For an exquisitely high number of startups out there, not getting funded is a bona fide death sentence. In that sense, your pitch is that ‘make it or break it’ factor and generally speaking, odds are not in your favor.
I’ve been through the ordeal and had my fair share of rejections. In my days as an investor now, I usually sit through these pitches once or twice a week, not to mention the sheer volume of online versions I go through together with my team.
Point being – I feel like I have a pretty good vantage point to explain how to pitch to investors and position yourself for success. Showcasing yourself as an attractive investment opportunity is hard but doable, starting with:
Know your audience
The first step is to find out details about your prospective audience. For instance, we at M51 rely heavily on a personal understanding of entrepreneurs rather than their business plan, along with a few other things we call ‘the M51 way’ (not very imaginative, I know). A simple search will further uncover the exact process behind our reasoning.
For us and some other investors, it’s about the entrepreneurs themselves. We realize a startup we invest in will likely pivot at some point, so we understand we’re ultimately investing in the idea of a successful entrepreneur, not in the same company from the beginning.
Others put more emphasis on the analytical side. Most of the investors are public figures and have or offer readily available information in various corners of the Internet. Naturally, there will also be some that prefer privacy – in those cases, you may wish to network with people they invested in and/or rejected to get the inside scoop.
There’s a lot to be learned about your potential investor. It’s about doing due diligence to not only secure funding but also to see if the investor in question is the match for you. Contrary to some belief, you are allowed to be picky as there is such a thing as a wrong investor. They can demand you give up too much or have a radically different view of the future than you. You’re not just looking for an investor – you’re looking for the right investor as much as they are looking for the right investment.
Be crystal clear about key things
Almost everything you say and show will be subject to scrutiny, more or less. You want to be hyper-focused on the task at hand but also to ooze clarity in what you say, especially on the key pitch elements:
- What your solution is;
- What your differentiator is;
- Who your target audience is;
- How you will market the solution
- What your revenue model is.
I cannot stress how important it is to convey these five points with the utmost precision. In doing so, not only do you exhibit the business objectives (arguably the main purpose of the pitch) and what is different in what you are providing but also show how funding would help take it to the next level. Keep it simple, long enough to convey everything important and be on point about it.
Weave a realistic story
If you’re wondering how to pitch an idea to investors, note that storytelling sells. It’s wired in our nature as we’ve been communicating through stories for as long as we’ve been able to speak (or grunt, back in the earliest of days). I could go on and on about why storytelling tingles our brain but to cut the long story short – strategic storytelling can influence attitudes and behaviors, and elicit trust.
A well-constructed narrative can move people, especially those that look at graphs, spreadsheets, and other usual documents by default. Look at it this way: information you convey about your startup through a story is information a sheet likely can’t convey with the same effect.
Naturally, relevant data points such as market opportunity, profit margins, current user base, and such are mandatory with almost every pitch, perfect or not. Data is the essential part you need to be able to back up – I find it’s how you package it that matters.
With that in mind, be honest about your challenges. You can use them for contrast to create a more dynamic story (‘good guy vs the bad guy’ trope) but more importantly, build trust and credibility. You can’t kid a kidder or bullshit a bullshitter – the person/people before you know how things are business-wise.
Have an exit strategy in place
At the end of the day, we all want to make money, the sooner the better. It’s ok to be hung up on your product or service (enthusiasm helps sell the story) but there needs to be a clear path to payoff present. You have to show the benefit to the investor, which ultimately translates to THE reason why you are the person to invest in.
In the ‘how to close a pitch to investors’ segment of pitching, mark ‘exit strategy’ as your end-with-a-bang moment. It’s a key concern for investors and by showing where the business will be in five years’ (or so) time, you’re basically buying them peace of mind.
The subtle art of the pitch
How to pitch to investors is a subtle matter. The hard part of your entrepreneurial journey starts by showcasing yourself as an attractive investment opportunity. As I said in the beginning – chances don’t favor you on this one. For every reason you think there should be an affirmative nod or a simple ‘yes’, there will be a hundred more reasons for an investor to scoff down on the idea and issue a resounding ‘no’.
But that’s no reason to despair. I can’t guarantee you’ll get funded if you follow these practices. Every investor is different from the next one and frankly – who knows what goes on in their minds at those moments? What I can promise though, is that by following the process outlined in this post, you’ll cover everything that’s in your power to make the best impression. The rest is up to you.