New businesses, in my opinion, are one of the most important ways to kick start an economy. But starting a business is very expensive. Before you even think about paying for marketing materials, you need to consider simple infrastructure costs. Luckily, the proliferation of funding options has rocketed in the last couple of years. Raising funds, especially in early stage is very difficult. The pitch is everything – it could be the difference between sealing the deal or not, so a lot of thought and rehearsal time is required.
So, what’s a perfect pitch? I am yet to find a formula or step-by-step guide that works for everybody but after hearing the amount of pitches I have during the last 30 years, you begin to recognise good and bad habits. I have listed below a quick check-list to make a good pitch to an investor.
Your pitch should be a careful blend of product information, business research and include a personal CV. Funders and investors want to know that their money is in the hands of someone who has failed as he has learnt his lessons from making mistakes. Investors invest in people first and then ideas. I want to know the credentials of the person that is going to be the custodian of my money. Structure your pitch to have product/service related information, showcase your team and the credentials of the key individuals, market research, market positioning and financial breakdown.
However, it is important that you don’t over complicate it. In the modern business environment, it’s always important to have clear PPT Slides that are well presented and the show the relevant information. Detail is important but you don’t want to have dozens of slides filled with graphs and jargons. I believe that if I can’t understand a business within a short space of time, the customers won’t either, so you need to be direct and to the point.
Show Proof Of Demand But Be Realistic With Projections
During my career, I’ve seen literally thousands of pitches, and one of the things which separate the good from the bad is the level of testing that has gone into the idea.
Rather than spending lots of time and money on the perfect prototype, get out there and speak to the people that matter – the customers. Get their feedback and determine the level of demand there is for your business. If you come into a pitch and tell me that you have x amount of buyers already lined up, that automatically increases your chances of investment. You have proved there is a viable market for your idea and for an investor there is nothing better to hear. However, it’s important that you are realistic in your projections. This is often the downfall of many a pitch. I have entrepreneurs tell me about the phenomenal growth they expect in the next three years when their current figures and the market both say different.
Do Your Homework
Do your research and know about your investor who you are pitching to. Your actual business idea is what you will be judged on, but before you’ve even got into the nuts and bolts of it, you need to demonstrate how well you know the investor in front of you. These days there is no excuse for not having key information about the people you are pitching to, and if you can demonstrate this near the beginning of the pitch you get a firm tick in the box.
I’m not saying you should know the entire balance sheet of the investor’s company, but why not talk to them about a recent deal they may have completed? This shows you prepared thoroughly and weren’t just wrapped up in yourself.
Don’t Get Hung Up Om Equity
It’s something I came across a lot on Dragons’ Den – entrepreneurs not wanting to give away what they deem to be too much equity. But you need to ask yourself a simple question – would you rather own 60 percent of a thriving, commercially successful business, or 100 percent of nothing? Remember investors don’t just bring capital to the table, but also experience and contacts. If you can, consider negotiating the type of deal where you give away a certain amount of equity, to begin with, but are able to buy stakes back every time you hit certain targets.
Pitching to an investor not only includes getting the right pitch material but also the right attitude and body language. From start to finish you need to show why an investor should back you, and in my experience, there are a number of traits that a successful investee should show during the course of their pitch.
Confidence Is Key
Set the tone with a confident opening statement and make eye contact with everybody concerned. Your first few minutes can set the tone for the rest of the pitch so make the right impression. The small details such as your outfit, your handshake and the amount of eye contact you make are actually hugely important. Remember if you don’t seem like you believe in your business proposition, investors certainly won’t. Convey total belief and Passion.
Rehearse Your Pitch And Be Interesting
Every presentation I give involves a lot of planning and preparation. I always find it useful to present in front of my colleagues beforehand, over and over again until I get it right (or until they can’t take it anymore). I find testing it out with an audience beforehand gives you time to implement any feedback they may have, which means you end up with a more polished end product. A presentation needs to be engaging and enjoyable for your audience, that’s the most important thing. Nobody wants to sit and listen to something dull and monotonous. When it comes to communication, I have always felt that the way in which you deliver your message is just as important as what you are actually trying to say.
Be Honest And Show Commitment
Don’t turn your pitch into a mere tool to impress investors. What entrepreneurs forget is that we investors get to see a lot of pitches on a daily basis and can easily differentiate between a pitch which is honest and has passion from a mundane one. Also, commitment is of prime importance to an investor. I don’t believe you can be a part-time entrepreneur and you’re highly unlikely to receive funding if you say you’re only putting three days a week into this. It has to be all or nothing – a business is like your child and you need to be completely dedicated.
What I will always ask entrepreneurs is how much time – and if they’re a startup, money – they’re putting into the idea. The more commitment you show, the more likely you are to get what you are looking for.
Master your pitch with the above checklist and let your business roll out…
About The Author
[The author of this post is James Caan CBE – Serial Entrepreneur, CEO of Hamilton Bradshaw Private Equity, Former Dragon, founder of the James Caan Foundation & Former Chairman of Startup loans.]