Is Pitching for You?
I am not a big fan of pitching by entrepreneurs to potential investors. Pitching is a highly pressured environment, pressure can be a good thing, stress is not. I don’t believe in placing entrepreneurs, usually skilled in a discipline other than business and investment, in the spotlight. Entrepreneurs, especially technicians, scientists, product developers should not be judged on pitching performance alone.
I am a believer in building relationships, making an emotional connection to the investor as much as going through financial projections and research. Trust and authenticity are words of the moment and for good reason. Without these, an investor is highly unlikely to invest no matter how good your pitch is. It is hard to build this under the pressure of a stage environment. Pitching clubs and pitching forums like are useful and certainly have a place in the industry. I just don’t like them much.
However, should an entrepreneur want to gain some market exposure and if they are competent and confident presenters, the pitching clubs and forums can be an excellent method of attracting potential investors. They also provide the opportunity to improve your pitch and understand the investment market.
If you decide to go down the road of pitching then here are some tips and considerations:
Preparation is Vital
Before you pitch to a business investor you need to be sure that you are completely ready for what could turn out to be the most important few minutes of your life. Investors have the ability to make your dreams come true. They can move you forward faster than you can imagine with a combination of their money, business acumen and contacts. Meeting truly active investors is not a common occurrence and you might only have one or two chances to impress and convince them that you are worth backing.
So here’s my top six things to remember when pitching to a small business investor:
Your Story – You will no doubt have practised your opening line and your elevator. This will help you to build confidence and relax. However, the most important thing to get across fast is your credibility and this is best portrayed in a story. Keep it short but peak their interest early and show a little of your passion. Practice the opening in front of family, friends or colleagues. See if they get what you’re all about in the first two minutes.
Tip – I am a big fan of calm breathing, Nuero Linguistic Programming and Hypnotherapy techniques that can help calm nerves with simple exercises before pitching.
Your Numbers – I don’t prescribe to the theory that there’s nothing more annoying for a small business investor than a pitch where the entrepreneur does not know his or her numbers. I believe true investors will forgive some haziness in a pressured environment like a pitch but you must be able to present your gross and net profits over the coming years and show the investors when they will make their return on investment and what it is going to be. Investors also like to know that financial forecasts and projections have been thoroughly researched and validated. If you stumble too much at this point your pitch is as good as over.
Tip – You will need a good grasp of the numbers and not have to defer to an accountant, these will not be overly complicated numbers so you really should know them.
Your Risks – Investors are risk takers to some degree. However, when you pitch it is essential that you give the investors the feeling that you have looked at things that can go wrong and not been overly optimistic. Don’t pitch risks right at the start or they will have this on their mind all the way through, risks are a “by the way” after the middle and before the grand finally.
Tip – Be confident but concede that there are risks but you intend to address them.
Your Valuation – One of the most common mistakes a new entrepreneur will make is to overvalue their company. By asking for x amount of funding for y amount of debt or equity, some forget that these figures marry up to a valuation, and this valuation needs to be justifiable. Simply stating that you have spent x so far and so the venture must be worth x will infuriate investors. The valuation must be done using industry benchmarks or by using industry techniques. I personally like to offer investors a large slice of equity in exchange for their funds but with a claw back based on the business performing to the agreed business plan. Underestimating your venture’s financial needs or incorrectly presenting the allocation of these funds can be fatal too. Knowing how, when, where and why the funds will be used in the way you have presented is essential.
Tip – Investors rarely want to hear that you need the money to pay back a loan or pay yourself a salary.
Your Uniqueness – You have to know yours or your product or service’s unique qualities or your pitch is dead in the water. Although investors are essentially looking for a return on their capital and they know that your business is most likely to succeed if you are offering something that nobody else is or doing it at a better margin. Whether the uniqueness of your venture is that you are doing something completely new, or that you’re going to be doing something better than anyone else in a sector, it is essential that you are able to express why you will stand out from the crowd to an investor.
Tip – avoid “product goggles” and don’t get tripped up by an investor saying something like “I saw one exactly like that the other day for half the price and better quality”, do your research and don’t make claims you can’t substantiate.
Your Exit Strategy – This is the probably investor’s payday. It’s wonderful to think that an investor will be interested in investing because you have a wonderful company that they can feel as emotionally connected to as you do right now, or that they are being nice, or that they’ve always dreamed of helping a business like yours off the ground as they know how they struggled. However, the reality is that the vast majority of investors are most interested in the return on their investment, which in most cases means the exit strategy and it’s likelihood to happen in the timeframe they want. Your plans for an exit strategy will affect their investment, so have a clear plan in mind that will benefit them as well as yourself and you’re on your way to winning their funding. This might be a part or full IPO, a buy out or a trade sale to a major competitor, but whatever it is your plan must be clear and financially rewarding for all concerned.
Tip – don’t make the mistake of just stating the options, you will need a clear plan and it should align to the objectives and timeframe in your business plan.
As I stated at the start of this article, I am no fan of pitching but recognise it as a necessary platform to attract investment. I would rather do the hard yards and legwork to meet with investors face-to-face but accept that some people prefer to pitch.
Tip – try to find a small group and practice your pitch to them first, get feedback from the audience and improve your pitch each time. Keep the pitch fresh and try to include current affairs or news to support your pitch.
Tags: Angel Investment, Angel Investor, Angel Investors, Debt, Entrepreneur, Entrepreneurs, Equity, Investment, Pitching, Pitching for Investment, Private Equity, Venture, Venture Capital
Are you thinking of pitching for an investment? Are you investment ready? Are you an investor tired of dealing with entrepreneurs with “product goggles”? Are you an investor who prefers to meet face-to-face rather than a pitch environment? Would you like our help? Please call on +61 2 9258 1972 or go to our Contact page.