Which Entrepreneurs Get Funded? Great Businesses vs. Great Presentations
Many entrepreneurs want to raise capital. It’s like when people say they want to lose weight. Wanting to and actually doing it are two completely different things. Raising capital usually means pitching investors. And if you pitch investors like most people, you’re not going to stand out.
The chart below tells the brutal truth of which businesses are most likely to be among the approximately 3% who raise funds from professional investors.
A great business which gives a great presentation has the highest chance of raising capital. A lousy business with a lousy presentation isn’t getting funded.
But what about a good business with a lousy presentation? Is it more or less likely to get funding compared to a good business with a great presentation? The answer probably won’t surprise you.
After speaking with over 110 angel investors, VCs, entrepreneurs, and educators, the consensus was solidly in favor of the good business with a great presentation. The deciding factor came down to the team, the single factor which most influences approximately 80% of investors.
A person and a team who made a great presentation took the time to practice. Investors like to see the results of preparation and hard work. A great team willing to practice may simply need some advice and be willing to pivot, changing a good business into a great business.
A good business which gives a lousy presentation says to investors, “We didn’t care enough to put in our best effort.” The lack of preparation and the condescending attitude toward investors will derail just about any business seeking capital.
At the very least, it says the team is not ready, not mature enough, and probably not coachable. With plenty of investing opportunities from which to choose, investors quickly move on.
Want to improve your chances when pitching to investors? Follow the recommendations below to maximize your chance of raising capital.
PRACTICE your pitch
If you didn’t practice 25–50 times before presenting, it will show in your lack of confidence, poor pacing, and use of filler words like “uh”, “um” and “like”. Then you’ll likely resort to the boring reading-slides-to-your-audience-with-your-back-turned method of pitching. Buy the coffin. You’re dead.
GENERATE some enthusiasm!
No one expects you to have over-the-top local sportscaster enthusiasm. But don’t pitch with a sleep-inducing monotone, either. If you don’t have passion for your business, neither will an investor.
PREPARE for contingencies
Fertilizer happens. Prepare for it.
* Know every slide in your pitch deck by heart
* Have two thumb drives with your pitch deck saved in PowerPoint / Keynote and PDF
* Bring your own laptop, projector, clicker, batteries, microphone, cables, and cords
* Inspect the room beforehand, if possible. Know the lighting and sound conditions
SHOW your traction
If you have users, customers, revenue, profits, contracts, letters of intent/interest, or patents, mention so early in your presentation. Investors currently are funding fewer idea-stage businesses than two years ago. Let them know you’ve advanced past the startup and customer discovery stage into the business stage.
BREVITY is king
Got 10 minutes to pitch? Finish in 9:45. Almost nobody finishes with a strong close in the allotted time. Investors love someone who can manage time effectively. It sends the message that you can manage other areas of your business effectively, too. Keep your pitch deck to 10–12 slides maximum.
NAIL the opening and closing
Tell a brief story; do something unexpected; focus on emotion. Those are great concepts to open a pitch. Close powerfully with your call to action. Now think about how most people open speeches — and don’t do that.
Sprinkle in stories to drive home a point, to magnify emotions, and to keep your audience engaged. Generally, a single story should take no longer than about 7% of your total pitch time. For a 10 minute pitch, a story is most effective when 40 seconds or less.
Use storyboarding, a technique invented by Walt Disney in the 1930s, to create your overall theme. Do this before designing your pitch deck.
DATA needs to be current and from a reliable source
Most of your data should be less than 1–2 years old (some government data is often 2–5 years old yet is the latest available). Using old data or data from an unknown source (Uncle Jeff’s ABC Marketing in Poulsbo, WA?) is a red flag to investors.
VISUALS, not text
Your pitch deck should be primarily visual. You’re the focus, not your pitch deck. If your slides are full of text, your investor audience is reading the slides and not listening to you. Your audience can read faster than you can speak. When they finish and you’re still talking, they’ll disconnect. After that, they’re almost impossible to re-engage. Great visuals enhance your story because vision is the most dominant sense in people.
WIIFI: What’s In It For Investors?
Why you? Why now? Why should an investor care? When your pitch answers those questions in a concise yet detailed manner, your chance of funding improves.
Knowing your investor audience is essential. Pitching friends and family is somewhat causal, pitching angel investors is more serious, and pitching institutional investors is sophisticated. Tailor your pitch accordingly.
Successfully raising investor funding is often a long, frustrating, and complex process with lots of nuances. Getting turned down dozens or hundreds of times will test an entrepreneur’s patience. Persistence doesn’t guarantee success but quitting guarantees failure. Investors use the process to find the most resilient entrepreneurs worthy of funding. Getting investor funding will often be the difference between the success and failure of your business. The guidelines above will make your process faster and easier.