Standing in front of a group of investors, who are effectively holding the keys to your startup succeeding or failing. So, the next question is how should you pitch new business to a room full of investors… or should we say, strangers?
As a pitch is a daunting and at times a nerve-wracking task – especially if this is your first pitch. Thus, we felt we would do our best to educate you on our five top tips on how to pitch your new business to investors.
Although you have made the brave decision to establish a new start-up venture, the hard work is still to come! However, having an amazing idea, product or service will not always make your company successful. For instance, Neil Patel a well-known influencer, explains why his first pitch didn’t end so well. Yes, he had a great idea, with a quirky business name, but he overvalued the companies’ worth. Consequently, no-one wanted to invest.
Moreover, even if you have a nice pool of savings or investments from your family and friends. Eventually, there will come the point that you need to seek investments to ensure that your venture can continue to grow and succeed. Business always has its ups and downs, some people are born to pitch, yet lack of planning and vice versa. However, we do recommend that all entrepreneurs should have a basic understanding of how to pitch to investors.
Why? Well, Patel, also explained that 13% of new startups failed due to lack of funding. Therefore, as gruelling as standing at the front of a board room, feeling completely exposed is never going to be easy. So, we asked our team of knowledgeable specialists, for their tops pitching tips for new startups. However, don’t worry if you’re still unsure or would like to further advice, we will talk a little more about our team at the end of this guide.
Now, let’s start pitching!
Well, not right now, first we need to get the basics in place. As we mentioned, many entrepreneurs have amazing ideas for new products services. However, according to The Start-up, 99% of entrepreneurs, (even if their pitch is successful) don’t receive enough funding or the right amount of funding. Therefore, nailing your pitch is essential. Not only to ensure the success of your new startup but so you don’t have to re-pitch because the original investment wasn’t sufficient.
Moreover, if you pitch lacks, well substance or you are unable to convey the correct message, then it may result in your business falling at the first hurdle. The last thing that we want is seeing your great ideas and business proposal going to waste. So, understanding that there is a significant gap between a fantastic business idea and actually implementing it. Thus, if you can succeed in your pitch before you know it, you will be on the road to success.
Five steps to pitch your new business to investors
Hopefully, the nine steps below including a few handy tips should be a great way to help you master pitching.
1. What is your “why?”
First things first, it is necessary for you to know why you are pitching. If you don’t know the reasons for seeking the funds for your start-up, how can you expect investors to get on board? First, you need to ask yourself the following questions:
- Why are you seeking the funds?
- What will it do for you, your employees and your business?
- Will it improve your startup?
- What or how will you use the funds?
- What will the investors gain?
2. Set guidelines
Although we mentioned that the investors are the ones who are primarily in control. It doesn’t mean that you can’t set some boundaries as well. Now, what we mean by guidelines, is a little like the Apprentice. You should go into your pitch knowing a reasonable figure or percentage, because of nine times out ten, there will be some negotiating.
A good way to look at setting your boundaries is similar to budgeting for a shop or a holiday. The last thing you want is to spend too much and then realise that it’s actually cost you more than what you gained in return. So, now when you set your guidelines, as yourself this next set of questions.
- What are you willing to give up to gain this funding?
- How much do you need and what is a realistic amount that you need to execute your plans over the next 18-24 months.
- Are you willing to give up some control/ownership? If so – how much, 10%, 15%, 20%…?
- At what point in the pitch would you walk away if the arrangement doesn’t benefit you or your startup?
The final question is probably the most important. Although investments can hold the keys to your success, you need to remember that these aren’t the only investors. Also, you need to learn how to put yourself and business idea first, you don’t want to be in a lose-lose situation. For instance, it’s your idea, you’re putting in the hard work, but the investors have asked for a 60% – 40% split.
However, if you are offered 50%, and they are willing to advise you and can contribute to your venture, then this deal may be worth it. Although, if you’re going to take a hefty split, we do advise that you do it on an interim basis. For instance, they receive 50% for 12-24 months, until you can repay at least 20% of the original investment.
