Over the last six months I’ve been helping a number of startups pitch to investors. There’s no magic formula for pitching, but there are some useful rules of thumb. These rules won’t ensure a successful pitch, but they might help you avoid some avoidable pitfalls. There’s no rocket science here, just common sense. But as common sense is not as common as it could be among some entrepreneurs, I thought it might be useful to set down some rules of thumb.
There are many more, but I’ll start with six:
1) Do your homework. Research who you’re pitching to. Angel investors are different than VCs and every Angel Investor and every VC is different. So first of all, you need to do your homework to find out what kind of investments they like, what phase of business they invest in, how big their rounds are, etc. It makes no sense pitching blind when it’s easy to find out about investors online. Do your research.
2) Don’t Wing it. It’s easy to tell founders who have finished their deck just before the meeting and those who have really practiced and honed the pitch. A lot comes down to confidence and you’ll be more confident if you’ve practiced more. So, make sure you give yourself time to practice. Watch good pitches on YouTube. Present to friends; take feedback; adjust and make changes; present again. Practice. Don’t wing it!
3) Remember you’re selling an investment in your company, not your product. I’ve seen too many founders spend 80-90% of their pitch on the details of their product. The product is clearly pivotal, but investors are not customers. They’re not buying your product; they’re deciding whether to invest in your business. This is why market research, projections, plans, partnerships etc. all matter. Investors will want to know that you understand the difference between what it takes to develop a cool product and what it takes to develop a successful business. This means that pitching the product should typically be less than 50% of the total pitch.
4) Focus on simple take-aways. The ideal scenario would be for a prospective investor to spend hours evaluating your business, working through the detail with you. The more time they spend the more they’ll understand. But the reality is that you only have short window to ensure the investor understands the core elements of your proposition. In too many pitches I’ve seen the investors left a bit bamboozled by detail and unclear on the key take-aways. This is not good. So, you need to make sure that, even if they forget a lot of detail, they take away two or three key points.
5) Describe your growth plan clearly. Investors want to hear the growth plan for your business because they want to be able to assess the likelihood of its success. They don’t need excessive detail, but they do need clarity. And they will want to know your guiding assumptions. Everyone knows that plans change over time, but this is not a reason to not bother setting down a clear plan.
6) Finish by talking about your exit strategy. A high percentage of pitches leave out the exit strategy, so the investor can be left uncertain on how you are going to be able to return their money to them. Experienced investors will, of course, know all the options; but you will impress them if you show that you are thinking about their inevitable concerns. Let them know when you plan to exit, how, with whom and at what kind of multiples.
You may also find it useful to take a look at David Rose’s TED Talk: How to Pitch to a VC. There is lots of good stuff in David’s video that I haven’t covered above.