As a startup, only the chosen few get the opportunity to pitch to investors.
Like most entrepreneurs, your business consumes every thought, and pitching is the culmination of all of your hard work. You’re ready to emerge victorious and get your startup funded.
As an investor, I’ve watched a lot of startup presentations and listened to feedback from other investors. As a startup advisor, I’ve coached many in pitches.
Here are six ways to show your prowess and get funded.
1. Skillfully articulate your company's value proposition and story.
This sounds really obvious, right? You’d be shocked to learn how many don’t. I’ve worked with many CEOs who knew every aspect of their product or service and couldn’t adequately describe it to investors. The company story should align with the mission statement and elevator pitch (a 60-second summation of what your business does); this must be concise and easily understood, or the results will be disastrous.
Failure in pitching isn’t ‘no,’ as it’s a numbers game. Failure is, “we don’t understand what you do. What exactly is your product/service?” I worked with a CEO who received this feedback in his first pitch. He came to me because he stated that ‘he was a very nervous speaker.’ After watching his pitch, I didn’t understand his business. After asking many questions, I finally understood. I rearranged his PP deck and had him add missing slides. Now, the story of his company was crystal clear; he has a strong product and a compelling story. His nervousness fell away, and he succeeded in receiving significant funding.
2. Make realistic claims.
Don’t claim to be a unicorn or a disruptor. These statements are overused, and too many startups are claiming this. A unicorn is a term used in the venture capital community that describes privately held startups with valuations of over $1 billion. This term was first popularized by V.C. Aileen Lee, founder of CowboyVC, an early-stage venture capital fund based in Palo Alto, California. Unicorns are often ‘disruptors,’ changing the industry as a whole. Uber is a prime example- does anyone use taxis anymore? Unless you’re the next Uber, stay away from the terms unicorn, and disruptor.
Tell them why your company is, or will be successful, and how you’re different from like products or services. Your S.W.O.T. (strengths, weaknesses, opportunity and threats) and competitive matrix analysis should give you a very clear indication. Make sure that you’ve completed thorough research, and can easily articulate this.
3. Plan for wise 'use of funds.'
You’re raising money to fund your startup; the investor will want to know how you’ll use their money, also know as “use of funds.” The absolute worst answers are: to give yourself a salary, and research and development. An investor doesn’t want to pay to research your idea, and then pay more to develop your product. Why wouldn’t they just do it themselves?
Most startups seeking capital have a viable product and a revenue stream. Typically, when describing how you’ll use the money, you should divide this into categories, usually between three-five and give percentages to each: 30% marketing, 50% inventory, and 20% for staffing. Be sure to have a more detailed account in the event they ask you.
4. Use realistic projections and graphs.
Every investor will want to have an estimate of R.O.I.- return on investment; this is typically the last slide. An investor always weighs risk vs. reward. If you’re selling a product and have more purchase orders than you can keep up with, this represents a lesser degree of risk. Your future financial projections are based upon your past growth rate, current purchase orders, and future prospects. You should have calculated estimates for years 1-5, post-investment. These must be realistic.
The ‘hockey-stick’ growth graph is overused in financial projections. Seriously, observe the slope of the “growth;” under what circumstances is this within the realm of reason? Stay away from it unless it’s believable and based upon solid historical, current, and projected (LOIs letters of intents) information.
5. Be brave and tell the truth.
In the question and answer phase, investors will ask tough questions. If you don’t know the answer, don’t lie or ‘wing-it.’ Don’t worry about ‘losing face’ with the tough questions. Investors love the truth. I’ve heard a room of about 30 investors shower praise upon the the company pitching who told the truth and make statements such as, “that’s refreshingly honest,” “no one just comes out and tells the truth,” “good for you!” Better to say something like, “I don’t know the answer to that question, but I’ll find out and get back to you.” You’ll gain credibility; this also allows you to get that investor’s information, so that you contact them with the answer– and potentially continue the dialog. This give you higher potential for a win.
6. Use compelling PPT slides that engage, inspire, and compel action with your pitch/presentation.
Better yet, some entrepreneurs are using videos . These tie into their company’s themes and are interesting, exciting, and engaging. If you use video, make sure that it does not detract from your pitch; rather, adds to it.
If you’re going to use PowerPoint, don’t use more than ten slides. Of course, this varies depending upon the length of your presentation. These should be visually appealing and not crowded with hard to read text or way too many words with motions. When you’re pitching don’t look at the ppt, or your notes, only the investors. Make eye contact while speaking. This is what engages your listeners.