You’ve been working so fast and furiously on your idea that you’ve started to forget what day of the week it is. Your family and friends can barely recognize you. Your bank account balance is showing more red than you care to admit.
And yet you’re exhilarated because you’re about to make your pitch, secure an investor, and change your life.
Or, you could blow it and leave with nothing, like 95% of those who pitch.
Investors are a sought after commodity. They hear a lot of pitches.
Mostly bad ones.
Here is something to remember: when you hear that the vast majority of investor pitches fail it is because those pitches are lousy. They are terrible. We listen to the first 30 seconds and immediately know that the business is going nowhere.
I am trying to figure out how to write this more emphatically, it is IMMEDIATELY OBVIOUS, whether you fit into the 95% or the 5%. Now, even if you are in the 5% the road to funding is a long and difficult one, but if you are in the 95% you are wasting your time.
Your pitch is short (also check out 6 steps to pitching an angel investor), so you can’t tell investors everything. the 95% pitch tries to cram everythign into a pitch, the 5% pitch is relaxed and has 30 seconds to spare. Remember your objective: Your pitch should get you to the next meeting.
This means that you have to be interesting. Avoid turning investors off and tell a story of a story that piques the interest of investors.
So what is in an investor story
First, please, it doesn’t start with “once upon a time” or describe your history as a human. Investors don’t want to know how much time you put into creating your product or how diligently you have worked on building your business.
There is a trend toward bringing your personal story into the presentation. Your brand and your “why”. We are proponents of human-centric business practices and of leading with your why – but it should be short and to the point. If you pitch us you have 8 minutes to pitch, and if you use 6 of those minutes to tell us about your life’s story and what brought you to us you will not get funding.
The story is a presentation that makes sense to the audience. It shows investors how to attain something through you. Specifically, here you must explain how they make money investing in you, your team and your business.
A key component of telling an inspirational story? Do your homework and understand what your potential investors want Content aligned with a potential investor’s needs will be more inspirational.
Once you have a good idea of what makes your audience tick, use the checklist below to help you pull it all together.
While the order, structure, and detail may vary, we have found that, in general, good pitches have many things in common. Keep these in mind as you prepare your pitch and you will be a step closer to that next meeting.
The eleven things investors are looking for in a pitch
Be careful with this list. You don’t want to present a bland litany of facts; you want to inspire. You also won’t have time for more than 8-10 slides, so don’t rely on creating a slide for each of these. And, not all businesses are the same, so you may need to emphasize one of these eleven more than another. The business model may be more critical, for example, than the solution itself.
That said, here are the eleven things we find investors are always looking for:
A solid attention-grabbing introduction.
In any story the lead is critical and that is just as true for investment pitches. The opening is an opportunity to present something that makes investors want to listen to more.
From the investor’s perspective, if an entrepreneur can’t explain the opportunity up front, the investors will probably never understand it. On the other hand, if the investors can understand it in the first thirty seconds, they will want to learn more. Note that if you ask investors whether they look for an attention-grabbing introduction, they will say that they don’t care. But the thinking brain doesn’t care. The reactive, reptilian brain, definitely cares.
The “pain” or market need
There must be a specific market need. The clearer the need, the better the opportunity. The more tangible the investors can understand the need, the more interested they will be in the solution.
The company’s product or service should directly address the need. But be careful here: one mistake entrepreneurs often make is spending 80% of their pitch on the solution. Investors need to know what the product is, but for this first pitch, the description should be concise. The solution should not take over the whole presentation – it is not that important.
The addressable market size
The market for the product must be at least $250 million, ideally much larger. There is no expectation that the entrepreneur will capture all of it, but investors do want to understand the potential.
The business model
This describes how the entrepreneur will make money. They may sell a product, rent the product, charge a fee for service or sell advertisements. Sometimes the innovation itself is in the business model, not the product, so investors will want to see clearly how the business will work.
Experience in the market/market validation
Feedback from the market, especially responses from customers that address any glaring weaknesses, is a powerful way to demonstrate value and show momentum. Any traction in the market is very valuable.
Channels to market/market strategy.
Sometimes this is covered in the business model, but if not investors want to understand how the company will drive awareness and sales.
Note this: Investors do not want to see how big 1% of the market is, based on the assumption that getting 1% of the market is easy. The entrepreneur should show that she has a concrete plan to deliver sales and value.
Every product no matter how innovative faces a next best alternative, a competitor. Before the very first calculator, people used slide rulers. So somehow the market need is being met today, the question is how and how is the entrepreneurial solution better.
Angel investing is more about the people and the team than anything else. Investors know that the market assumptions and plan are guesses and therefore wrong. Even the best product depends on a long list of assumptions. A good team will recognize this, pivot and make the business work.
We prefer an “A” team selling a “C” product than a “C” team selling an “A” product.
Forecast / Plans:
A plan for spending money and for delivering returns. In a six to twelve-minute pitch, this cannot be detailed, but it is necessary at a high level. And, if your pitch goes well, you will need to show details.
Angel investors make money when a company is acquired so they need to know who may be interested in acquiring the company and for how much. Entrepreneurs often don’t like thinking this way, but angel investors care about the exit.
Every pitch should clearly state what the entrepreneur needs from the investors. Often pitchers forget this, but it is a crucial part of any investor pitch. End strong make the ask inspiring: rather than show a number on the screen talk about what you will do with the money, who else has invested and what the opportunity is. Try to end with a bit of fear of missing out.
The list above is long, especially for a short presentation and even more so when you consider the pages of details behind each one. You can’t possibly present all of this and all of the detail, so you have to craft a story that communicates and engages while explaining the key aspects of your business.
Every entrepreneur looking for financing is up against the same challenge. They all want to stand apart and get noticed, in our experience the best way to do that is to give an excellent presentation and be ready to answer questions.