21 Feb Pitching Your Startup to Investors – Simple Hacks You Should Know
Pitching is one thing that many (first time) founders dread – but cannot avoid. You pitch your business every day and to everyone: investors, customers, collaborators, potential employees, and other prospects. Your success or failure as a startup founder, in most instances, depends on this singular act: pitching.
From the experience of helping many entrepreneurs prepare their pitches – and reviewing/judging hundreds of pitches through my work with organizations such as Seedstars World, Adansonia, Impact Hub, among others – below are hacks for pitching your startup to investors.
Know who you’re pitching to
There are different pitches for distinct kinds of people. The way you pitch to an impact investor will differ from how you pitch to an angel investor. That will vary from the way you pitch to a customer or prospective employee. Know your audience and prepare your pitch to highlight relevant metrics.
Many founders don’t always think that the panel they are pitching to have seen several hundreds of pitches. And they have red flags they look out for in pitches. Also, from personal experience, judging pitches is a tough job sometimes. If your pitch is another tiresome, rehashed rhetoric, it will be challenging to sustain your audience’s attention.
Know what the investor is looking for and see if your business meets those criteria. If you need someone to hear you out, that’s different. But if you need them to make an investment decision, you must put yourself in their shoes. No matter how much someone wishes you to succeed – as most pitch judges often do – if you don’t connect with him/her, you’ll lose the attention.
Start with why not what
Simon Sinek’s 2009 Ted Talk argued that inspired leaders and organizations, regardless of size and industry, communicate from inside out.
“People don’t buy what you do; they buy why you do it,” Sinek said.
This analogy aligns with research conducted by neuroscientists at the California Institute of Technology (Caltech). The team found that reasoning and behavioral control depend on different frontal lobe regions than the areas called upon when deciding.
Starting your pitch with your why helps you highlight the purpose, cause, or belief that drives your business. That is a simple way to connect with your audience – instead of the conventional approach of hoping your product description will pique their interest.
People want to be a part of something big. Your “why” is how to show your passion for the problem you’re solving. Consider Nike’s vision of everyday greatness. That vision has gone viral because it encompasses everyone. People who hitherto felt left behind can now connect with significance by putting on a pair of sneakers.
Communicate the problem you’re solving and how you solve it
Many founders spend so much time discussing irrelevant details except the problem they’re solving. Don’t waste your time with too much extraneous information. Tell your audience what you’re building.
- Highlight the reason this problem is persistent and requires urgent attention.
- Explain how you’re solving it and the beneficiaries.
- Discuss the uniqueness of your solution from that of your competition.
- Discuss the size of the market you’re addressing and the potential size you can capture in the foreseeable future. As Patrick McKenzie, a developer at Stripe Atlas, said, “venture investors are looking for companies which can sustain revenues of hundreds of millions of dollars per year, least. “Niche” products where the ceiling is millions of dollars are only exciting to the extent they unlock adjacent, bigger markets.”
- If you’ve launched, discuss your users. Your success stories might be one of the key differentiators for your pitch – include testimonials or news features if you’re giving a PowerPoint presentation. Use graphs or charts to show your growth and traction, as it’ll be easy to comprehend.
Remember, your investor might grasp the intricacies involved in delivering your solution. Avoid jargon and buzzwords. Make it easy for people to understand how your service starts and ends. Don’t make anyone figure out your key points. Tell them.
Talk about your financials.
Gary Vee was right. How you make your money is more important than how much you make. Explain the costs involved in starting and running your venture to actualize the critical milestones over time. From my experience, two key things many investors want to see from your metrics are:
- Value creation: Can the business make a profit, and does it work on a per-customer basis at any point in time?
- Scalability: What is the size of the market the entrepreneur is addressing, and how attractive is it?
Here’s an insight: your business model should tell a crisp story of user economics in customer acquisition cost (CAC) and long-term value (LTV). So, it shows how the business makes money. Highlight your unit economics – the costs involved in acquiring users and make a clear projection of your revenue.
Even if you’re still early in your journey with no traction (quantitative evidence of product/market fit), you must show you have the potential to generate revenue and make a data-driven decision. But if you have traction, make sure you calibrate and over-index on that. Know your numbers: revenues, margins, profitability, etc. This article has extensive information on startup metrics.
The warning is, be careful how you site your financial projections. Manipulating your revenue is fraudulent behavior or a sign of incompetence.
Do talk about yourself and your team.
We say this all the time, investors do not invest in a business idea but the entrepreneur. It’s true. Business ideas like Uber, Facebook, Airbnb, or even Amazon did not look impressive to many people at conception. Their teams built them to what we know them to be today. So, make sure you do not sell yourself short!
If you have built something well or achieved any form of success in the past, discuss it. It does not have to be in line with the business you’re pitching. Maybe you finished your college course work while building a startup: discuss it!
Entrepreneurship requires an awful lot of discipline and commitment, and investors are mindful of this. They will always use your earlier success as a plausibility for success in your recent venture. The same goes for any history of failure you share with them. Failure can only be a plus if it resulted in something meaningful and worth discussing.
Further, make sure you highlight the complementary skills and abilities of your team members. If your team is skewed, be sure to mention your plans for (or how you’re) balancing the skills.
Don’t just pitch an idea; a prototype is better than several pitches.
If you have a prototype, bring it to on your pitch day. Understand your fundamentals and handle your pitch like a conversation. It’s great to have aspirations, but judges will always weigh your pitch on your business strategy scale. Don’t pitch the product; pitch your business. Many of us – entrepreneurs – spend so much time discussing the product or service but say little about the company. Also, be specific. Know what you’re asking for or the exact amount of money you want. In the same vein, before you send or deliver any pitch, it’s essential to put yourself in the investor’s shoes. Many investors want to see you understand the investment risk.
Last, if you’re delivering a PowerPoint presentation, make your slides as easy-to-read as possible. Don’t clutter the slides with unnecessary information; keep images and graphics to the minimum, and review your stuff before your pitch day. Use this Y Combinator Seed Deck template to structure your deck.
Remember, a pitch is not a war. Try to have fun while keeping your eyes on the goal and the judges. Be authentic and be yourself. Even if you miss your lines, as many people often do, don’t stop! Keep pitching, and if things do not turn out the way you expected, there’s always another opportunity. Don’t take rejection too hard.
My best wishes on your next pitch!
Need business advice or support in structuring your pitch? Schedule a strategy session here.
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Tom-Chris Emewulu is the Founder & President of SFAN (Stars From All Nations). When he’s not building SFAN and helping entrepreneurs and rising professionals create fulfilling careers, he’s telling African innovation stories or advocating for people-centered policy. Tom-Chris is a former consultant at Mastercard Foundation, Seedstars Ambassador for Ghana, and the author of the forthcoming book: Breaking the Limits. He is a thought leader on youth development, social entrepreneurship, technological innovation, and the future of work.