You know your business better than anyone else and you know it like the back of your hand, so do you really need to focus that much on your investor pitch? The answer is absolutely, Yes! Although you can ramble on about your business and projections for hours, when you tell a potential investor you only need 10 minutes of their time, prepare yourself to only give ten minutes of your time. This means preparing your pitch over and over in the mirror and in front of a clock. More practice and a perfect PowerPoint will make your pitch a breeze, but there will be unavoidable curveballs. In a sense, I’m telling you to prepare for something you can’t prepare for. Put on your best business suit, make yourself presentable, and follow these tips to give a flawless investor pitch:
How did you get here? If you want to grab an investor’s attention, tell them the story from the ground up, but fast forwarded about a hundred times, since you only have a minute or two. Get them intrigued to hear the reason you’re standing in front of them today, willing to hand over a chunk of your business for a little cash to keep it going. This includes what you need the money for. Don’t forget to tell them what it is you actually make or do!
Is it working? It’s time to brag about your own product, which hopefully won’t be too hard for you to do. This means explaining your progress and profit to date. How many customers do you currently have? How much have you sold to date? What do your profits look like since you’ve started? Give them details on where every minute and dollar spent has gone. This is the point where, when you mention your progress, you should see investors eyes open, the eyebrows raise, and maybe they even sit up in their seat a little. If you’ve ever seen Shark Tank then you know what this looks like. That’s the reaction you’re looking for and not Mark Cuban with his hand on his face.
Who are you marketing to? Your product might be a little out of the ordinary and even if it’s not, investors may be thinking “who’s looking to buy this?” Obviously, you’re first answer is to look at the people who have already bought your product, but that’s not enough. How do you plan on expanding that target market? If the people who bought from you before were local, how do you expect to make that scale nationally? If you’re looking to market to other businesses, how do you expect to get their attention? In other words, what are your marketing goals and why?
Who else is doing this? Being an entrepreneur means being competitive in an extremely competitive market. Your investors will want to know who you’re competing against and how your product is different. Whether it’s price, location, features, etc. you need to make it apparent that your product is better- or just better at selling. After all, investors invest in the person first and the idea second.
What are you missing? Now comes the truth, why are you here? If you’re asking for money, clearly you plan on doing something with it. Whether it’s to hire more people, invest in software, create more product, inventory- the list can literally go on forever- explain how you intend to use the money you get.
What do you look like in 10 years? At this point, investors have heard all about what you’ve been doing since you’ve started, but what do you plan to do in the future and how will that affect their wallets? Here’s where you bring out your projection models and they better be realistic. If you don’t have the expertise to make projection models, it would behoove you to hire an expert. The last thing you want is to present a graph with “hockey-stick growth”, which investors will rightfully laugh at. Instead, make three projections; one with the best-case scenario, one mediocre scenario, and one worst-case scenario. Each of these should have inflection points with explanations. At what point do you plan on releasing a new product or expanding? At what point do you plan on expanding your marketing strategy and how will this affect your projections? Give them evidence to back up all of your claims.
How much will this cost your investors? So you’ve explained to them what your business will look like and you’ve explained what you plan to do with the money, but now it’s time to get down to business and talk equity. What percent are you willing to give up of your business for how much money? While the ratio is easy to figure out based on how much you’ve made already in the valuation of your business, do you want to give up 5 percent, 25 percent, or even 50 percent? Word of advice, start small and plan on keeping your business. This means not going over even 30 percent, because you never know when you’ll need a second round of investing. If you’re giving away over 50 percent of your business, guess what, it’s no longer your business. It’s up to you on how much you need and how much you’re willing to give up, but think about you and your business in the long-term when making this decision.
Starting a business isn’t easy and giving away part of what you’ve already started is even harder. When you have your pitch together, get out there and start finding the right shark to invest in your business!
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