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10 Tips for Giving the Perfect Investor Pitch
COLUMBIA, S.C. – What is the biggest obstacle to starting a business? For most people, the answer is money.
There are several ways a startup can find money to get started. These include applying for micro loans or business loans, crowdfunding, starting a part-time job, borrowing money from friends and family, or, if your business has the potential to grow to a significant size, look for angel investor groups. In this case, you will need a business plan and be able to prove that your business will make enough money to make the investors a nice profit.
During the 2015 Global Entrepreneurship Week, South Carolina Angel Network and the Midlands angel investor group Capital Angels gave a workshop with the theme "How to Pitch to Investors." The event was held at IT-oLogy located in downtown Columbia.
The workshop was led by Charlie Banks, managing director of Capital Angels and Co-Founder of the South Carolina Angel Network (SCAN), and Matt Dunbar, managing director of Greenville’s Upstate Carolina Angel Network, Co-Founder of SCAN and board member of the Angel Capital Association.
Here are the top 10 tips heard at the "How to Pitch to Investors" workshop:
1. Do Your Homework!
Your job is to find out what stage you are in and look for investors that will fund that stage, so you can tailor your presentation type, message and style to fit the target audience.
Idea/Seed ----> early stage ----> growth ----> later stage
Capital needed for each stage
10K-100K ----> 100K-3M ----> 3M-50M ----> 50M+
As an entrepreneur looking for money, you need to understand that investors are not "one size fits all." If you are in the idea/seed phase, you do not want to look for banks because they do not fund that company stage.
2. Get a Warm Introduction
The key word here is to build credibility. Almost everyone invests from referrals, so leverage your network to get an intro. Have someone in your network that knows your business, you, and the investors, someone who will be able to introduce your business to the investors, who will work as a mediator. A warm introduction is fundamental.
OBS: LinkedIn is a great way to connect.
3. Have an Elevator Pitch Up Your Sleeve
You need to be able to summarize your business in 10 seconds. Here is the best business description model:
Describe the problem > solution > business model.
4. Be Sure to Send an Executive Summary
Summarize your company in 1 page (2 at most). Think about structuring your executive summary with clear headers, making it visually pleasing and easy to digest. Talk about your team, market and briefly talk about your business. Put yourself in the shoes of the investors and think what they would be interested in reading.
Mistake: You never know what technology someone is using, so always send a PDF document.
5. Slide Presentation/Pitch Deck: Pay Attention to Details
Time to put the presentation together. A pitch deck is a brief presentation often created using PowerPoint, Keynote, or Prezi. Generally speaking, you want 10-12 slides. Pay attention to the following:
Be concise – use bullets and phrases;
Formatting, spelling, grammar, color scheme, alignment;
Diagrams and white space are good;
Pictures are worth a lot of words;
It is helpful to demo the product/service - make sure it works!
OBS: Remember that you want the investor to be paying attention to you and what you have to say, not to the slides. Beautiful slides do NOT save bad delivery.
6. Pitch: Focus on What is Important
In your presentation, you need to make sure that you are not taking too long to describe what your company does. Keep your company description short and focus on "a compelling solution to a large and meaningful problem." Angel investors' diligence criteria is: Team, Traction, Market.
7. Remember the Purpose of the Pitch
When speaking to investors, you are there to SELL, not to TEACH. You are there to EXCITE, not EDUCATE. Tell a compelling story and convey knowledge. The person presenting should typically be the CEO and ideally someone who is passionate, clear, concise, engaging and not boring. Never, never, never present claims you can't back up. Remember, talk to your audience, not to the screen!
OBS: Be prepared for a possible Q&A session at the end.
8. Explain Why Your Team Can Execute the Business Plan
Give high-level backgrounds. Never say that you have a "world class team." Be realistic and remember to mention the "support team" like advisors, if they are really involved.
9. Remember that Investors’ #1 Concern is Return of Capital
Explaining how you make money is more important than your technology. The purpose of the money has to be defined, do not just show revenue and net income. It is important to include metrics (# users, retention rate, average price, mix, etc.).
10. Famous Words You Should NEVER Use
"I am confident YOU will be very interested. Get in now or you will miss out..."
"1% will be worth $47B in 10 years..."
"Our primary audience is customers between the ages of birth and death..."
And do not forget: PRACTICE, PRACTICE, PRACTICE, and PRACTICE.