Imagine exposing yourself to a group of people who know little to nothing about you and your startup. Pitching ideas to potential investors is important for any entrepreneur. Even though each business idea is different, each having its own story, there are some basics for pitching the deck and its presentation.
It is often challenging to put your business idea into a few slides as an average startup pitch has a few sectors to get or lose the attention of a backer. Meaning, you will need some thoughtful preparation and planning to make a solid pitch for your business idea.
Therefore, we have compiled a list of surprising keys you will need for successful fundraising.
For most entrepreneurs, a pitch starts when you meet eyes with an investor and start your pitch deck presentation. However, in reality, you can win or lose fundraising long before you even walk through the door. More often than not, the result is decided when you choose an investor (1).
Wait, why? How? As we mentioned in our previous story, Saying “Yes” to Any Investor is Bad for Your Startup: Here’s Why, the relationship between a founder and a backer is much like dating. It is all about chemistry. You need to know that not every investor would be interested in backing your startup.
Yes, you could be the next unicorn. However, if your business idea is not resonating with the group of people you are pitching to, they won’t write you a cheque.
Hence, before you move any further, ensure you are choosing the right investors. And the key to that is doing your due diligence (2).
Do Your Homework
Before you schedule the meeting or even decide to reach out, learn everything you can about your potential investors.
Who is that you will pitch your idea to? A partner? A general partner? An associate? Someone who has been an entrepreneur? Someone who experienced failure at a startup? Can they resonate with your business idea? What do they care about the most? What companies have they previously invested in? Find out everything you can. You can use platforms like LinkedIn and Crunchbase for your due diligence.
You know whether you can nail down a pitch before an investor when you know their background information. When you know who they are, you know whether you can be yourself in front of them or not and whether you would want them as your partner or not (3).
And once you have found your ideal investors, it is time to start preparing for a pitch deck. Keep on reading to know how to nail it.
Preparing a Pitch Deck
Preparing a pitch deck needs a lot more than putting information on a PowerPoint presentation. You will need strategic planning, purposeful design, and thoughtfully curated words.
Your pitch deck can become a great visual complement to your presentation if you do it properly. After all, it will help your potential backer visualize your market data, comprehend your business model, and engage in your pitch.
A typical startup pitch usually includes:
- The problem you are looking to solve – Is this a big issue?
- Your solution – Can you fix the issue?
- Your product
- Your target audience – Is there a big enough market?
- Your financials and business strategies – Can you make money with your solution?
- Team – Do you have enough talent and human resources to do it?
- Your exit plans – what if your business doesn’t work or runs into a pitfall?
However, before you pitch to anyone, make sure you have a story to tell. Remember, your goal is to excite your audience with your startup idea, not put them to sleep. It can be difficult if you are only focusing on trends, numerical data, and market forecasts. That’s why your story becomes crucial.
You can think of your journey, problems you faced that inspired you to create this business in the first place. You can also talk about the successes and milestones since then and the setbacks that changed your business. And more importantly, where do you wish to go next?
When you share these things and show off your learnings and achievements in your pitch deck, it will not only piques your investors’ interest but will also keep them engaged throughout the presentation. In addition, a story will also create a logical sequence to your pitch itself (4, 5).
Details Always Dominate
Often, the most crucial thing you can talk about in a pitch is your team, business model, financials, and future roadmap. It is especially true since investors don’t hand out their money for big ideas. They also want to know if there is a viable plan in place or not to give them a nice return (6, 7).
You can condense these details in an elevator-style fashion in your presentation:
- Details about your product
- Details about your market
- The demographic
- Business model
- Marketing strategy
- Your competitors
Remember, a repetition is a great tool. Allow data to underpin your pitch and openly share the data throughout your presentation. Refer to these data during Q&A sessions, and discuss them even in future conversations with the potential investor.
The more frequently and clearly you will present your crucial data, the more confident the investor will be in their decision to finance your business.
Read Also: 12 Keys to Grow Your Small Business
Be Specific About Your Investment Needs
Often founders become vague when money talks start coming up (8). Yes, it can be quite intimidating to ask for a specific sum of money. And, of course, there is always a chance that the investment will come up short.
