One of the best parts about being an entrepreneur is the freedom that comes from discovering a gap in the market and crafting an idea to fill it. However, businesses new and old must usually rely on investors and stakeholders to bring these visions into reality, and pitching business ideas to potential investors can be one of the hardest parts of being a startup.
Though often a nerve-wracking part of any entrepreneur’s journey, pitching shouldn’t be so daunting so long as businesses plan ahead and follow some key guidelines. Here we’ll highlight various ways startups can better ensure a greater chance of success when approaching potential investors.
Table of Contents
What businesses should understand before making a great pitch
Different pitches to help diversify your approach
6 tips to pitch successfully to stakeholders and investors
Summary
What businesses should understand before making a great pitch
To make a successful pitch, entrepreneurs must demonstrate several key qualities to persuade investors to back their innovative ideas. First, they must thoroughly understand their business idea, target market, growth strategy, product-market fit, and overall business model. This comprehensive knowledge helps to set their business concept apart and outlines the necessary steps to achieve it.
A compelling pitch not only presents a proof of concept but also reassures investors that they can anticipate a return on their investment. Another vital element of a successful pitch is grasping the venture capital (VC) ecosystem.
Harvard Business School senior lecturer Jeffrey Bussgang emphasizes this point in the online course Launching Tech Ventures, explaining how entrepreneurs must understand venture capitalists’ backgrounds and motivations. This knowledge will help them identify priority areas in a firm and show them how to build strong, trusting relationships when seeking funds.
Different pitches to help diversify your approach
Effective pitches likely feature a few key elements, but entrepreneurs can diversify their approach to fit different situations. All investors are not the same, so it only makes sense that pitches should vary according to the prospective business partner. Businesses must tailor their pitch to their audience to increase their chances of success in the available time frame. Below, we take a closer look at several different types of pitches to help diversify your approach.
The elevator pitch
Elevator pitches are great for quickly conveying a startup or plan’s value in 60 seconds or less. A strong elevator pitch should be brief, persuasive, and showcase the idea’s potential value and unique features. It should also conclude with a powerful call to action, like stating the capital needed to get started. If you can’t condense your regular pitch to a punchy and concise elevator pitch, then you should consider rejigging your key touchpoints.
The short-form pitch
Startups must focus on delivering their business idea’s value to potential investors in a concise and effective manner. This strategy involves summarizing the key aspects likely to spark their interest, such as a market size overview, the strategy to outpace the competition, the monetization plan, and the required funding.
Short-form pitches, typically lasting three to 10 minutes, are ideal in such situations. Startups must also be mindful of any time limits if they are pitching in competitive settings, and adjust their material to fit such constraints. These pitches, while brief, can engage investors and help to secure an opportunity for a more detailed presentation later.
The long-form pitch
When you have more time to pitch an idea, fully utilizing the time and covering all aspects of the business plan is crucial. This is where long-form pitches come in.
Startups can use long-form pitches to flesh out their idea fully, as well as focus on telling their story and sharing real-life scenarios. Explain the market size to show demand for the idea and show clear examples of how the plan can attract and retain customers, taking competitors into consideration. This approach demonstrates the speaker’s plan for how to tackle any future challenges. Remember to leave the floor open for follow-up questions from investors to field any concerns they may have.
6 tips to pitch successfully to stakeholders and investors
#Tip 1. Understand who you’re pitching to
Don’t make the mistake of trying to attract every investor. Remember stakeholders and investors have different investment strategies and industry expertise, so partnering with the wrong fit will likely cost you both time and money. Hence, startups must research potential investors before crafting their pitch.
Researching potential investors is easier once startups have asked themselves three vital questions: What industries does the investor invest in? What stage will they invest in? And what’s their investment track record?
What industries do they invest in?
An investor’s expertise and interest shape the focus of their firm. Some firms concentrate on specific sectors, like educational technology (edtech) or financial technology (fintech). For instance, Blockchain Capital focuses on companies innovating in the crypto market, while Rethink Education invests in early- and growth-stage edtech startups.
Other firms are generalists, investing across various industries. Understanding the types of companies a firm invests in allows startups to tailor their pitch to match their target investor’s priorities and interests.
What stage do they invest in?
Businesses in the early stages of development won’t qualify for growth equity. This funding is reserved for established companies looking to expand, enter new markets, or acquire other businesses. Hence, before pitching, startups must estimate how much money and resources they need to launch their idea. Then, they must seek out investors who specialize in supporting businesses in the early stages.
What’s the investor’s track record?
