Getting the right funding can be the key to turning your startup idea into reality. Here are some tips to nail your pitch to investors.
You may have a great idea. But to turn your idea into reality, you need funds. While there are multiple ways to raise funds, the competition is also high. According to a 2019 report, insufficient funds are the second most commonly cited reason for a startup’s failure.
To raise capital for your startup, you have to know how to pitch your idea so that it piques the interest of potential investors. However, whether you are raising your seed capital or you are experienced at fundraising and seeking venture capital or even secondary VC funds, pitching to investors can be a stressful experience.
How can you prepare a good pitch and deliver your best? Here are some tips that can help you nail your pitch:
1. Do your investor research and find the right investor
Choosing the right investor is one of the most important decisions for a startup founder—an investor can make or break a startup. Your investors will hold stakes in your company – they’ll play a crucial role in directing your startup towards success. Therefore, you should devote as much effort in selecting investors as you put in selecting co-founders or employees, may be even more. Besides, the initial investors you get on-board can be crucial in attracting additional rounds of funding.
Before pitching, find out all you can about the potential investors. Learn about the companies they have invested in before, gauge their understanding of your industry, and know their interests. Make sure the investor you choose has the right skills, understands your product, aligns with your company’s goals, and can add value to your company. You also have to ensure that they have the funds to invest in your startup.
According to Rousseau Kazi, CEO and Founder of collaborative decision-making platform Threads, founders should look for investors who align with their values.
“We’re not only building a product; we’re building a company,” he said. “So it was important that I found someone that I knew was aligned with me, who cared about diversity and inclusion, and who recognized my strengths, but also would push me on my weaknesses.”
2. Build your pitch deck
A pitch deck is a presentation consisting typically of 15-20 slides. It should detail information such as the company overview, the problem you are addressing, the solution your startup is offering, the market size, the team, your competition, competitive advantage, business model, and marketing plan, among others.
A great pitch deck is your means to show that you have more than just an idea to offer. It can go a long way in getting you the financing you need. Keep your deck concise and avoid wordy slides and excessive use of jargon. You can also include graphics and images to make it interesting.
Meanwhile, having a product demo along with your presentation can go a long way in addressing investor’s product-related concerns. It can also help investors to better understand your product’s value and potential.
Furthermore, make sure to tailor your pitch to cater to the investor you are pitching to. Every investor has different interests, priorities, and investment goals. And the same pitch deck is not going to work for all investors.
This is where some of the investor research you carried out will come in handy – understanding your investor’s interests and needs can help you customize your pitch accordingly.
3. Know your numbers and show realistic forecasts
While pitching to investors, it is important to know your numbers. The investors are not going to give you money for your idea; they would want answers to many questions. How much would it cost to make your product? What is your revenue model? What are your future projections? When will the investor get paid back with a premium? How can they exit and when?
The more clearly you can put forth all the relevant data, the better. A clear road map adds credibility to your idea/product and the investor will be more confident to partner with you.
Additionally, ensure that your forecasts are not just bogus numbers. They should be backed by competitor analysis and market data. At the same time, make sure to mention your key assumptions.
4. Tell a compelling story
Once you have a great pitch deck ready with all the sufficient details, you shouldn’t rely on the pitch deck alone to sell your idea. Instead, use the pitch deck and all the facts and figures to tell a compelling and interesting narrative. This can help show your passion for your business as well as keep your investors engaged.
As Jessica Chang, Founder of childcare platform WeeCare, pointed out: “When you want to capture a room of investors, you really only have five minutes. Talk to them directly. Showcase your story and your passion.”
Additionally, it is important to be honest and transparent and present a realistic picture of your startup’s strengths and weaknesses.
“I think that sort of intellectual honesty and humility goes a long way, because nobody expects the founder to be a superhero and say, ‘We’re going to fix everything,’” Manuel Silva Martinez, Head of Investments at Santander InnoVentures, said during a webinar held by Innovate Finance last year. He added that it’s okay to admit there are problems and that you have not figured out everything.
5. Be clear about what you want
Be precise in asking what you are after. You may only want an investment or partnership or both. To ensure that both you and the investor are on the same page, it is important to be clear about the details and be specific with your requests.
Make sure to include details such as the amount of money you are seeking, information about funds previously raised, previous investors, if any, and how long you expect the funds to last.
Asking for a precise amount alone is not sufficient, investors need to know where their money is going. Hence, it is also important to mention what the funds will be utilized for and the milestones you will be able to reach with the amount.
6. Prepare yourself
Before approaching potential investors, make sure to nail down your pitch and prepare well. Practice your pitch multiple times in front of others, even if they are family or friends. This will not only help you to better prepare yourself but also to identify any mistakes in the presentation and make corrections.
Prepare yourself for the follow-up questions after your presentation as well. It is likely that investors will have some tough questions or objections. Go over your pitch from an investor’s perspective and anticipate the questions they may have. Then, prepare yourself to give adequate answers that can clarify the doubts or concerns.
According to Yin Wu, Founder of crypto startup Dirt Protocol, take the feedback from you initial meetings and then improve your pitch accordingly. She also made it a practice to jot down the common questions investors asked and prepared clear answers for the next pitch.
7. Maintain investor relations
Whether you land the funding or not, it is important to stay connected with the investors. You never know how they or their connections can become a resource in the future.
“Every investor that you currently have, whether it’s your cousin who put in a tiny amount when you started or the VC who came in later on – everyone has contacts, and some of those contacts could be prospective investors in your next round,” said Myles Milston, CEO of Globacap, during the Innovate Finance webinar. “Exploiting that contact network can help you increase your runway.”
While pitching to investors is an important milestone for your startup, the key is to do it right. Make sure you choose the right investor, prepare a good pitch desk, and pitch with confidence. However, if an investor rejects your idea, don’t lose hope. Investors like Ycombinator admire persistence – a number of companies apply multiple times before getting accepted.
As Dima Venglinski, Founder of a boutique design and software development company Fireart Studio said: “If you have ideas and want to grow your own company, never give up. Be diligent and patient, and do things as many times as needed to hit success and build a prosperous business.”