Do you know when you should begin pitching investors? How about the three most important factors investors want to see in a pitch? A lot of the work that goes into finding investors lies in subtlety and knowing the not-so-obvious elements of pitching. If you’re out looking for quality investors to buy into your startup, here are 14 tips you might not have considered before, from financial experts and entrepreneurs themselves.
- You Are Central to the Pitch
- Build Relationships Before Pitching
- Team Unity to Achieve Clearly Set Goals
- Respond to Investors’ Needs
- Captivate Investors Using Brand Storytelling
- Don’t Overload Your Presentation
- Know What Power Dynamics Investors Operate Under
- Relax and Enjoy the Moment
- Identify Investors’ Expectations
- Plan Out the Exit Strategy
- Don’t Get Lost in the Product Details
- Begin Raising Capital Before You Need It
- Check for Spelling and Grammar Mistakes
- Show Investors You Have Buy-In
You Are Central to the Pitch
One of the most important things to remember when pitching investors for a new startup is that you aren’t just pitching your business idea—you’re also pitching yourself. This means that you need to be able to articulate not only why your business is a good investment, but also why you’re the right person to lead it. Investors want to see that you have a clear understanding of your industry and your target market, as well as a solid plan for how you intend to grow your business.
They’ll also be looking for evidence that you have the drive and determination to make your startup a success. Your pitch should be well-rehearsed and delivered with confidence, but don’t try to memorize it—investors can spot a script a mile away. Be prepared to answer any questions they may have, and be ready to show them how your startup will solve a problem or fill a need in the marketplace.
Build Relationships Before Pitching
It’s important to develop relationships with investors before you start pitching them. Raising money can be a lengthy process, especially for first-timers adjusting to a learning curve. You’ll want to take notes on how your conversations with investors go and use these notes to fine-tune your pitches.
If you do this, you’ll be fully prepared to impress when you pitch to your first-choice investor. But even then, it’s a good move to build relationships with your ideal funds before you need money urgently. This gives you a good jumping-off point when it comes time to pitch, as you already have a dynamic between you.
Team Unity to Achieve Clearly Set Goals
One thing to keep in mind when pitching to investors is that they’re not only looking at the numbers but also at the team behind the startup. They want to see that the founders are passionate about their idea and have the skills and experience to make it succeed. They also want to know that the team is able to work together effectively and is open to feedback.
Additionally, investors will be looking for a clear plan on how the startup will use the funding to achieve its goals. Therefore, it’s important to have a well-thought-out pitch that includes not only financial projections but also information about the team and the company’s plans for growth. By preparing in advance and knowing what investors are looking for, you can increase your chances of successfully raising money for your startup.
Respond to Investors’ Needs
It’s crucial to understand that not all investors want the same thing. Several types of investors have different needs, and your pitch should present benefits that satisfy them. For example, venture capitalists are mainly oriented on numbers, so your pitch should focus on metrics and potential risk. At the same time, angel investors want to see the bigger picture and that you understand your target market. The point is you need to create different pitches that respond to particular investors’ needs.
Captivate Investors Using Brand Storytelling
Tell the story behind your product or service—the who, what, why, and how of your brand that makes it unique and interesting. Captivating your audience of investors is imperative for getting them on board to put money into your idea, and brand storytelling is a surefire way to elevate any business pitch. If an investor feels moved by or connected to your brand in some way, they’re more likely to open their pockets.
Don’t Overload Your Presentation
When it comes to pitching investors, don’t try to cram too much information into your presentation. Your goal should be to give a clear and concise overview of your business, your team, and your plans for the future. You don’t need to go into excruciating detail about every aspect of your operation; just hit the highlights and leave the rest for later. The key is to focus on what’s most important: why your business is worth investing in, and how you plan to use the funding to achieve your goals. If you can communicate these things effectively, you’ll be well on your way to securing the investments you need.