Research the investor’s experience and investment history to understand their background knowledge, personality, and the companies they usually fund. This insight allows startups to tailor their pitch for the highest success chances and decide if the investor or fund is the right fit for the business. The more entrepreneurs know before going into a pitch, the better.
#Tip 2: Consider presenting personality, not just ideas
While the entrepreneur’s ideas and skills are important, their personality is also a big part of the pitch. Research from the Harvard Business Review shows that a pitcher’s character and perceived trustworthiness influence investors more than their apparent competence. Investors always want to know if they are partnering with the right people.
Additionally, investors want to know if the founders have previous experience working together, if the early hires have complementary skills, and if the team is flexible and open to different perspectives. Startups must keep all of these things in mind as they prepare their pitch.
Also, when asked for financial projections, ideally you won’t need to exaggerate. Firms seek genuine founders they can trust and will accept guidance and mentorship without a fight. If you’re unsure about what your responses and reactions will be to certain questions, practice various answers before the pitch.
Note: Most high-end investors look at personality first before exploring the opportunity. Even when the project is in its early stages, the investor will still depend on the team’s leaders to make profitable decisions.
#Tip 3: Weave stories into the pitch
A business pitch shouldn’t feel like entrepreneurs are reciting a script. Instead, founders can add personal touches where appropriate to make it more genuine. Humanizing the pitch and slide deck makes founders more relatable and can even help to reduce tension.
More importantly, when explaining the business idea, focus on the problem it will solve for the target audience and how the solution is superior to the competition’s. Then, use a real-life example to illustrate it: describe a challenge current or potential customers faced and how the product or service resolved it. This approach can help investors connect with the idea personally and better appreciate its potential.
Pro tip: By combining the data and charts with a compelling narrative, founders can give a more complete picture of their goals and showcase the business opportunities they present more effectively.
#Tip 4: Leverage the power of visual aids
When businesses have the chance to present beyond quick elevator pitches, they must avoid using slides overloaded with text, numbers, or endless data. People naturally respond better to visuals, like photographs, infographics, and icons. So including visual aids in the pitch deck increases the chance for success.
Every pitch aims to capture the audience’s attention and support, and visual storytelling is the perfect way to do just that. Demonstrating creativity in presentation methods, whether it’s via slideshows, handouts, images, etc., can better evoke interest and help investors understand what founders want. After all, the clearer the idea, the more likely founders are to gain the backing of angel investors, venture capitalists, and potential customers.
#Tip 5: Get the details right
While setting the stage is important, founders must also cover the specifics in their pitch deck. They must clearly define their value proposition and share a memorable tagline that will stick with investors after the meeting. Here are nine key elements every investor pitch should have:
- Introduction: Answer essential questions like “who you are,” “why you’re seeking funding,” and “your founder-market fit.”
- Problem: Describe the ideal customer’s pain point and how founders plan to solve it.
- Solution: Explain why the idea is a compelling solution and how it surpasses existing alternatives.
- Opportunity and market size: Present the total addressable market (TAM), serviceable addressable market (SAM), and serviceable obtainable market (SOM) with research data.
- Competitive advantages: Highlight the idea’s unique market advantages and how founders can sustain a competitive edge.
- Go-to-market plan: Clarify the strategy for reaching customers.
- Business model: Explain how the business will generate revenue.
- Financials: Outline the financial projections and how investors will get their returns.
- The Ask: Specify the funding needed, its duration, and the milestones to be achieved.
Pro tip: Investors expect entrepreneurs to define the milestones for each funding round. Founders should also know what efforts they will make to reach these milestones and what results they anticipate.
#Tip 6: Cinch the pitch with the perfect exit strategy
Even though the business is in its early stages, investors want to know how they will eventually cash out. And that’s where the exit strategy comes in. A clear exit strategy shows investors that the founders have a good grasp on their business’s future and will attract them if they share the same goal.
Here are three of the most common exit strategies:
- Acquisition: One company buys most or all of another company’s shares to gain control.
- Merger: Two companies combine to form a new entity.
- Initial Public Offering (IPO): A private company issues its first sale of stocks to the public, allowing it to raise capital from public investors.
Summary
Creating a business pitch, especially for the first time, can be nerve-wracking. But your preparation doesn’t need to be based on guesswork – simply follow the six expert tips above as a guideline for the perfect pitch. Eventually, you’ll discover their unique pitching approach and style the more often you do it.
And what if investors are too busy to listen to the well-prepared speech? In such cases, it’s best to prepare a one-pager, condensing everything, from the business pain points to the solution and value, in an easy-to-digest format. For such tasks, use tools like Picktochart’s brochure to create one in minutes.
