Pitching to investors can be a scary experience, especially if you don’t know what to expect. But keep in mind that investors are likely hopeful that you’ll have a great project for them. By lining everything up in advance, you’ll be able to track down and land the perfect investor for your business.
Lining Up Investor Pitches
The hardest part of pitching to investors is getting them to meet with you in the first place. In fact, much of the work is done on the front end. You’ll need to spend time researching each investor’s current portfolio and be able to communicate the value your business will bring.
A great place to start your search is the Small Business Administration (SBA). The SBA licenses qualifying investors through the Small Business Investment Company program. The SBA fully vets these companies. There are also sites like AngelList and SeedInvest that will help connect you with the right people.
Doing Your Homework
As you research potential investors, you can give yourself a big hand with your future presentation. With each one, imagine how you would pitch your new concept to go with their existing investments. Why is it the right fit? What makes this particular investor more likely to put money into your business versus another one?
Once you’ve identified potential investors and secured a meeting, it’s time to start preparing. You’ll need to put together a pitch deck, but you should also be ready to answer questions. The SBA has a pitch preparation worksheet that can help you get started.
Reaching out to investors can be the tricky part. A cold email is a one-way ticket to the spam folder. Instead, check with your network and see if you have any connections in common with the venture capital firms or individual investors you’re considering. Investors are more receptive to opportunities that come by way of referral than through random requests.
Read More: How to Tell Whether an Investment Is Good or Bad
Getting Your Finances in Line
Your top priority in your pitch meeting is getting money to fund your startup. An investor’s top priority, though, is quite different. For an investor, it’s all about the money. Put simply, the vast majority of investors will want to make sure they’ll get a return on investment before agreeing to hand over a single dollar.
You should never attend a pitch meeting without a financial plan in place. Yes, you’re asking for money, so you don’t exactly have piles of cash to show potential investors. Still, they need to see details of every asset your business owns as well as income projections for your new business.
Preparing Your Pitch Deck
The heart of your presentation to investors is your pitch deck, which is a step-by-step visual of your business plan, your mission and goals and your potential for succeeding. You can find pitch deck templates online, but there are basic components found in every pitch deck.
- Problem: You’ll introduce the problem your product or service solves.
- Audience: You’ll need to identify the people that your product or service will help. This is your target audience.
- Market size: Investors will want to know the potential market for your audience. Is there a demand for what your business will be offering?
- Solution: This is where you’ll pitch your product. How does it solve the problem you introduced at the beginning of your presentation?
- Competitors: Is there competition for the market you’ll be serving? If so, how does your product or service set itself apart?
- Current status: Here, you’ll share where your innovation is in the development cycle.
- Intellectual property potential: If a patent or trademark can be issued for your innovation, mention that here and let the investors know what the status is on applying for those protections.
- Financial model: This is where you disclose how you’ll make money.
- Timeline: Investors will want to know what comes next in the development process.
Preparing Your Business Plan
As important as your pitch deck is, investors will want to see a business plan. While the pitch deck is designed to sell the business, the business plan is an in-depth look at your company, from its mission statement to all sources of funding and your estimated monthly expenses. The SBA offers business planning assistance through its website.
In the best-case scenario, you’ll have the business plan in place already. If that’s the case, you’ll need to make sure that the information you’ve included in the pitch deck matches what you’ve written in your business plan financials. In the worst-case scenario, you’ll have to create a business plan before you start looking for investors.
Read More: How Can a Business Plan Help My Small Business?
Buying a Franchise
If you don’t already have a business concept, one way to boost your chances of getting help with a startup venture is to choose a franchise. With a franchise, you’ll already have the established name and reputation. If you find an investor who specializes in businesses like the one you’re buying, you’ll already have crossed some of the hurdles.
One of the best things about buying an existing franchise is that some of the work might already be done for you. Franchises often have financials in place, along with many of the elements you need for a business plan. You might also be able to get help with tracking down and pitching investors who can give you some or all of the startup capital you need.
The truth is, investors respond to stories more than facts and figures.
Negotiating Like a Pro
The most important part of any investment meeting relates to your needs and wants. The investor will want to know what your company is worth and the amount of funding you’re requesting. You’ll also need to state what you’ll give in exchange for that investment.
It's important to understand the value an investor will bring to your company beyond the funding. You can, for instance, offer a higher amount of equity for less funding to an investor who is willing to also provide expertise and coaching in exchange for a higher share of the profits.
Read More: Angel Investors: What Percentage of Equity?
Be a Storyteller
The truth is, investors respond to stories more than facts and figures. If you stand in front of them with a dry, data-heavy presentation, you could easily lose them. In fact, often investors buy into the person running a business as much as the concept itself.
That means you should inject some of your own story into your presentation. What inspired you to start this type of business? What unique traits do you have that make you the best person to run it?
Brand storytelling is important, too. As you’re putting together your pitch, make sure you’re also telling the story of your business. What will the customer journey be? What type of person will be drawn to your offerings? This information is crucial to helping investors make a decision.
Pitching to investors can be a frightening prospect, but as long as you understand your product’s unique features, you can ace your investor pitch. The key is to make sure you’re pitching to a warm audience. The best way to do this is to carefully research potential investors and only reach out to those likely to be interested in what you do.
Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a ghostwriter for a credit card processing service and has ghostwritten about finance for numerous marketing firms and entrepreneurs. Her work has appeared on The Motley Fool, MoneyGeek, Ecommerce Insiders, GoBankingRates, and ThriveBy30.