Five Tips For Pitching For Investment Money
You have come up with the multi-million dollar business idea and now it is time to start pitching investors for start-up capital. Here are five quick tips to consider when preparing to pitch your business to investors.
- Know everything about your business, your market and your customers. First of all this makes good business sense but it also allows you to show the investor that you are serious about making this business a success. It raises your credibility when the investor asks you questions. The worst thing that can happen is for you to get tripped up on something that you should know.
- Talk to the investor about what they are interested in, money. To often entrepreneurs get wrapped up in talking about the operations. Yes this is important but when you are talking to money people you need to talk about how you are planning to make money. Investors want to know how you are going to make enough money to give them the return they are seeking. Don’t be afraid of the financials. Understand them and be able to speak confidently about your financial plan.
- Don’t expect to get a check based on your first pitch. Seeking investment is a journey. Both you and the investor need to get to know each other so that a great partnership can be formed. In your first presentation your goal is to get the investor’s attention and get to the next meeting. It is also a great opportunity for you to learn more about your presentation. Listen to the questions. Did you expect the question or is it something new you hadn’t considered? Was the question on something you felt you had covered but obviously the point didn’t land? This allows you to tighten things up so you are even more ready the next time.
- Don’t show up with an NDA on the first meeting. Nothing pisses off an investor more than being asked to sign a Non-Disclosure Agreement (NDA) at the first meeting? Remember, meeting one is to gauge interest and get to the next meeting. You control the information shared in this meeting. There is plenty to share without giving away the secret sauce. A good investor will realize that they will need to sign an NDA to look under the hood and when the time is right they will.
- Setting valuation is a negotiation. With early stage companies there isn’t much to hang your hat on to set value so typically you will have a number and the investor will have another. Your valuation says a lot to the investor. Have a good reason you choose the valuation you did. In the early stage it will be based on projections and comparable deals that are similar to yours. Also, if you have a crazy high number you should really rethink it. Sure it sounds cool to say you have a $20 million valuation on your two month old start-up but it also shows potential investors that you you either don’t understand how to set valuation and/or you might be difficult to work with as you are not rooted in reality.
Be ready to take you time with this process. It will probably take you several months to actually get money in your account. Use this time to really get to know and understand the investor because once you take their money you have a partner. A good partner will bring more than just cash. They call them “Angel” investors because they can help you avoid mistakes, open doors and grow the company. After all that is the point, to grow the company not just to get investment.