However, it is important to be confident and specifically ask about your investment requirements. Tell your investors what you require to execute in terms of money and how you would spend that money. It is important because most investors want to know what their investment will look like and see how thoroughly you have thought of your financial requirements.
In addition, it is also essential to show your potential backers where you anticipate to be after you spend their money. It is something that will let you build trust.
Even though such a level of specificity may not guarantee a successful pitch, it will ease your potential investors’ concerns and instill greater confidence in your business model and strategies, leading to greater fundraising success.
Be Prepared for a Q&A
While the real-life startup pitch deck looks nothing like a shark tank, preparing for a Q&A session is essential. Remember, no matter how flawless and perfect your pitch is, your investors will always have questions.
When you anticipate potential queries and prepare clear answers, you will increase your credibility. Moreover, it will offer you a chance to address any concerns before you leave the boardroom (9, 10).
Here are some tips for doing it right:
- Go through your entire pitch presentation.
- See if you have missed any details that are essential to understand your business’s viability.
- See if there is anything you said that might require more clarification.
- Take a look again and figure out if there are any gaps and how you can fill them in.
- Also, look at your pitch from your investors’ POV and see if there are any concerns they may have about your product market, etc.
- Keep a list of potential questions, concerns, and figure out the best way to address them.
Read Also: Strong Brand Community: A Key to Success
Trial Run Your Pitch Deck
And when you are litmus-testing your pitch with them, listen carefully to what questions they ask and what they have issues understanding. Don’t get defensive. Instead, recognize that your friends have a lot of common sense. If they are asking something, so will your average or even an excellent investor.
It will help you prepare thoughtful answers and real strategies to fix the issues they mentioned. Trial-run your pitch deck on your friends before you even hit an investor.
It is an ideal low-risk way to perfect your pitch (13). Moreover, always remember to change your pitch deck as you update your product, business model, etc.
What are Some of the Must Do’s for a Successful Startup Pitch
- Tell a Story: The goal is to captivate your audience. Try including an interesting personal story and get the attention of your potential investors. You can also try asking a question everyone has. Another excellent method is a story that conveys the value of what you do, why you do it, and why anyone should care about it. Use a story to approach your investors, and they will be curious to know more (14).
- Know Your Audience: You need to explore your audience for good pitching. Do some homework on the investors you decide to approach and curate your strategies accordingly.
- Keep Things Simple: Make sure your pitch is concrete and short. Giving a lot of information may lead to an opposite effect and leave your audience overwhelmed and confused. Instead, try to focus more on competitive advantage, your team, and problem-solution relationship.
- Brag About Your Team: Remember, investors invest in the business idea and the people behind the idea. Highlight the strength of your team and present a well-equilibrated professional and educational mix.
- Do Have a Strategic and Thoughtful Plan:
- Talk about your future goals and how you plan to achieve them.
- Offer a timeframe with a clear vision of your company, product, including your milestones.
- Be prepared to answer any questions your investors may have, especially about how you will spend the funding and how much and why you are looking to raise.
- Back Your Claims with Data: Remember, no matter what you say in your pitch, you must have data to support your claims. You can add research data, simulation runs, testimonials, surveys, statistics, and anything else you may need to prove your product viability.
- Share Your Big Vision: If you want to successfully secure venture capital, it is important to have a big, bold vision about where you wish to take your startup. Often, first-time founders think small.
- Build Your Board: The smart and free way to get started on is by gathering a team of advisors who can get behind you and make introductions to great investors on your behalf. You should include people who are passionate about your idea and committed to it as your board of advisers. From there, get those people to make intros to the right people for you. It should be an intuitive step. However, we found that it is often skipped (15).
- Show Competence and Passion: Passion is the driving force for founders. As an entrepreneur and a person running a company, you will have to prove to your investors that you have the industry knowledge, experience, business skills, technical know-how, and whatever else it would take to turn your business idea into a success story.
