in investors and stakeholders.

“Investor fit” is particularly important to angel investors compared to venture capital fund managers.  Angel investors place great importance on “chemistry” between themselves and the entrepreneur because they generally take a more hands-on approach in the businesses they invest in.

Pitch Perfect #3 Company uniqueness. 

Your product or services need to be unique. Prove to your investors, with concrete evidence, that your market potential is big enough to make investing worthwhile.

Venture capitalists’ are influenced by product characteristics such as proprietary features and competitive advantage. Investors look for features that distinguish you from potential competitors and give you some sort of advantage, such as intellectual property protection, exclusive licenses and exclusive marketing and distribution relationships.

Pitch Perfect #4 Effective business model. 

Your business will start to display its strategic value as soon as it begins to generate profits. Present the business model that you are currently using and prove that it will help your company become more profitable.

Different types of investors seek different attributes from a business plan. It’s important to customize your business plan and pitch to each investor. For example, venture capital fund managers and angel investors tend to put more emphasis on both market and finance issues, so those are areas that you should focus on when approaching these types of investors.

Pitch Perfect #5 Large market size. 

Angel investors typically invest in solutions that address major problems for significantly large target markets. On the other hand, venture capitalists look at market characteristics such as significant growth and limited competition when investing.

The larger and more stable customer base that your brand has, the stronger competitive advantage you will have when pitching to investors. A larger and more stable customer base will serve as proof that your company has a great impact to its target market.

Investors look for companies that can grow quickly and manage this high growth scale. Investors must see that the company can generate significant profits beyond the initial product idea with adequate financial projections and a plan to include multiple sources of revenue.

Pitching for funding is one step to building your startup. There’s a lot more to raising a round of financing than simply creating a pitch deck and nailing its delivery. That’s 1 percent of the battle. The other 99 percentis building the right product, hiring amazing people, building a fantastic culture, and understanding your metrics. Acquiring funding for your startup is a means and not an end itself. Your job is to grow the value of every dollar you take, so take them wisely.

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