In order to secure investment, you will apply to many angel networks or VCs. You should try to attend networking events where investors may be present as meeting someone in person is the best way to secure investment. Once you apply to these investment groups, your proposal will be reviewed usually by a board and they will decide whether to invite you to pitch or not. Make sure you only apply to groups which you are eligible for / meet their investment criteria. A life science fund is never going to invest in retail so don’t waste your time and theirs.
How to secure a pitch
You could have the best business in the world, but if you can’t communicate this in your investment deck then you won’t get a foot in the door. An investment deck is a 10-page PowerPoint providing an overview of your business. You may be tempted to get create and do a video or something else, but ultimately, the investors need to look at the numbers and share it with the board so stick to the simple PowerPoint. Your 10-page deck must cover:
- The idea: What is your business? I’ve been on calls for 20 minutes and the founder still hasn’t explained what his business is. Keep it simple and spit it out!
- The problem you’re solving.
- The size of the prize – show them the money! Investors will only be interested in a large or fast-growing market.
- Defensibility – do you have intellectual property? Is it protected? Could someone copy you overnight, if not, why not? If so, what will make you succeed over them?
- Exit – when will you exit and to whom? What will be the investors ROI?
- Team – do you have the experience to do this?
- Financials – high-level revenues and costs to date and forecast
- What you’re asking for – how much you’re raising, at what valuation and how their money will be spent
Once you’ve been invited to pitch, prepare, prepare, prepare. I’ve seen brilliant entrepreneur bomb in the dragon’s den as they did not practice their pitch. You will be given anywhere from 5 minutes to 30 minutes to pitch so prepare versions for 5, 15 and 30 minute events. Whether your pitching to customers or to investors, some nuggets for success remain the same:
- Dance: Body Language
- Be confident. If you don’t believe in yourself, neither will they
- Smile, enjoy yourself
- Use your hands to illustrate points but don’t conduct an orchestra
- Move gently but purposely back and forth or side to side but do not pace erratically
- Stand tall
2. Sing: Voice / Tone
- Slow down! Even without hearing you, I know you’re speaking too fast. It’s better to say less and leave them wanting more than to gallop through your pitch and no one understand you
- Don’t be monotone, inject life into your voice
- Sound positive and confident, show energy and passion
- Articulate! Be clear, be heard
3. Lyrics: Words / Content
- Be clear and concise, less is more on your slides and what your say
- Don’t get lost in the weeds
- Prepare you story, know it by heart in case technology fails you and so you can deliver it at networking events
- Know who you’re pitching to and tailor it to them – analytics, visionaries etc
- Signpost your story – let them know what you’ll cover / Say what you’re going to say, say it, tell them what you just said
- Don’t be defensive to any tough questions, take them on board and thank the person for their insight
I coach people on pitching so if you would like some help for any pitching, presenting or public speaking then please do get in touch firstname.lastname@example.org.
What Investors look for during your pitch
While you’re sweating up front, this is what the investors will be looking out for:
- The team – Especially positive if they have worked together before or have built a successful business before
- IP portfolio – Especially in early stage tech firms
- Sector – Investors back what they know (so check out their portfolio).
- Traction in large, growing markets
- Financial indicators – Gross margin is a favourite
- Entry valuation – A black art…
- Exit route – Can I get out? When? How? Valuation?
- Due diligence – any skeletons?
- S/EIS (Seed Enterprise Investment Scheme) offers 50% tax relief. EIS (Enterprise Investment Scheme), you can raise up to £15m over the lifetime of your business and investors can back up to £1m each year.
Consider when you raise money. If you are desperate and tomorrow you’ll need to shut down the company, then you have very little bargaining power. Raise early. The below graph illustrates your relative bargaining power over time.