Now, if you are feeling overwhelmed. Don’t worry! Many entrepreneurs have been where you are, and it’s something all new start-ups face. But, it is important to remember that you can also seek further advice from a business manager, advisor and even your accountant.
One thing that we would like to note is that if you have a good understanding of your books and accounts, then it will be far easier to set your guideline. Moreover, if you have a good handle on your accounts, can list your monthly expenses you can enhance your sales pitch significantly. If you’d like to learn more about Bookkeeping for your Start-up, take a look at one of our articles on Bookkeeping for your Shopify store.
3. Make a shortlist of potential investors
Hopefully, you should now feel a little more confident as to the “why” your pitching, as well as your guidelines. Sometimes, it isn’t always available to have the help of our friends and family. However, beyond who you know personally, you should begin branching out and networking. For instance, business angels, also known as office angels. If you’re unsure about how to arrange a meeting with an office angel, then our team of specialists at Pearl Accountants, have assisted many entrepreneurs in receiving investments from business angels.
Now, getting back to your shortlist, ask yourself:
- Who can help fund your start-up?
- Who do you know that is actively seeking new investments?
In the case that you feel stuck, you can begin to seek your networks. For instance, who do you know well on LinkedIn? Perhaps send a few e-mail pitches to gauge, which investors are actually looking for new investment opportunities? Sometimes, when it comes to finding investors it can be about “who you know,” but it is also about being proactive and growing your network.
Important Tip: We recommending pitching to investors who already actively invest in a similar industry – BUT they will not want to invest in the same product. So, before you send an email or LinkedIn message, do some market research first.
4. Prepare your Pitch
Prepare, prepare, prepare! Think of your pitch as an exam, you need to revise, do your research and put your best point forward. The last thing that you want is to see your great idea go to waste, simply because you weren’t prepared. Although when it comes to sourcing funds and investors, it’s a very quick and snappy process, having a skeleton pitch beforehand is a good way to start.
Moreover, if you have managed to arrange a meeting with a group of willing investors, you do not want to come across unprofessional and unprepared. Although many investors, tend to be patient with new entrepreneurs, most will not tolerate a sloppy, misinformed pitch. If you walk into the meeting with your held high, hoping to “wing it,” then we suggest you walk right back out the door. Why? Well, as we mentioned in point three, it’s all about “who you know.”
The “Six Degrees of Separation” theory seems to be a good way to describe this point.
So, without going off point too much, the theory essentially means that all six people, (sometimes fewer) always have social connections with each other. It’s a quite interesting theory, and it if it true. The last thing you want is to deliver a sloppy pitch to a room full of investors because chances are, they will know a lot of investors in the same industry.
Thus, as a new startup entrepreneur, the worst possible thing for you is that you gain a bad reputation as a “poor” or “lacking” businessperson.
Now, getting back to preparing for your pitch.
At this point, we hope that we drove home the point that you need to prepare. Part of being prepared will help you to feel confident. We understand that it is a daunting prospect, but as much as possible try not to feel intimidated. Chances are, the people who you are pitching to will have been in the same position as you at some point. So, try to avoid procrastinating or rambling, feel confident in the fact that you have researched, done your homework and understand what you need to gain from this pitch.
The actual preparation takes longer than the pitch itself. So, you want to be sure that you have listed the crucial points, and that you feel confident in your knowledge. Remember, you have made an effort to prepare for your pitch, so believe in yourself. On the other hand, you need to keep in mind if your pitch lacks effort or consistency, would people want to invest in you?
Here are four ways you can begin your preparation:
1. A brilliant pitch deck
2. Elevator Pitch
3. Email templates
4. Potential answers (to what the investors may ask).
Arguably, the first part has an outstanding pitch deck. You want to leave your investors feeling informed, and confident in you and your product/service. Generally, your pitch deck shouldn’t have more than 10-15 slides. Neil Patel also has some good tips on how to create a smart pitch deck, so that you leave your investors wanting more.
