How To Pitch Investors
Creating your business plan and pitch deck is only one part of the capital raise process
If you’re like most entrepreneurs, you’re passionate and excited about your company. It’s amazing, it’s groundbreaking, and any investor would be LUCKY to get in on it, right?
But that’s where you’re wrong. Investors are bombarded with interest, all from people just as excited as you, all saying their project is the one that will disrupt the industry.
Instead, approach fundraising process with the attitude that investors don’t want to invest. Your job is to make it hard for an investor to turn down your opportunity.
Like all of us, investors don’t want to lose money or look foolish. To establish yourself and your company as legit, you need to make the case that the opportunity is a sound business decision. I can’t stress this enough: DO NOT approach investors with just an idea. Make sure you have a strong start that includes research, a prototype or a minimum viable product, and even some media buzz or feedback from early adopters if you can get it.
Remember, if you fail to impress an investor the first time — if you come off as wasting their time or not having done your homework — you risk never getting a second chance and getting a bad reputation. Or worse, you’ll end up a punchline. They’ll say, “Remember that Uber meets Facebook meets Snapchat guy?” And laugh as they sip their thousand-dollar whiskey. No one wants to be that person.
Find the Right Investors
It’s not just you having to impress investors, though. Make sure they’re a good fit for you, too, because not all investors are alike. You don’t want to partner with just anyone. Research each potential investor to ensure they’re trustworthy and a good match for your industry, mission, and stage of growth. Most angel investors invest in industries they understand; they are looking to invest and incubate. Rare is the passive, silent investor. They are looking to protect their investment and bring about success by leveraging their knowhow.
Investors will have a major say in your company, so make sure they align with your values. The right ones will provide you with more than just money, such as priceless referrals, entry points into hard-won networks, and advice.
If you’re in an earlier round of funding, like a seed round, you’ll most likely be pitching angel investors. Angel investors provide less money than venture capital firms, but they do so sooner, when it might be more crucial. VC firms prefer you to be somewhat established, and while they can provide millions, they do so very selectively.
Like so many things in business, finding an investor is a numbers game. According to a survey from First Round, nearly 14% of founders pitched more than 20 potential investors, and nearly half pitched more than you can count on two hands.
Add to that fact that most funding rounds will comprise multiple investors, you’re going to be talking to a LOT of investors, and cultivating them will take time and organization.
Fortunately, there are many tools out there to help you locate and then manage investor communication. Our friends at Founderssuite have developed an efficient management tool that includes 21,000 VC firms and over 100,000 angels and family offices.
Even if you believe you’ve found the perfect investor, sending a “cold email” requesting a pitch meeting is unlikely to secure it. Investors get countless requests from founders, so it’s crucial to build relationships long before you request a pitch meeting.
The easiest way to think of this is as a funnel: you start by casting a wide net and then begin to whittle it down. The key is to give yourself time and to put in calculated effort. We recommend beginning this process 3–6 months before you intend to start pitching for capital. Look at investors that fit your growth cycle and industry and put together a pool of possible investors. Based on industry averages, a top-of-funnel of about 100–150 potential investors is a good place to start.
Now that you’ve identified your pool, it’s time to start initiating a conversation. One way to begin reaching your potential investors is via permission-based marketing, such as email newsletters. We recommend sending an email to each person in your investor pool saying something along the lines of, “I saw that you’ve made investments in <your industry>. We are not currently seeking funding, but we will be in 3–6 months. Would it be alright if I add you to our newsletter list?”
Concurrently, you should follow these investors on LinkedIn and Twitter. Both social media platforms have robust venture funding communities, and now’s the time to begin to get participating in the conversation. Look to make insightful and relevant comments on your potential investors’ posts and articles. Congratulate investors and founders on successes. Share your experiences with other founders.
Now that you have laid the groundwork, the email you send to request a pitch meeting is much more likely to be received positively.
Prepare to Succeed
Now let’s talk about how to get ready for your pitch. In order for investors to take you seriously, you absolutely MUST have a comprehensive business plan and pitch deck — in that order. If you skip the business plan and only make a PowerPoint, you risk being empty-handed when investors ask for your business plan afterwards. Start with your business plan, which will be the foundation of your pitch deck. The business plan is the waffle, and the pitch deck is the syrup. You wouldn’t eat straight syrup, would you? Wait, don’t answer that.
When you’re crafting your pitch deck, as well as your elevator speech, social media, and other communications, make sure you have clear, consistent messaging across every medium, and with everyone on your team. Develop your story and make sure everyone tells it the same. Inconsistency will confuse people and weaken your impact. Hone in on what you do best. Clearly lay out how you’re better than competitors, because they’re probably pitching the same investors you are.
