Keen to know my top tips for when you are pitching for investment? Let’s dive in.
Over the years, I’ve seen literally thousands of pitches for funding, as well as pitching for finance for my own businesses on a weekly basis. Despite how quick and easy shows like Dragons’ Den may make it look, to stand any chance of attracting investment, you have to put in some serious groundwork so that investors and funders have faith in the credibility of your business plan, as well as your ability to execute it.
So I have put together my top tips for when you are pitching for investment, whether it’s in person or on paper. And if you want to read more about whether TV business shows are reflective of real-life business, check out my blog here.
Know your business inside out
As I’ve said in previous blogs, real-life business is not like reality TV. If you’re pitching for investment there’s no room for faltering over figures – at best you look incompetent, at worst it looks like you’ve got something to hide. If you want someone to inject cash into your venture, you need to know your numbers to the penny. Exactly how much money it has made to date, precisely what it could make in the future, and what every penny has been spent on so far. Having a thorough grasp of key metrics like ‘Client Acquisition Cost, ‘Gross Margin’, ‘EBITDA’ to name but a few, is essential – KNOW THEM & USE THEM! It is absolutely unacceptable as a business owner to try and pass on a number’s question, using the excuse that you ‘have an account for those things’.
Upsell your profitability
It sounds obvious, but it’s important to be clear about what makes your business special and why it’s going to make money. A good pitch should radiate enthusiasm and explain how the concept is different, or better than anything else on the market. Whether it’s the service you’re selling, how you plan on marketing it or the potential of a product – what sets you apart from every other company? What is your unique selling point? Ultimately, investors want to see great returns on their money, so your pitch MUST make it sound like a strong possiblity. That being said, your enthusiasm must be built on cold, hard facts and numbers. Any switched-on investor will determine the value of your business early on in the pitch, so don’t bother trying to spin any fantasy bullshit. They’ll sniff it out in seconds!
Ask for the right amount
Many investment pitches are turned down because they don’t justify the amount of funding that they require. Asking for too little is just as bad as asking for too much. Don’t just pluck a figure out of thin air – if you want investment, it has to be for a specific reason, typically some kind of growth, and you’ll need to calculate exactly how much you need. Some pitchers ask for too much – more than is realistic and usually at a valuation on the business that could never be achieved in a million years! And don’t forget, every penny of investment you take is going to cost you your precious equity, so only spend on what’s necessary and don’t waste funds on frivolous crap or things that aren’t going to generate income.
Similarly, if you ask for too little, don’t be surprised when your pitch is rejected. Potential backers need to know that the amount you’re asking for is enough to achieve what it is you have set out to do. Unless further fundraising is on the cards, the chances are you’ll burn through a small amount of money early on and run out of road. At this point, don’t expect your backers to supply more cash, your time to impress is long gone!
Be confident and convincing
If you’re delivering a pitch in person, your own presentation skills count for a lot. If you’re fronting up your business on a day-to-day basis, potential investors have to believe in you, as well as your ideas, so that means coming across as confident and polished. Not all pitching scenarios are like Dragons Den – you may just be talking to investors on a one-to-one basis – but if delivering your presentation is likely to turn you into a nervous wreck, you need to practice, practise, and practice some more until your delivery is flawless. If that still fills you with fear, consider whether there’s someone else in your company more suited to delivering the bulk of the presentation – but you’ll still have to be involved, whether you like it or not.
Make it look pretty
These days it’s unlikely you’ll be pitching without some sort of visual backdrop, whether that’s a presentation running in the background or a striking document that you can hand out. If design isn’t your forte, and for most people, it’s not, it’s worth investing in a professional who can tart up your graphics to give them the wow factor. First impressions count in every aspect of life, and pitching for investment is no exception.
Prepare for a grilling
For anyone handing over serious sums of money, investors want to know what they’re getting, and they WILL quiz you to find out. Treat your pitch like a police interrogation (although there is no opportunity for ‘no comment’!), and make sure you can answer every query from who your target customer is, to what your career successes (and failures) have entailed in the past.
Make the exit clear
Even if you can’t envision ever leaving your business, all a potential investor wants to understand is how they are going to get their money back and what the return on it is. In a pitch, you need to make it clear how the exit strategy will work, and at what point you see it happening. This will enable them to view your venture as a way to profit, via multiple avenues. Selling up doesn’t have to be the only route – a highly cash-generative business could provide sufficient returns for investors via the payment of dividends, or it could lead to you buying them out when the time is right. Either way, have a plan for all potential outcomes and make them profitable!
Are you looking for an investor to support your business growth? Or do you need some expert tips and advice from someone who’s done it all? Get in touch with me via info@matt-haycox.com and find out how we can work together.