Read Also: Hacks to Finding New Business Ideas
What are Some of the Most Common Don’ts for a Successful Startup Pitch
- Don’t Waste Time on Obvious Problems: If issues you are trying to solve are clearly understood and visible, don’t waste time on them. Instead, use that time to precisely address the need and then introduce the essential part of your pitch, the solution (16).
- Don’t Ignore Competitors: The more you know your competitors, the better you will convince your investors. Present a clear competitive difference and communicate why your product or solution is superior in the market compared to your rivals.
- Don’t Ignore Key Risks: Find out all the key risks your business can potentially face. And then present clear strategies on how you plan on handling the identified risks upfront. It will leave an impression that you are well-prepared to handle any challenge that may come your way ahead.
- Don’t Go Too Technical: If you go into too many technical details or numbers, your audience may find your pitch boring or non-related. Instead, make sure you are short and precise. Only link your statistics and data to the value your startup can deliver.
- Don’t Be Afraid to Ask for Money: Don’t ask for a big number if you don’t need it. Instead, talk about realistic figures that align with your company’s needs. Also, don’t ask for too little, or investors can interpret it as your lack of knowledge about your market and business. If you raise too little, you can also end up in a situation where you run out of funds too quickly and enter fundraising again within a short time (17).
- Don’t Worry Even If You Don’t Have All the Answers: Being an entrepreneur is a long journey. Only after crossing some milestones will you find certain answers. Plus, you can always hire advisors.
- Don’t Try to Oversell: Always remember, you will have a better chance of success if you present a more realistic pitch. If you present your solution as a game-changer or oversell its benefits, you may leave an impression of a dreamlike product (18).
The key to a successful pitch is always to keep it simple. Understand the core ingredients we mentioned above and think through how you can relate everything to one another. Make sure to convey your message clearly and never assume your investors understand your business (19).
How Your Delivery Impacts Your Fundraising Efforts
A recent study published by two Yale Management School students used an AI to analyze startup pitches (20). They aimed to determine how the delivery, such as wording, facial expressions, tone of voice, etc., impact fundraising.
Their finding was quite surprising: “persuasion delivery works primarily via leading investors to build inaccurate beliefs.”
No, it does not mean all successful fundraisers deceive. Instead, according to researchers, when a startup team is likable and conveys a high degree of positivity and warmth, investors are likely to become overconfident in their likelihood of being successful and are more willing to invest.
The duo collected about 1.1k pitch videos from startups applying to five accelerators in the US, 500 Startups, AngelPad, Techstars, MassChallenge, and Y Combinator. The videos spanned from 2010 to 2019 and included a mix of sizes and gender profiles.
Then, the researchers fed those videos to a series of analyses with algorithms designed to rate them across three areas: visual; how the team appears, verbal; the tone of their message, and vocal; the tone of their voice.
They combined scores in each area into an overall quality score they named “Pitch Factor.” They used Crunchbase and Pitchbook data to judge the success of startups based on the cumulative number of employees, whether they would raise a follow-on venture capital round, and if their website is still active today.
So, what did they find? Fascinatingly, businesses with a high pitch factor tend to underperform in the long run.
So, what does it mean? The researchers believe that investors merely lower their standards for vetting ideas if the pitch is positive, passionate, and war.
Likewise, they have higher standards for investing in a startup after a bad pitch. Hence, when a business has a low Pitch Factor, it can only convince investors if its idea is really good.
In addition, the effect of a negative impression was also much stronger than a positive impression. It manifests in two surprising ways:
- Warmer pitches, with friendlier rhetoric, are more likely to attract investment over competence
- Women are still judged differently
If you are a founder pitching for funding, it will not be enough to have strong facts and a competent team supporting your business idea.
As per the study, there is a huge potential to fine-tune your delivery to convey warmth and passion. If you can’t do it, find a co-founder who can.
For an investor looking to make the best decisions possible, ensure you shield yourself from any internal biases uncovered by the study.
Try to get your pitch information as boring as possible and challenge the subconscious biases you may experience when analyzing ideas from female entrepreneurs.