When you’re creating your pitch, limit it to 20 minutes — even if you have an hour — because you want to keep it short and powerful, with time for questions. Better yet, rehearse it down to ten powerful minutes. A common rule of thumb is to prepare for 15 minutes for the pitch and 15 minutes for question-and-answer. Investors are notorious for getting you off track by asking a question mid-stream. They want to see how you react under pressure. Be prepared for quick, concise answers, and then get back on script with a respectful, “Does that answer your question?” Sometimes, when your time is up, your time is up.
After you make your pitch deck, proofread it and have a friend check it as well. Double-check your statistics and figures. This is an easy place to look stupid. After all, if you can’t spell your co-founder’s name right, what other important details are you ignoring?
Once your presentation is perfect, rehearse it until it’s second nature. Practice in front of the mirror to see if your body language communicates confidence. Record yourself on your phone and play it back to see how it sounds. And when you’re ready, test out your pitch on friends and family. Maybe even bribe them with free snacks.
You should also try to anticipate questions from potential investors and practice the answers beforehand so you can stay calm and confident in the moment. Some questions will be easy to answer if you’ve done your business plan — like when you’ll break even, and how much funding you’ve already raised.
Expect to be asked tough questions: why you’re better than your competitors, what the biggest risks to your company are, and why you think you can succeed. Investors not only want to know the answer; they want to see how you perform under pressure and that you can improvise. A startup founder who is easily flustered won’t be able to withstand the stress of rapid growth. Practice will help you stay calm in the moment.
Finally, dress to impress (a bit)! Whether you’re male or female, wear something nice. I used to suggest wearing your suit, but times are changing. The rule-of-thumb is to dress one level up. What is one level up? Glad you asked. If the room of investors is wearing t-shirts and jeans, put on a polo and khakis, if they are wearing button-down shirts and no tie, put on a suit. You might have to do some investigating here, but their receptionist can be your best friend — “hey, what does Carl typically wear to the office on pitch day?” You get the picture. Every investor is different and you should treat them as such.
The Pitch Meeting
Once you’re in the room with potential investors, don’t start off on the wrong foot by asking them to sign an NDA, because most will say no. Investors have probably seen something like your idea before and will again. If you like, put the word “confidential” on any handouts.
Once you get started, respect their time and stick with your key points. Be confident, positive, and urgent. Investors should feel like now is the time to get involved, and things are happening quickly. Make good eye contact and be enthusiastic. You of all people should be your company’s biggest cheerleader. If you’re bored, investors will be too.
Pay attention to how investors are responding to your presentation. If they look confused, either explain something in a different way, or ask if they need clarification.
After your pitch, take questions, and respond to them graciously. Ultimately, an investor is giving you their valuable time and advice, so take questions seriously and don’t get defensive.
Most importantly, be honest. Your integrity is priceless, and nothing builds an investor’s faith in you like honesty and transparency. You should be ready to back up all statistics and trends with multiple respected sources. No decent investor wants to partner with someone who’s charismatic and flashy but ultimately dishonest. If you lie, chances are, it’ll come back and bite you in the ass.
With that in mind, if you get a question that stumps you, don’t bluff. Investors may already know the answer and be testing you. Instead, admit that you don’t know. Say something like “I don’t have an answer for you today, but I’ll follow up with you as soon as I get back to my desk.” Afterwards, find some solid market research and get back to them immediately.
You’ve probably picked up on a theme throughout all of this: investors are extremely busy. Don’t expect them to follow up with you. Take the initiative yourself. The day after you pitch — or even that night — send a short email to thanks them for their time and includes anything you promised, like the answer to a question or a link to a demo.
Email them again a week or two later, but make sure you provide value in some way, like a relevant news article, event invitation, or milestone you hit. Remember, they’re overworked and being pulled in a million directions, so keep it really short. If they’re not responding to email but they’re active on Twitter or LinkedIn, contact them there. Make it easy for them to respond.
Keep following up as you develop new features or have something impressive to show the investor, keeping in mind that he or she may be interested but working on other deals. Be persistent and polite, not pushy or desperate.
If you get a “no,” be gracious and accept it. View rejections as opportunities to strengthen your pitch and presentation. See if you can make it even stronger and shorter. Learn from the rejection and go onto the next! Keep trying, and you’ll improve your chances of getting funded.
Whatever you do, stay positive. Airbnb was turned down by five big Silicon Valley investors. Salesforce was repeatedly rejected by the big VC firms in Silicon Valley. And Pandora got rejected by VCs 300 times before getting funded. Bottom line, rejection doesn’t mean you’re a failure. Either you’ll land investors, or you’ll find the funding you need another way. You got this!