Pitching to Investors: The Best Approach
Contrary to what you might think, an idea or even the people building it aren’t the most important part of a startup. After all, you can’t expect to build the next great thing if you don’t have the resources to do it.
For that reason, runway — the amount of money you have in the bank that allows you to keep your doors open even when you’re operating in the red — is actually the most important thing to a startup. You can’t expect your startup to takeoff if the runway isn’t long enough.
Quite simply, companies need money to buy the time to survive. But there’s a tricky dichotomy that pervades the world of venture capital: Investors will give you money when you don’t need it, but they won’t give you money when you do need it.
If you want your startup to be successful, you need to get investors to part with their money — and you need to do it quickly.
Know What Investors Care About
You may think that investors care about helping build products that change the world. To a certain extent, this may be true. But only if said world-changing products are profitable. Because when it really boils down to it, investors care about one thing: return on their investment (how their money will become more money late).
So when you’re presenting to investors, you need to head into the room with a clear understanding of what your goals are — essentially convincing investors to open up their wallets.
To be successful, you need to know exactly who’s in your audience and cater to them specifically.
Generally, they’re looking to hear three things when startups present to them:
1. The Problem is Big
Investors are drawn to startups trying to solve big problems. They like companies that have huge upside potential with respect to market opportunities. Whenever possible, highlight the failings or lack of current solutions. If the problem plagues millions, but no one’s cracked the perfect solution code yet, then there’s a BIG opportunity that will attract interest.
Whether the problem is HUGE or not, make sure that you explain why the investors should care about it or the people it plagues. This is what Andy Raskin calls the “Master Move”, something he says Elon Musk, Steve Jobs, and many others display in every pitch.
2. The Solution is Right
There may be other companies out there trying to solve the same problem as you. So you need to understand exactly how your product is different from your competitors’ solutions. Sometimes, it’s good to know that others are out there trying to solve the problem as it validates that there is a market. But you need to show why your product is better suited to fill the need.
You also need to know your product inside and out; talk about the benefits, not the features. Whenever possible, show, don’t tell — let someone else press the buttons. Let them ask questions and guide the demo. If you don’t show them the one feature they want to see, you’ve lost.
And you need to show a strong product/market fit for your solution. This can displayed with paying customers, traction, validation, growth, and more. Any positive indicator that you’re on the right track helps your case for why an investor should give you money instead of to another startup.
3. Your Team is the Best
It’s impossible to build the best idea with the wrong team. Investors are well aware of this, and you should be too. Show potential investors that yours is the best team available to solve the problem and build the solution. Highlight previous wins, market expertise, and the fact that you all work well together.
You can’t just expect to show up, have a conversation, and walk home with a bunch of checks. Don’t forget that how you talk actually matters. For example, if you talk like Ferris Bueller’s teacher, you probably aren’t going to inspire many people to reach into their wallets.
So be lively. Talk in different tones, and enunciate clearly. Whenever possible, reinforce your presentation with visual aids. Make it conversational when possible, but investors don’t want to be asked a million questions about everything. If you’re teaching them new things or reinforcing ideas they had, you’re in a good place.
And, of course, to increase your chances of success, you need to practice your pitch — over and over and over — until it’s perfected.
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