Having seen more than a few pitches in the last decade, working as a CMO at a fund, and being married to one very active angel investor, I can tell you that there’s no one-size-fits-all, magic pitch formula. However, there are lots of things you can do to earn your investor’s respect and attention.
Let’s start at the end – although investing in startups is one of the riskiest investments out there, most investors are looking for a relatively stable / safe investment, and that’s why they will try to identify the specific metrics that create a relatively “risk-proof” investment (in their eyes); it’s what they would normally describe as gut-feeling. It’s something they can’t really explain or measure, but it’s your job to provide them with as many “safety” indications as possible.
Here are some pointers that will help you score your pitch:
At an early stage of a startup, your team is really all you got. The investor is actually partnering with you and your team more than he (or she!) does with your product, and so they will try to make sure they’re teaming up with the right set of people and will probably look for the following characteristics:
“I’d rather invest in a startup that has a really great team and an idea that needs some refinement, than one that has the brightest idea but its team is lacking the right passion and resilience that are needed for the journey they’re about to take.”
Andrey Shirben, Follow[the]Seed
I’ve met many founders who had some brilliant, innovative ideas that no one ever picked up or opted in to, and in most cases, it’s simply because no one really needed them – these startups were inventing a problem. I know, I know, not all startups were built to save the world’s problems and create a better future and there are many successful startups that are developing games, for example, and that’s great.
However, if you count your business as a problem-solving one, you need to prove that there is a real human need / problem / wish / aspiration behind it… it needs to have an existing market.
Don’t assume the investors will automatically “get” the painpoints or the size of the problem and market – you’ll need to show them how real the problem you’re solving is or the major changes your solution will bring into people’s lives / workplace / gameplay / etc.
Once they have a better understanding of your potential growth, they will be able to decide accordingly how risky this investment is.
The more your solution answers an existing and burning problem, the more likely you are to get your investment. It’s that simple. So when pitching, don’t forget to use data to support your point and prove the existence of a real problem and market size (you can use existing researches, testimonials, online search volume, the existence of alternatives, early traction figures, etc.).
This part usually distinguishes the great pitches from the not-so-great ones, and it’s all about the way you present your solution. It’s clear that you, the founder, has all the knowledge about your idea, but you should be careful in how you present it. Unless you are talking to a very technical person, don’t focus on your features list or how you achieved it technically – talk about the benefits instead. Think about it: people don’t use Canva, for example, because it’s the best design tool out there or because it has the best pre-designed options for them; they use it because it allows them to quickly and easily create the design they had in mind and it saves them the time and cost of working with a designer. The pre-designed options there are just a feature that supports this main benefit. Investors look for the benefits that people can relate to, not for a list of features that can’t explain what’s in it for them.
Want to impress them even more? Show a long-term vision and/or your innovation pipe-line for future years. It’s true that some solutions are a one-trick pony, but it would be great if you could prove your creative and business view as to how this solution can be further developed to cater for more / different needs in the future.
Oh, and try to keep it short and sweet (even if your solution is technologically complicated). Good ideas are easily explained – make sure yours is the same.
After you’ve (briefly!) demonstrated all of the above, get to the point: how much money do you need, what are you going to invest it in, and where will it get you to.
Investors don’t just give you their money and let you play with it. They want to have a clear view as to what this money will be used for, how will it affect your startup growth, and what will be your burn-rate.
Do your homework and make sure you are asking for the right amount for what you’re about to allocate it to, and no less important: make sure you have the numbers to back up this decision (e.g. why do you estimate that investing $X in marketing will get you to Y users in 2 years’ time?). This will give the investors a good indication that you know what you are talking about.
There’s no right or wrong here, but if you were to put yourself in the investor’s shoes, you would understand that at the end of the day, all they look for is a serious entrepreneur with a good product-market fit!
It’s that simple. And it also means that you just have to do your homework and have all the answers to the above questions in hand.
When you know what they’re looking for, it’s much easier to win them over! Good luck!
Looking for some further assistance with your pitch? Need help with creating additional versions for the one you already have? Look no further! Contact me, I’d love to help! Contact me here.