Know What Power Dynamics Investors Operate Under
Seed investors for startups are operating under key power law dynamics. Founders should know the mindset that venture capitalists have when they make an investment in a company. Early-stage investors often want to make as many low-capital bets as they can in order to capture the upside of high returns through power law dynamics.
Even if a venture capitalist makes dozens of investments in startups, they only need one or two of those companies in their portfolio to perform with a 10-20x plus return in order for them to make all of their money back. Sometimes early-stage investments can see a 50-100x return which further emphasizes the scope of power-law dynamics. Founders should know that venture capitalists are operating with power-law dynamics.
Relax and Enjoy the Moment
Any public speaker will tell you that the audience usually has fun when the performer is having fun. Try to relax and enjoy yourself—talk as you would to a friend. When we speak to our friends, we don’t just recite facts. Instead, we embellish what we are saying with funny stories and examples. We interact and make connections. We ask questions about their opinions of what we are saying. All these elements of natural human interaction make speech more interesting. Make sure not to lose them just because you are making a pitch!
Identify Investors’ Expectations
To me, the most important thing to know about pitching investors is how to talk about your business in a way that’s going to resonate with them. When you’re talking to investors, they are looking at you and your team as an investment opportunity. They have an idea of what they want out of their investments, and if you can’t meet those expectations, then they’re not going to be interested in working with you. So it’s important to understand what those expectations are and how your company can deliver on them.
I’ve found that a lot of founders don’t really understand this—they just assume that because their product is awesome and everyone loves it, then investors will love it too. But it really isn’t that simple. You need to be able to speak the same language as investors so they understand what they’re getting into when they invest in your company.
Plan Out the Exit Strategy
One overlooked point when pitching investors for a new startup is the exit strategy. This is especially when you need large sums of funds. Be clear on whether your exit strategy is an acquisition, going public, or what you plan to do. Make sure the pitch is powerful. In the executive summary, your business plan and exit strategy are crucial for investors. Show your due diligence and what companies you target for an exit strategy. Have a timeframe and explain why it’s essential to have an exit strategy in the stated period.
Don’t Get Lost in the Product Details
Founders fall in love with their idea. They fall in love with their (beta) product. They fall in love with their initial conception about what problem they are solving. When pitching investors, the three primary topics to focus on are going to be on the team, product, and market size. What isn’t obvious is that the investors may not care as much about your product’s nuances and details.
What investors care about is knowing whether this product solves a fundamental need in the market and will customers pay to use it. Focus more of your pitch around the team’s ability to execute, the problem the product is solving, and the potential around how big it could become. Getting lost in product details is a surefire way to alienate investors.
Begin Raising Capital Before You Need It
Start raising money early. Research shows that nearly 40% of startup failures occur when a company runs out of cash and isn’t able to raise more in time. Even if you’re able to raise money, negotiating from a place of desperation is an easy way to make a bad deal. To avoid this scramble, begin raising funds early. Typically, it’s smart to start pitching investors at least six months before your budget is expected to run dry.
Check for Spelling and Grammar Mistakes
While spelling and grammar may not seem like the most important thing, you should still definitely spell-check your investor pitches and fix any grammar issues. A few grammar or spelling mistakes could cost you because these can reflect a sense of carelessness and a lack of professionalism. So, review and edit your investor pitch very carefully before making it final.
Show Investors You Have Buy-In
This might sound obvious, but when I began my startup, how to display to investors my personal buy-in was something that took me years to learn. I’m not talking about paying customers, or even an MVP. Investors want to see your fieldwork. Who have you spoken to, are they signed up if this project launches? Show them that the product has a real, authentic, and reasonable potential. It has to be real people, who you spoke with, and interviewed, and who gave you a green light that when this product launches, they are in.
And all of this of course needs to come with case studies, proof, and something tangible they can smell, see and feel. A lot of the time, this process will lead to a shift in direction for the startup as a whole. This is the number one thing I wish someone told me from the beginning and helped me to internalize.
Chaim Semerenko, SEO, Digital Marketing Expert, Growth Hacking, PPC, vcsem93