Your hard work and dedication have paid off, and you're ready to launch your startup. But before you do, you need to find investors who are willing to sink some startup funding into your new enterprise.
When looking for investors, you only have one shot at making a good first impression with a potential business investor, so be prepared with an elevator pitch that succinctly describes your business in 30 seconds or less—the length of an elevator ride.
Once you nail that crucial initial meeting with a group of business investors, practice your presentation, so you come across as smooth, polished, and professional.
A bad presentation will leave startup investors reaching for the doorknob, not their checkbooks.
Here are 10 common mistakes entrepreneurs make when pitching to investors and how to correct them.
Not Preparing an Executive Summary
An angel investor doesn't have time to read a 100-page business plan to learn more about your business. Spend some time pulling together a brief executive summary and a PowerPoint presentation that address, among other things:
- The problem your business will solve
- The target market
- The market size
- The customer acquisition cost
- The projected revenues and expenses
- The exit strategy
Not Knowing the Audience
Finding investors takes perseverance and a bit of luck. When you find an investor, do your homework before the first meeting. A quick online search is often all that is needed. Ask yourself:
- Are they a member of an angel network?
- What is their background?
- Do they invest in your business sector?
- What business investments have they made in the past?
- How much money do they invest?
Knowing who your audience is beforehand tells you if this group of small business investors is a good fit for your startup.
Not Delivering the Pitch
Too often, entrepreneurs spend more time talking about what their product or service does than about why it is needed. Share a compelling story that addresses the problem your product or service was designed to solve and relate it to your audience, if possible.
If you can't clearly delineate how your product or service solves a problem, chances are you'll walk away without an angel funding offer.
Not Knowing the Competition
Entrepreneurs often fail to address who their competition is when pitching, which only shows investors that they haven't done their homework. Chances are the investors you're meeting with already know what competitive products or services are out there, so be prepared to explain how your product or service differentiates you from your competitors.
Not Controlling the Meeting
Investors don't have all day to listen to your pitch. At most, you'll have 30 minutes to present your proposal.
Watch the clock, and don't spend too much time on introductions and small talk. Confirm how much time you have allotted for your presentation and stay on track.
You want to hit the important points of your pitch and allow time for discussion and questions afterward.
Not Preparing a Demo
Have a working prototype of your product or service ready to show investors. If it can be arranged, arrive for your meeting a few minutes early to set up and make sure your demo works.
If it malfunctions during your presentation, don't waste time attempting to fix it. Also, bring paper backup copies of your presentation in case your on-screen presentation fails.
Not Waiting to Discuss Valuation
If your startup is new and has acquired zero to few customers to this point, it's difficult to discuss valuation in the beginning. It's best to wait for an investor to pose this question. Otherwise, you risk being shot down and looking foolish.
Not Having an Exit Strategy
Investors want to know how their money will be invested and, ultimately, how they will make money by investing in your startup.
Be prepared to discuss how much has already been invested, and by whom, ownership percentages, and your proposed burn rate—the rate at which you'll spend money in excess of income—so investors know how much money you need to advance to the next level, as well as how they'll recoup their investment.
Not Allotting Time for Questions
Make sure to include time for Q&A after your presentation. Anticipate the difficult questions and be prepared to give clear, concise answers.
Investors don't want to hear that you'll "get back to them with an answer." That shows a lack of preparation on your part and is a quick way for investors to move on to the next pitch.
Take the time to consider each question without rushing into an answer.
Not Following Up After the Pitch
Never leave the meeting without a clear understanding of what the next steps are in the process. However, don't expect immediate feedback. It may take investors a few days to process what you presented to them.
While it can be scary asking for feedback, use this to your advantage. If the presentation has gone well, find out what additional materials the group needs. If it hasn't, learn from your mistakes and move forward.
At some point, as an entrepreneur, you will have to make a pitch before a group of investors to raise capital for your business. It takes practice to master the art of pitching, so start preparing before laying the groundwork for finding investors. Angel investing is about building relationships.
If you take the time to do the prep work and follow the steps outlined above, you can avoid the common mistakes entrepreneurs make when pitching to investors. Remember: It's your reputation on the line.