What Makes a Great Investor Pitch
What Makes a Great Investor Pitch
A great business pitch typically sets the first impression an investor has of a company – and of an entrepreneur.
While not necessarily an indicator of future success, it is a critical moment for any business. A great pitch can bring valuable partnerships to the table – partnerships that are richer than just financial; connections, experience, knowledge and skills.
Usually, a pitch is capped at a short period of time. At Henley Business Angels, you have 10 minutes to tell your story, and 5 minutes to answer questions to make an impact and sell your proposition. How you deliver your pitch, and the story you tell, will determine whether you win an expression of interest to talk about potential investment.
When thinking about a great investor pitch, here are Henley Business Angels’ top 8 tips:
Preparation
Before you make your pitch, do your homework:
- Know your business (including financials) intimately
- Know your investor – study the bios, social media accounts, and investment backgrounds of every single investor who will be in the room (find them on LinkedIn) and anticipate and have answers to the questions the investor will ask.
- Know the key points of your presentation cold and nail the 10 minutes of your presentation where it’s just you doing the talking
Preparation is everything. This should not be a surprise.
Selling your idea is as much how well you present it, as it is the idea itself. How well you are able to present is all about preparation.
Practice Your Pitch (In Front of Real People)
‘Practice makes perfect’ is true, however, it’s important to reiterate that how well and often you practice your investor pitch can have a life-changing impact on you and your business.
In the instance of Michael Dubin, Co-Founder and CEO of Dollar Shave Club, A California-based company that delivers razors and other personal grooming products on a monthly basis to customers by mail.
Not only was the product simple, but the differentiator for Michael was practising his pitch in front of other people before presenting it to investors. In total, Michael Dubin raised over $100m and a simple video titled ‘Our Razors Are F***ing Great’ that garnered him millions of views and worldwide notoriety.
The more familiar and comfortable you are with your pitch, the more effective your presentation will be.
There are no shortcuts here you have to practice, a lot, to reach the level of familiarity and comfort that will result in a flawless presentation. A presentation that does not reflect you are comfortable with the ins and outs of the business is not attractive to investors and will do a disservice to yourself and your company.
At the end of every practice pitch, ask yourself ‘What would I change about it?’. When presenting to people, ask them what they would change about it and use it as a learning exercise, to reflect on what went well, and what you can do better or differently next time.
Tell a Compelling Story
A pitch needs to tell a story and be much more compelling than a list of facts. Remember, facts tell but stories sell.
A great example of how a compelling story can win over investors – and can even, in some cases, make up for a lack of business acumen – can be seen in Pobble.
Pobble’s Co-Founder, Henry Smith, began their pitch with the story of how he developed a way to teach primary school kids to write by posting their work on an online platform, similar to Pinterest, and attracting a global audience which motivated the kids.
Telling a story is making an emotional connection with the investors and connecting with them on a human level can make a huge difference to the outcome of your pitch.
Demonstrate That You're Business Savvy
The best pitches come not only from telling a compelling story, but also from entrepreneurs who are successful in promoting themselves as smart, savvy, businesspeople. An investment results in a business partnership, and investors want to work with smart people who know what they’re doing, and who can generate a return on their investment.
For investors, the level of business savvy an entrepreneur exhibits reflects that they are more likely to succeed. It is vital that you know your business and how to make sales. Knowing your market, growing your sales and delivering on your business plan’s sales projections is a surefire way to demonstrate business savviness to investors.
Make Your Presentation Visual and Interactive
A successful investment pitch is much more than presenting PowerPoint slides.
Showing a short video, demoing products that investors can hold in their hands and experience for themselves, as well as sharing customer experiences, are all great ways to make your pitch more interactive.
Visual presentations and physical interaction have positive psychological impacts on an audience. Research shows the more we touch, or the longer we hold, something, the more we want it. The more we feel we already own something, the higher value we place on it, and therefore ultimately buy it.
At Henley Business Angels, the pitch in the room is not the only opportunity for entrepreneurs to capture the attention of investors. After the presentations have finished, entrepreneurs are able to showcase their business and products, at a private showcase for members and guests – allowing that element of interaction after the pitch as well. Take advantage of that opportunity.
Talk About Sales and Demonstrate Customer Traction
Among the most common questions investors ask of entrepreneurs at the pitch event are about sales –
- What is your sales run rate?
- What do you think you’ll do this calendar year?
- What are your projections for the next 3 years?
The investor is seeking validation of your products.
For investors, early sales success is one of the most promising signs of the product’s validation. Sales show that customers are already valuing the product.
Along with a compelling story and presentation, talking confidently about your sales numbers and projections is very persuasive. Without numbers to back them up, whether a person likes a product or not is anecdotal; and investors like to see ideas that are backed by real sales numbers.
If sales haven’t yet been made, then the entrepreneurs should have a realistic idea of the demand from campaigns and customer trials using crowdfunding sites, or social media sales channels such as Instagram and TikTok. It is important to remain realistic with your sales predictions: if they’re not believable, then you won’t be either.
Be Clear About What Investment You Want and at What Valuation
Know what you are raising and what equity share you will trade. Importantly, be ready to negotiate. A common reason why entrepreneurs fail to land an investment is because they don’t negotiate well. Either they haven’t done their homework on the numbers, or they become anxious and indecisive, or both.
Before you confront your investors, have a plan for negotiating. This is the part of your pitch where the stakes are very high. You’ll need to do a lot of preparation ahead of time.
Be prepared for not getting what you want or even no deal. This is where you have a clear alternative strategy. This is your ‘Best Alternative to a Negotiated Agreement (BATNA)’. This could engage the angel investor in an advisory capacity, which could hugely benefit your company’s success.
Keep Calm and Manage Your Nerves
Pitching is nerve-wracking and often quite daunting, particularly when you are pitching your passion and belief to individuals who are primed to be both sceptical and critical. It can oftentimes feel like you’re stepping into the hot seat and being interrogated when the questions start pouring in – not unlike Dragon’s Den – but it’s important to remain calm.
If you are visibly uncomfortable, the investors will see that and could sense that as a lack of confidence, so keeping your cool can pay off massively. Deals are won because the pitching entrepreneur delivered a relaxed response during a barrage of questions and expressions of doubt.
When faced with difficult questions, the entrepreneur can and should deal with this in an open and honest way. If you don’t know the answer, offer to ever back with one, but never guess. If an investor points out a deficiency in your business plan, you might talk about how the investor’s guidance and capital can help turn those weaknesses around. If things go poorly, don’t dwell on it; learn from the experience and make identifying what you’ll do differently next time into an exercise.