Although a pitch deck is to inform your potential investors mainly, you also want to create a story. If you can, you want to move your pitch away to the sales, and without sounding too cliché “selling your dream.” There are some great pitch deck templates and examples out there, particularly one that Peter Theil, the well-known Silicon Valley legend. A little more about Theil, as well as pitching his own products, he was actually one of the first investors in Facebook. As an Angel investor, he provided Zukerburg and his team with a $500k investment, which subsequently turned into $1billion.
Yes, you may not have a billion dollar idea, but that doesn’t mean you can make your pitch seem like something that shouldn’t be missed! Another tip that our team suggested at Pearl Accountants is to have two types of pitch desks. You can have one that contains more visuals, or infographics, which are great when presenting in person. The second one is that you can send to the investors after the meeting, so they can review your research and proposal further.
Perhaps, you really do sell them the dream, and they want to invest straight away. Well, we suggest that you still provide them with some time to review the information. If you do this, it shows that you have patience and are willing to wait for the right investors to ensure the success of your business. You don’t want to jump at the first deal on the table, regardless of how much you require the funds. If your product or service truly can deliver on what you have proposed in your pitch, you will be able to negotiate better terms (as mentioned point two). Don’t forget your guidelines!
5. Nailing your pitch
As individuals, we all have our own styles, including speaking and writing styles. Even the most confident business people have “off days.” Some, still struggle with a public speaking or lack oratory skills. However, it doesn’t mean that your pitching skills can’t improve over time, and similar to “preparation, preparation, preparation!” You need to practice, practice, practice!
As the saying goes, “practice makes perfect.” The same notion applies to nail the art of pitching in person. Remember, you need to own your style, add your own flair to showcase your personality as well as your business venture. You want your investors to be able to relate and believe in what you are saying. Still, there are some simple strategies and best practices that can help you improve.
- Showcase the benefit of what you are an offer
- Demonstrate why they should invest in you – as they may be considering multiple options
- Check, double check and triple check that your figures are accurate and coherent. You don’t want to be left feeling like Dianne Abbott (Labour) when she messed the ‘cost of leaving’ figures to leave the EU during the Brexit campaign!
- Ensure your projections have a balance between being realistic and bold
- Try not to come across as “needy” or desperate.
We understand that even if you have all of these points in mind, it still doesn’t take the anxiety away when the day approaches. So, perhaps practice your pitch with your family members or colleagues first. The best recommendation we can give is to feel confident and believe in your vision.
Also, think of the pitch similar to an auction. If you have this mindset, you leverage the control of the pitch, and you can make the negotiation more competitive and in your favour. As biased at seems, walk into the meeting feeling that you’ve already received your investment, but showcase that your humble and are willing to learn. The primary point you want to stress, (even if it’s true), is that your new startup can still be successful eventually, without the funding. The reason you’re seeking the fund is that you want to enhance and take your respective industry by storm.
Thus, if the investors seem to be indecisive or swaying toward a “no deal” approach, ask for advice. If you ask this, it demonstrates your eagerness and commitment, and it can improve your chances of changing their opinion. Keep your investors engage, to use another clichéd saying “Ask for money, receive advice. Ask for advice, and you’ll receive money twice.”
The Bottom Line
Pitching is never an easy task, for a novice or an experienced business person. However, pitching is a fundamental element of making your new startup transform into a successful venture. As mentioned, we have a specialised team who are more than happy to assist with your pitching, provide advice and introduce you to angel investors.
If you would like to learn more about
how Pearl Accountants can enhance your pitching skills, speak to a member of
our knowledgeable and approachable team today.
Shoaib Aslam is the co-founder of Pearl Chartered Accountants, a UK-based chartered accountancy firm that has multiple locations across London. They are experts in helping startups and established businesses with all aspects of growth, strategy, scaling up, accounting and tax planning.