Author: Brigitte Lawler | Reading Time: 9 minutes
Investors hear pitches all the time. And we mean… ALL THE TIME. Consider this their day job which means they know it inside and out.
And, while they remember some, most pitches are forgotten the moment they leave the room. For this reason, founders are usually very stressed when it’s time to put an investment pitch together. So much rides on the need to acquire revenue so they can fund and continue to develop the business and its products. Receiving funding could be what makes or breaks a business venture.
Yet, so many businesses with great ideas and huge potential are rejected because they were unsuccessful at ‘wowing’ the investors over in their pitch.
How do you make your pitch shine through?
We could give you advice like: don’t have long presentation decks, or make it look professional but you’ve probably already read those online elsewhere or been taught these best practices in an accelerator program.
I’d rather tell you the 5 top mistakes that could lead you to a ‘no deal’ situation… and STOP, so you can avoid them.
1. Not articulating how big the market opportunity is for your company
Firstly, investors need to know that there is a market for the product, and secondly, that it is of substantial enough size for continued growth and profits. So you will want to cover a few points in your investment pitch about the market opportunities for your company. You can do this by;
- Defining the target customer(s). Make a persona profile of the type of person who would likely buy you product. Get into the specifics of demography, habits, hobbies, hangouts and how they would come across your product. Make it clear you know exactly who are the people who would become your loyal customers.
- Estimating the number of target customers. Once you know who you are targeting, you can find out how many of the perfect clients are actually out there and what the actual size of your market is with definitive numbers.
- Calculating potential market size: Volume and value. To find the potential market volume you want to understand what the penetration rate is for the product and multiply that with its number of target customers. The market value can be calculated by multiplying market volume with your average values. (For more details, check this article in the MaRS Startup Toolkit)
2. Not showing what traction your company has already gained
Business traction is the progress of a start-up company and the momentum it gains as the business grows. In this, customer response and revenue are the indicators to measure traction and business success.
How much traction is enough for investors?
The traction that’s relevant for your current stage should be in the range of 0.1% to 0.5% of your projected 36 month customer base.
- 0.5% means you can command the top end of the valuation.
- 0.1% means you are likely to get a serious look.
3. Not clearly articulating the big problem your company is planning to solve
In your investment pitch, outline the problem that your business is going to solve, convince investors it is a big problem and why it is crucial to solve it in first place. There has to be a clear ‘why’ someone would consider your product and usually it can be found in the problems your target audience faces regularly and would greatly benefit from your product as a solution to this exact problem.
4. Not clearly articulating why your solution to the problem is compelling
Your elevator pitch and customer value proposition should be be exactly on why yours is a compelling solution to a real problem that will generate revenue. The more concise and clear you can get with this information, the more you sound like you know what you are talking about. And sounding like you know what you’re talking about is going to greatly build trust and credibility with the audience.
The key to getting an investor to read the remainder of the pitch summary lies in a great first impression, so make sure you do stress about making a good elevator pitch. It’s worth the extra effort and will be much easier to keep your audience on board than trying to make up for it later during the pitch.
You will want to outline why prospective customers would choose your product over other products already in the market. Explain how it is better with respect to features, functionality, ease-of-use, cost, etc.
DO NOT give a history lesson and DO NOT ramble on about your vision to change the world. Give your audience some credit, and assume they know some things, also don’t waste their time with an irrelevant back story, that information can be saved for a later meeting when story matters. Otherwise just keep it to the main points, you are not selling you, but your business and the its product’s potential.
Heads up (in case it’s not obvious). Nice-to-have solutions and customers with no money are not compelling.
Lastly, do clearly define your business model. Investors want to know how you plan to make profit and that you have a solid strategy in place to do exactly this.
5. Not showing why your technology and intellectual property rights are valuable
Intellectual property rights are essential tools for preserving your market position. They will ensure your long-term competitive viability and they can be converted into an asset to help turn your idea into a huge money-maker.
So, address the important elements of your technology when pitching to investors and key intellectual property rights such as patents or patents pending, copyrights, domain names, trademarks.
Speak about why the technology is and will be superior, also how it will be difficult for competitors to replicate. This give assurance to your investors, that you aren’t likely to be quickly lost in the market if another company has or makes something similar.
Summary (for the skim readers)
Investors are taking a gamble, a risk by giving their money to companies so you need to make sure that you make them feel very sure that your business is going to be a win for for them, that they can feel comfortable about their investment and know that not funding you will highly likely be a missed opportunity.
The top 5 mistakes:
- Not articulating how big the market opportunity is for the company
- Not showing what traction the company has already gained
- Not clearly articulating the big problem the company is planning to solve
- Not clearly articulating why your solution to the problem is compelling.
- Not showing why your technology and intellectual property rights are valuable
If you can avoid making this 5 mistakes in your investment pitch, you will be in a good position to confidently show why your company is a good option for potential investors. Committing any of these mistakes is a sure way to be another rejected business in funding so cover these bases and go in to have a successful pitch!