Pitching early stage investors
Pitching investors is an art form that takes almost endless practice to get really good at. Here is a list of 7 things that will help you improve your pitch and hopefully get that cheque:
1. Use storytelling. Have you ever tried pitching holiday plans to your friends? Instead of telling them straight away about your idea for a destination, you make all the research first so you have enough ammunition for a good story and hence make it easier for yourself to pitch as a great experience.
You check transportation, accommodation, things to see, places to visit, restaurants to try etc. By creating an appealing story on what the holiday will be like you make your friends imagine the adventure before it happens. Hopefully this will get them all excited about being part of the journey and they will end up going.
“You might not have realised it, but what you are doing here is a perfect example of storytelling.”
Pitching your startup to investors is very similar. It´s all about creating excitement. You don’t want to bore them with long lists of potential product features. Instead you want to create a feeling of where this adventure will be heading. Your ship is soon about to sail across the Atlantic and now is the time to pay for the ticket.
You want to have a consistent and believable story. These are questions that should be answered as part of the story:
Why is your startup going to disrupt the industry?
Why is this going to be the next big thing?
Why is your team so freaking awesome?
Why are you the right person to build this?
Why is the timing right?
Why is your approach unique?
Why is the investor going to make a ton of money?
When you are done explaining about your startup they should be as excited as if they were just about to board a space shuttle.
2. You are the startup. By now you have probably heard that the team is more important than the idea itself. If you are pitching for the first round of funding and you don’t have much traction yet, then your idea is actually just another datapoint that represents your skills or overall intelligence.
Like your university diploma or the outcome of your latest startup, your current idea for a startup tells the investor something about you, but not much more than that. While your diploma might reveal you are really hard working and your latest startup that you are reasonably good at executing, your current idea might signal to investors that you have industry knowledge in a specific field.
To make it simple: Just because your idea seems really smart it doesn’t mean your new business is going to succeed. It just makes it more likely you are actually as smart as you are trying to convey.
“Ideas quickly change, so pitch yourself instead.”
Why you are really smart, why do you know a lot about this space or why will you be able to overcome any obstacle on your road? That’s the stuff that will make investors think you are worth throwing their money at.
3. Reveal your soft spots. Telling an investor that you aren’t going to have any competition or that you have no real challenges moving forward is probably the worst thing you can do. If you don’t get any competition then your space is probably not worth being in and if you aren’t going to have many challenges, then this can’t be a very interesting problem to solve.
Instead do like Eminem did in the final scene of his movie 8mile. Take all the investors usual arguments and shoot them down before they have a chance to present them. Reveal all your competitors but explain why you are better, faster or simply way ahead. Mention the big challenges ahead, but explain how you intelligently and easily have solved the ones that have come up so far.
Make slides in your presentation deck that leads to questions that you want the investors to ask. When they do ask them make sure you have a good answer ready. That will make it seem like you have intuitive answers for their difficult questions.
4. Over promise and over deliver. All startups use BS and POMA when they pitch and I don’t think that’s ever going to change (If you don’t know or can’t guess what the letters stand for then please Google it). If you are pitching conservatively while everyone else is making their presentation super optimistic then you are probably going to seem unambitious in the eyes of the investors.
You want to pump your numbers, but at the same time you don’t want to lie about your traction. The solution to this is called “over promise and over deliver”. You might not have all the numbers yet even though you are pitching them as if you did, but you will make sure you will be able to get them if you get the investment.
“Pitch the ambition prematurely but have a plan for getting there quickly afterwards.”
5. Turn the tables. You are probably expecting that the investor is going to drill you for questions on why he or she should invest and why you are going to succeed. While this is likely to be the case, don’t let yourself into believing that this is going to be a one-way relationship. Like in any good partnership you want to have balance, so go ahead and drill your investor as well. Ask questions like:
Have you done other investments in this space?
Are you active in the startups you invest in?
What is the most successful startups in your portfolio?
If we raise another round would you be able to commit more funds?
Could you refer us to some of the startups that you have invested in?
Do you know other investors that would be interested in investing if you commit?
Making the investor the one who has to qualify to you just makes you seem more exclusive and like you wouldn’t take money from anybody.
6. ABC. The classic phrase “Always Be Closing” also applies to selling equity in your startup. Since investors favourite hobby is watching from the side lines and either wasting your time or waiting to the last moment to commit their money you got to treat them like any other sale. You got to create some sense of urgency which means having a deadline for them to invest or agreeing on what the next steps are before they are willing to commit.
Ask questions like: How long time did it take from first meeting until you invested in the last startup you invested in? Do you need any other information from us? Could you commit before the end of the month?
“If they are not responding then simply cut them loose by asking them if you can count on them.”
7. Start at the bottom. Pitching takes a lot of practice and the content of your deck is hopefully going to improve along with the input you get from pitching investors. Since you don’t want to burn your best leads you should start pitching the investors whose money you want the least.
That way your performance is as good as it gets when you go and pitch the big dogs and hopefully one of those will allow you to make them rich.