Recently, I have seen a lot of pitches by entrepreneurs looking for money. As I have read through their emails, listened to their elevator pitches, and stared at their power point decks, I have become convinced of the following: Most entrepreneurs do a lousy job of pitching investors.
Five mistakes occur so often that I feel compelled to offer suggestions on how to avoid them. So here are my five recommendations to entrepreneurs pitching for money:
1. Make the Basics of Your Business Clear at the Beginning of Your Pitch. Right off the bat, tell investors who your customers are, what problem you can solve, and why customers will part with their money to buy your product. Without this simple framing, it is hard to follow a presentation of a business opportunity that one hasn’t seen before.
2. Explain Why Investors Will Benefit. Think about your pitch from the perspective of the person listening to it. As an entrepreneur, you are asking investors to make an illiquid investment in an uncertain opportunity for an undefined period of time. People don’t make those investments because they enjoy uncertainty and illiquidity. They make them to earn a financial return. So instead of telling investors what their investment will do for you, tell them what your business opportunity can do for them. Explain how investors will profit from their investment in your business. (Incidentally, that means being clear on when and how investors will exit.)
3. Make Your Pitch Short and Sweet. Like everyone, investors have limited time — far too little to sort through all the information that entrepreneurs bombard them with. Start-up company investors receive many pitch emails, hear numerous elevator pitches and thumb through many slide decks.
Given investors’ information overload, you need to make your pitch for funding short and sweet. My rules of thumb are two paragraphs for an email, less than a minute for an elevator pitch and fewer than 15 slides for a deck. If you can’t deliver your message this succinctly, then either your message isn’t clear or you aren’t good at delivering it. Either way, your odds of getting funding won’t increase by making your pitch longer.
4. Make the Pitch Interesting. Engage your investors. Figure out the most compelling dimension of your business and make that point crystal clear. If customers love your product because it cuts their production costs in half, tell investors that. Better yet, present the customer testimonials themselves. Firsthand information from customers is more interesting and more persuasive than secondhand data.
Moreover, if you have a demo, show it. People respond much better to visual demonstrations than they do to hearing others talk about how products work.
5. Answer Investors’ Questions. Be sure you leave enough time to answer questions. Unless you are lucky enough to be stuck at an airport in a snowstorm with a venture capitalist, you aren’t going to get all the time you want to pitch your idea.
Don’t make the mistake of shaving time off of Q&A, rather than trimming your talk, when you are faced with time limits. Responding to queries is a much better way to give people the idiosyncratic information they need to make decisions than is trying to anticipate the different bits and pieces that investors want to hear.
Moreover, most investors ask questions to see how you answer them, which makes question and answer time crucial. It gives you a chance to show how you think.
While these recommendations are anecdotal and not based on any study I have done or read, the patterns are clear. Most entrepreneurs make five easily-remedied mistakes when pitching investors. Following these five steps will eliminate the vast majority of pitching errors.
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Well above recommendations can work as a successful engine, if implemented thoroughly. But before that creation of positive environment is must.
These are great tips. I think another area that is really important is know your investor (audience). Each investor will have his or her “thing” that they are interested in. For example, some investors are very interested in certain industry ratios (or they may have even developed their own ratios and metrics), while others may want be most interested in the what the founders have done before.
The key here is to really research the person / people you are pitching to truly prepare for the meeting.