Business First Family Business, Accounting, Finance, Investing, Marketing And Management
Your early-stage enterprise needs more capital, but the well is dry close to home. If you’re going to continue to grow, you’ll have to seek outside funding.
You know this is a good problem to have. You’re still nervous about the next steps, though. Breaking through means putting together a compelling pitch that actually convinces smart, startup-savvy people to invest in your idea. There are various investment definitions you should know before selling a pitch.
Daunting, sure. Doable? Absolutely. Here’s how to make it happen.
Know Your Audience Before You Enter the Room
Preparation is key to a compelling investor pitch. Before you walk into the room, learn about the people you’ll be pitching and tweak your pitch accordingly. While the core components of your presentation shouldn’t change from pitch to pitch, your audience determines how you’ll personalize it and drive it home.
Use online resources like AngelList and Crunchbase to learn about prospective investors, their companies, areas of expertise, current and prior portfolio components, and anything else that might give you an edge. The Crunchbase profile for Andrew Nikou, OpenGate Capital founder and CEO, shows basic information about Nikou’s private equity investment activity, for example — providing helpful clues for founders planning to pitch him.
Start With a Compelling Hook
Every investor pitch needs a compelling hook. Don’t overinterpret this guidance — real life isn’t “Shark Tank.” But your audience should learn something they didn’t know within the first 15 to 20 seconds of your presentation.
If possible, make that “something” a legitimately surprising statistic and reinforce it with a personal or visceral story. Talk about the struggling entrepreneur who went under because they didn’t know about your solution in time or the neighbor who used your solution to start a thriving side business. Tease your solution’s potential.
Have a Clear Value Proposition That Situates Your Solution in the World (As It Is or Will Be)
If your solution’s value is truly self-evident, you might not need to clothe it in a visceral story or eye-popping statistic (though you’ll need to talk numbers at some point). Airbnb’s original pitch deck famously jumped right in with a three-sentence value proposition that neatly summed up its potential. Of course, there are several beautiful pitch deck designs online.
Your value proposition (and potential upside) might not be as compelling as Airbnb’s. Frame it well and there’s a good chance you’ll get an investor or two to bite, though. Make sure it’s both ambitious (conveying metrics like market size) and realistic (not crowing about changing the world).
Acknowledge and Celebrate Contributors (Including Those Not in the Room)
Most pitches are a team effort, as are most early-stage companies. If you’re fortunate enough to represent your enterprise as it seeks to raise capital, be sure to acknowledge the contributions of those not in the room with you.
This isn’t merely a play at humility. It’s a way to naturally and succinctly convey the depth and breadth of talent at your enterprise. Founder risk is a serious concern for investors these days, and rightly so after high-profile implosions at founder-dominated enterprises. Make clear that the whole show isn’t riding on one person.
Define and Demonstrate Traction to Date
This is the time for hard numbers if you haven’t gotten there yet. Point to objective metrics that convey your company’s momentum. These will depend on your company’s growth stage; but, at a minimum, you need to convey that you’re selling something your target market is interested in buying. Treat this as the most important part of your pitch — because it may well be.
Benchmark Future Progress (And Show How You’ll Get There)
Build on your traction slide by clearly (and realistically) benchmarking future progress. How will the people you’re pitching know that their investment opportunity is paying off? What’s your timeframe for each milestone? Your benchmarks must be objective and testable, the better for investors to hold you accountable.
If you’re still early in the business lifecycle, this part of your pitch should focus on your go-to-market strategy. Farther down the road, it should cover your market share expansion strategy, however that looks for your company.
Have a Clear and Realistic Exit Strategy
Your investors have a right to know how they’ll be made whole. So give them a peek ahead at your exit strategy. What happens after you’ve reached the milestones you just laid out: an IPO? A strategic partnership? A private sale?
Make a Specific Ask That Goes Beyond the Headline Number
Finally, make a specific, detailed ask that’s more than just a round number. Break down the total sum you’re seeking and drill down on each component. What do you plan to use these funds for? And if you’re giving up equity in your enterprise, why are you willing to reduce your personal upside? Your ask tells your investors a lot about who you are as a founder and how you really feel about your company, so this piece is anything but an afterthought.
Does Your Pitch Stand Out?
A specific ask. A clear exit strategy. Benchmarks galore. Audience awareness. These are the components of a compelling pitch. Does yours have them? That’s the test. Don’t rest until you pass it.
