If there's one thing that can't be stressed enough for entrepreneurs when trying to raise capital, it's the importance of rehearsing the pitch. Many entrepreneurs may think, “I know my business inside and out—pitching will be a breeze!” These same entrepreneurs could end up crashing and burning if they ramble on for too long. There's nothing more frustrating for investors than who are expecting a 10-minute pitch, and 20 minutes later the speaker is only on slide number five in the presentation—and there are eight more slides to go.
Here are some of the most important things to keep in mind as you prepare your pitch:
- Tell a story. Begin your pitch with a compelling story. This will engage your audience right out of the gate. And if you can relate your story to your audience, even better. Your story should address the problem you're solving in the marketplace.
- Have a solution. Share what's unique about your product and how it will solve the issue you shared in the previous slide. Keep it short, concise and easy for the investor to explain to others. Avoid using buzzwords unless your investors are very familiar with your industry.
- Show successes. Early in the presentation, you want to build some credibility. This is your opportunity to blow your own horn and impress investors with what you and your team have accomplished to date, such as sales, contracts, key hires and product launches.
- Give a target market. Don't say that everyone in the world is potentially your market, even if it could be true one day. Be realistic about who you're building your product for and break out your market into TAM (Total Addressable Market), SAM (Segmented Addressable Market) and SOM (Share of Market). This will not only impress your audience, but it will help you think more strategically about your roll-out plan.
- Mention customer acquisition. This is usually one of the most overlooked sections of an investor pitch and a full business plan. How will you reach your customers? How much will it cost? How will you measure success? Your financials should easily allow you to calculate your customer acquisition costs.
- Talk about your competition. This is an important part of your pitch, and many people omit this section or don't provide enough detail about why they're so different from their competitors. One simple way to communicate your value proposition over your competitors' is to show this slide in a matrix format, in which you list your competitors down the left side of the page with your features or benefits across the top and use check marks to show what your company offers and what your competitors lack.
- Outline your revenue model. Investors may show lots of interest in this part of your presentation. How will you make money? Be very specific about your products and pricing and emphasize how your market is anxiously awaiting your arrival.
- Provide financial projections. Show what you're projecting in revenue (per product) over the next three to five years. You should always back up any numbers by sharing your assumptions. You may see investors taking out their smartphone calculators to make sure your numbers make sense, so give them the information they need to see that your calculations are accurate. If your financial chart shows “hockey-stick growth,” be sure to explain what happens to cause those inflection points.
- Highlight your team: Investors invest in people first and ideas second, so be sure to share details about your rock star team and why they are the right people to lead this company. Also be sure to share what skillsets your team may be missing. Most start-up teams are missing some key talent, whether it's in marketing, programming, sales, operations or financial management.
- Explain funding needs: Clearly spell out how much money has already been invested in your company and by whom, any ownership percentages, and how much more you need to go to the next level—and be clear about what level that is. Will you need to raise multiple rounds of financing? Is the investment you're seeking a convertible note or an equity round? Remind the audience why your management team is capable of managing their investment for growth.
- Briefly describe an exit strategy: If you're seeking large sums of investment capital (over $1 million), many investors will want to know your exit strategy. Are you planning on getting acquired, going public or have something else planned? Show you've done some due diligence on this exit strategy, including the companies you're targeting, and why it would make sense five or ten years down the road.
With a pitch, you only get one shot. Remember to practice your pitch a few times before presenting to investors. And while keeping your pitch informative and on point is key, it's also important to back up your claims. Have a solid business plan on hand to share after your pitch, so investors have the option to read more. And best of luck!
Caroline Cummings is the VP of Marketing at Palo Alto Software, and is responsible for leading their marketing and business development for the cloud-based business planning and management tool, LivePlan. Learn more about LivePlan.