Attracting capital is a primary step towards growing a business but this requires winning a potential investor’s attention with a shining proposition. Before preparing your pitch, you have to become familiar with the basics of the art of the business pitch. In a vast sea of startups and SMEs that have a burning desire for getting funded by a potential sponsor, pitching a business in the right way is key for success. I outline the key principles of pitching your business idea successfully to investors:
Before the Pitch…
Just before you start pitching, don’t miss the opportunity to get introduced to potential Angels or Venture Capitalists. Make sure you review investors’ backgrounds, their size of capital they invest etc. Practice your presentation and slides. As for your attire, a smart business outfit is fine.
Keep it Simple Stupid
First of all bear in mind that less is always more. This means that your elevator pitch has more value if it succeeds in selling your business’s key strengths in as little time as possible. Keep it short, sharp and focused to the point. Present your business idea to investors in 15 minutes or less without leaving out important stuff.
Grab Your Audience’s Attention
Start by introducing yourself and allow your audience to get familiar with your voice before you start pitching. Treat your presentation like a storytelling and try to connect with the people listening to you by interacting with them whenever possible. Don’t just read slides or stare at projector screen. Speak clearly and relatively slow so that people can follow you smoothly.
Give Them Facts, not Fiction
Try to spark confidence by presenting them with real, tangible data when it comes to future predictions or growth figures since the company started. Investors hear so many pitches about revenue forecasts, but if your business lacks a solid track record you may be deemed as a big dreamer. Be prepared to show how your cash flow, track record and real-world experience make your business functional before you seek investment.
Show them precise facts showing how your company fits into the market landscape, its key revenue streams, main competitive advantages, marketing strategy and so on.
Be Future-focused and Realistic
When you present your projections for future revenue and profitability, try to keep them as realistic and reasonable as possible. Show investors that you have a good understanding of reality with three versions of financial projections: best case, moderate case and worst case. Base each of these models on figures, past and present performance data, industry and competitor analyses and a series of well-thought-out, defendable assumptions.
If you have a startup business, present them a 6-year financial projection plan. If your company is in an early-mid stage present them your financial projections for the next 3-5 years.
Don’t Be Greedy With Your Expectations
In an age where spending is uncontrollable, you need to show that you are a fiscally responsible manager who knows how to maximise profits and minimise costs. Give yourself wiggle room in your operations and marketing budgets, but avoid being excessive. Refrain from asking for a huge salary or big-budget perks. Investors want you to be in a position where everything is on the line.
Present them an Exit Strategy
Come up with an exit strategy to show the investor how he will make money after the angel investment will reach an exit. The exit strategy should clearly outline a possible value of the company when sold or transferred, the tax consequences of the business exit and other possible scenarios that relate to the company’s viability.
Don’t go too far With Your Business
Investors may be reluctant to fund a business that seeks for expanding too fast, because many SMEs don’t have the skilled staff and management systems that a larger business requires. When you present your plans for future growth, show your potential investors that you’ll be able to run your business efficiently while it grows in the course of time. Prove that your business can crawl before you say it can walk.
Be Open to new Ideas
If an investor raises concerns or doubts about your business or makes a suggestion that sounds strange to you, don’t ignore it or take it personally. Be open to investors’ feedback and try to learn from it. Ultimately, see how you can use their ideas to improve your business. On top of this, strive to learn from the people who know what you don’t know. It’s a good idea then to build a team of reliable experts. The smartest leaders in the world are those who are surrounded by smarter people.
Overall, pitching your business to investors is not easy endeavor but not impossible either. You just have to be brief, realistic, provide well-grounded facts when making future predictions and embrace other people’s ideas, suggestions or worries.