21 Feb Pitching Your Startup to Investors – Simple Hacks You Should Know
Pitching is one of the things that many (first time) founders dread – but unfortunately cannot avoid. You pitch your business every day and to everyone: investors, customers, collaborators, potential employees, and other prospects. As a matter of fact, your success or failure as a startup founder, in most instances, is underscored by this singular act: pitching.
From experience of helping many entrepreneurs prepare their pitches – as well as reviewing/judging hundreds of pitches through my work with organizations like Seedstars World, Adansonia, Impact Hub Accra, etc here are simple hacks for pitching your startup to investors.
Know who you’re pitching to
It goes without saying, there are different kinds of pitches for different kinds of people. The way you pitch to an impact investor will definitely differ from the way you pitch to an angel investor. That will equally differ from the way you pitch to a customer or prospective employee. Know your audience and prepare your pitch to highlight the metrics they’re looking for.
The thing a lot of founders do not take into consideration is the panel they are pitching to have seen several hundreds of pitches before. They probably have certain red flags they look out for in pitches. Once you make any of these mistakes – especially at the early stages of your pitch – you’ve automatically shot yourself in the foot.
Again, from my personal experience, judging pitches can be a lot of work sometimes. If your pitch is another boring, rehashed rhetoric, it can be difficult to gain the attention of your audience. So, put the effort to understand what the investor is looking for and see if your business actually meets those criteria. If you just need someone to hear you out, that’s different. But if you need them to take some form of investment decisions, you must put yourself in their shoes. No matter how much someone wishes for 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
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’s talk is in consonance with research carried out by neuroscientists at the California Institute of Technology (Caltech). The team was able to show that reasoning and behavioral control are dependent on different regions of the frontal lobe than the areas called upon when making a decision.
Starting your pitch with your why helps you highlight the purpose, cause or belief that drives your business. This is an easy 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 demonstrate your passion for the problem you’re solving. Think about Nike’s vision of everyday greatness. That vision has gone viral because it encompasses everyone. People who, ordinarily, would have felt left behind can now connect with the feeling of greatness by simply putting on a pair of sneakers.
Communicate the problem you’re solving and how you solve it
One of the things I notice from many pitches I judged is: A lot of founders spend so much time talking about several irrelevant things except the problem they’re solving. Don’t waste your time with too many irrelevant details. Tell your audience exactly what you’re building.
- Highlight the reason why this problem is persistent and requires urgent attention.
- Explain how you’re solving it and who you’re solving it for.
- Talk about the uniqueness of your solution from that of your competition.
- Talk about 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 rightly said, “venture investors are looking for companies which can sustain revenues of hundreds of millions of dollars per year, minimum. “Niche” products where the ceiling is millions of dollars are only interesting to the extent they unlock adjacent, bigger markets.”
- If you’ve already launched, talk about 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 not understand all the intricacies involved in delivering your solution. Avoid all jargons 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 directly.
Talk about your financials
Gary Vee was right, how you make your money is more important than how much you make. Clearly, explain the costs involved in starting and running your venture to actualize the key milestones over a period of time. From my experience, there are two key things many investors want to see from your metrics:
- Value creation. That is, can the business make a profit and does it work on a per-customer basis at any point in time?
- Scalability. That is, 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 the user economics in terms of customer acquisition cost (CAC) and long-term value (LTV). Therefore, show 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) whatsoever, it’s important that you demonstrate you have the potential of generating revenue and making a data-driven decision. But if you do have traction, ensure you calibrate and over-index on that. Know your numbers: revenues, growth margins, profitability, etc. This article has extensive information on startup metrics you should pay attention to.
The caveat, however, is to 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
It’s been said many times that investors do not necessarily invest in a business idea but in the entrepreneur. It’s true. Business ideas like Uber, Facebook, Airbnb or even Amazon did not look impressive to a lot of people at conception. Their teams built them to what we know them to be today. Therefore, ensure you do not sell yourself short!
If you have built something exceptionally well or achieved any form of success in the past, talk about it. It does not necessarily have to be in line with the business you’re pitching. Maybe you finished your college course work while building a startup: talk about it!
Entrepreneurship requires an awful amount of discipline and commitment and investors are mindful of this. They will always use your previous success as a plausibility for success in your new venture. The same goes for any history of failure you decide to share with them. Failure can only be a plus if it resulted in something meaningful and worth talking about.
Further, ensure you highlight the complementary skills and expertise of your team members. That means: Your team should not be skewed to one direction. If this is the case, 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, do bring it to on your pitch day. Understand your fundamentals and handle your pitch like a conversation. It’s great to have aspirations but your pitch will always be weighed on a scale of your business strategy. Don’t pitch the product, pitch your business. A lot of us – entrepreneurs – spend so much time discussing the product or service but say so little about the business. 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 important to put yourself in the shoes of the investor. Many investors want to see that you understand the investment risk.
Finally, 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.
At the end of the day, a pitch is not a war. Try to have fun while keeping your eyes on the goal and on 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!