How Do You Give The Perfect Investor Pitch?
At some point in their journey, all entrepreneurs will need to pitch their idea, product, or service to an investor or investors. Most of them don’t get the required funding and subsequently fail, or get lesser than they needed. These pointers will help you improve on your pitch, and crack it right in the beginning.
- Entrepreneurial background
Initially, one needs to take time to build credibility. This time needs to be taken to talk about the success stories and achievements of the individual and the team. The entrepreneur needs to highlight the achievements, learnings, and expertise he brings to the table, and a plan to use all those learnings to grow his business. If it’s only an idea that’s being brought before them, and no cohesive plan of action to bring that idea to fruition, the investor won’t be impressed. This will greatly reduce chances to get an investor to commit.
If the entrepreneur is only bringing sweat equity to the table, an investor will not be keen on investing his money and time into the business. The investor needs to believe that the entrepreneur is also sticking his neck on the line for his company, and pledging time and money for the success of his company. The entrepreneur also needs to prove to the investor that he can lead fairly and make the correct judgment calls, or can listen to guidance when it’s necessary.
- Business Idea
The idea should be disruptive in its space. Like Uber in the taxi segment, your product or service needs to stand out from the crowd to attract the attention of an investor. If you create the same product sold by countless other businesses, you won’t raise any money from an investor. Another example is using plastic bottles to store coconut oil for Marico’s Parachute oil. It was disruptive in its segment, and now has a majority share of the market.
- The Team
An investor invests in people first and ideas second. They invest in your team, your passion and your dedication. It will be easier to get funding if one partners with people who can fill in the gaps of domain expertise and complement skills. If you get someone with the same skill set you have, it makes no sense. For example, if you’re good with coding and technical skills, then partner or hire someone who is good with design and someone with good business skills. Of course, they also need to be able to see your vision, otherwise they will not work as hard.
- How to deal with disruptions
Being level-headed in times of crisis should be one of the main characteristics of an entrepreneur. Freezing up and being indecisive during difficult times spells death for the company, and death for any investments. All startups face problems and setbacks before making it big. The investor is more interested in how the entrepreneur will deal with these problems, and that information plays a major role in getting funding.
- Competitive Market
A very important part of the pitch, though many people don’t provide enough detail about why they’re so different from their competitors. The best way to communicate the value proposition over competitors’ is to show it in a matrix format- where one lists the competitors and the features or benefits they offer and the features or benefits of the product or service of the entrepreneur to show the competitive advantage.
- Revenue Projections
The truth is, unless you are a later-stage company, the numbers in your projections typically don’t matter. Nonetheless, putting together a set of thoughtful projections on both the revenue and cost sides enhances your credibility with potential investors.
One should demonstrate an appreciation of the capital they are raising and how does one intend to deploy it to meet milestones that will be critical for future fundraising. While investors may feel projections are premature in assessing the business, they will appreciate the understanding of financial metrics and how to “operate” a business.
- Exit Strategy
It is critical to have a good exit strategy. Even if you never want to exit your company, your investors do. They want to make a tidy sum of money from your company, and then exit it. Ideally, they look for a 5 year exit plan, with the exit in the way of a buyout, franchise, takeover, IPO, etc. You need to include this in your pitch, with projections of how much money they can make from the exit.