When it comes to attaining the funding that could get a start-up to its ‘next’, entrepreneurs have a variety of options. Approaching investors is a popular choice.
You need to convince investors to put money into your start-up or idea in exchange for equity, or ownership. Some, like angel investors, invest their own money in promising SMEs, while others invest the money of clients – these are venture capitalists, or VCs.
But, whether investing their own capital or that of others, they all have the same goal – to see a return. You need to show them how your company could make them wealthier.
To do this, you’ll have to pitch. Many investors see dozens of pitches a day, so yours has to be convincing and unforgettable. Here’s how:
1. Tell a story
Begin with a compelling story that addresses the problem your offering will solve for consumers.
Keep your story simple and realistic. It’s ideal if you can base it on real-life events, such as the moment that inspired you to create your business.
Share your accomplishments in terms of sales, contracts, key hires, product launches and the like. Not only will this impress potential investors, but it will increase the credibility of your start-up.
Creating an engaging, but concise pitch means having a laser focus on the core components of your business. They are:
● Your product/service:
o Show potential investors your product with a sample, mock-up or picture
o Explain why it’s unique – how does it meet a need in a way that’s different from others?
● Target market:
o Define who you designed your product or service for. Pinpoint your customers
o Never say that your target market is everyone, even though this may be true in the future.
● Customer acquisition:
o How will you reach your customers?
o How much will this strategy cost?
o How will you measure your success?
4. The competition
This is an integral section of your pitch, but many entrepreneurs omit it, or don’t provide enough data on how they are unique from their competitors. Don’t be afraid to sing your own praises.
Conversely, if you can’t think how your start-up meets the needs of consumers in ways your competition doesn’t, go back to the drawing board rather than pitch.
5. Your business model
This tells a would-be investor how your idea will translate into being economically viable.
You need to explain:
● What you sell;
● Who you sell it to;
● How much they pay; and
● How they pay you.
6. The team
Investors invest in people first and ideas second. A confident, experienced and frictionless team is likely to win over investors. “On the flip side, investors know a bad partnership can destroy a business.
7. Funding needs
Clearly define how much you need to take your business to the next level and explain what this “next level” is. You need to state how much you need, why you need it, what it will be used for and the intended outcome.
8. Exit strategy
An exit strategy informs investors how they’ll get their money back. For instance, are you planning on going public with your business, getting bought out, or something else? Show your audience you’ve done some due diligence in this regard, presenting the companies you’re targeting and why your plan would make sense in five to 10 years.
Practicing your pitch well in advance is the key to a smooth delivery. Also anticipate questions and craft convincing answers ahead of time.