- How to Pitch Your Business Idea to Startup Investors - May 19, 2022
Securing funding, whether for a startup or an established business, is not an easy task. A strong startup concept won’t be enough when approaching investors; you’ll also need an exceptional pitch to sell it. Let’s look at what defines a startup pitch, a few different types, and how to create a fantastic one for your startup.
So, what defines a startup pitch? It’s a brief introduction, paper or speech that you provide to a potential investor. It’s used to persuade potential investors to supply funding. It communicates the viability, sustainability and scope of your startup concept.
A startup proposal should be concise, engaging and memorable. Ultimately, it should emphasize the value your products provide. Depending on the audience and/or circumstance, startup pitches can range from lengthy to concise. The key? When it comes to investors, focus on compatibility rather than persuasion. Demonstrate how your vision — and values — are compatible with theirs. Keep this objective in mind as you present. Remember: Investors typically don’t have much time. Adapt your pitch to their availability–and attention span.
The main types of startup pitches are:
Elevator Pitch: A pitch that is completed in the time it takes to ride an elevator. Aim for anywhere between 30 seconds to two minutes. You have only this limited time period to pitch your product, the problem it solves and why it’s worth investing in. Don’t worry about every little detail during an elevator pitch. Your goal? Stimulate the investor’s interest in learning more so you can secure a meeting to discuss it later.
Short Pitch: This pitch is around 5-10 minutes long; it’s the happy medium between an elevator and long pitch. Think of your short pitch as “phase two” after a successful elevator pitch. If an investor shows interest in learning more about your startup, they could potentially invite you to a meeting. This is your opportunity to cover the essentials: your product, business model and so on.
Long Pitch: When your short pitch is a success, but an investor is not fully convinced — and needs that final push — they will request a long pitch. This is very promising, and suggests they’re interested in funding you. An extended pitch is typically 20 minutes long, and gives a broader picture of your startup; not just the essentials, but extra information that completes the investor’s understanding of who you are. Make sure, however, that it covers critical information about your startup: such as financial projections, sales, market share, etc. The long pitch is often your final chance to impress an investor.
Selling your startup concept to investors
One guaranteed road to rejection? Going into an investor meeting without adequate preparation. Successful presentations are orchestrated and rehearsed well in advance. Here are the vital steps to complete before pitching to potential funders:
Research the investors
Many entrepreneurs make the mistake of using the same pitch on every investor. You’re most likely to obtain funding when your proposal resonates with their interests. That’s why it’s crucial to conduct audience research before crafting a pitch. Some questions to ask about your potential investors prior to updating your pitch:
- What industries do they typically invest in?
- Do their company values align with your own?
- How much cash do they typically invest?
- What stage startups do they usually invest in?
Build a pitch deck
Before setting up a meeting, you will usually present a pitch deck to potential investors. The goal is to stoke their interest and create an outline of what you’ll discuss. A presentation deck is what you use to showcase your concept in its entirety. It serves as a visual depiction of the topic you’ll be discussing. A good practice is to follow the 10/20/30 rule. The rule is a simple trick for making your presentation more appealing. Your presentation should have a maximum of 10 slides, be under 20 minutes long, and use fonts no smaller than 30 points.
You’ve pitched your concept. Now you’ll need to convey all of the pertinent information surrounding it. The objective: communicate viability, scalability and profitability. Every startup proposal should have the following elements:
- A target audience
- The market size
- A competitive analysis
- Plan for marketing, finances, and sales
- Product-market fit
- An investment amount
Display your values
When investors listen to your pitch, they are more interested in your personality than in your startup idea. To gain an understanding of your actual business culture, investors look for particular attributes in you and your team. Here are a few of the questions they may ask:
- Do you work well with your cofounders?
- Do you respond well to criticism and feedback?
- Are your predictions accurate, or did you exaggerate them to appeal to us?
Tell a story
Humans are more likely to remember stories over facts. Rather than bombarding investors with statistics, make room for storytelling. This provides a different viewpoint for investors–and an opportunity to interact with you. Once you have their attention, use facts, figures and other evidence to give your tale credibility (and exhibit your business skills). In taking a narrative approach, you can fulfill the investor’s emotional and intellectual interests.
Make a road map
Make your startup stand out by presenting a road map of how you foresee the enterprise growing. This will demonstrate a “growth mentality” to investors, who want to see preparation to scale your startup. Express this by outlining the core objectives for the next few years. Describing your organization’s dangers–and how you plan to mitigate them.
Tips for putting together a startup proposal:
Avoid technical jargon and details
A startup pitch does not have to be lengthy. Don’t burden potential investors with details they didn’t ask for.
Make accurate projections
Investors are interested in learning how lucrative your startup is–and how you plan to develop it. This is communicated via your financial estimates. Although exact projections are difficult to make, you may still estimate and offer reasonable statistics based on historical data and analysis. Many entrepreneurs underestimate their costs, but experienced investors are quick to recognize them. The bottom line: Be certain you’ve thought of everything.
Use bottom-up forecasting techniques
When estimating future financial success, there is more than one approach to gathering the requisite figures. While the top-down approach is quicker and produces more spectacular data in pitch meetings, investors are fully aware of its limitations. The bottom-up market analysis technique is slower, but produces more definite estimates, which is what investors really want. It generates a generic prediction using particular criteria. It provides a more realistic view of your organization’s future potential.
Practice your pitch
Your presentation is only 20 minutes long. Make the most of it! Practice as much as possible; this will ensure you’re spending your time effectively–and not wandering off the subject.
Bring the necessary documents
If your presentation goes well, investors will usually want supporting documents. Your executive summary, mission statement or even entire business plan may be requested. Make sure you have these documents on hand, just in case.
Accept feedback and refine your pitch
Accept all feedback from investors with a constructive attitude–regardless of harshness. You can also ask for comments voluntarily if time allows. This way, you’ll be better prepared to pitch to future prospects.
If you want to grow your organization, you must acquire the skill of selling your startup concept. Create a pitch that communicates your message effectively. Use the methods and advice above to produce a captivating pitch that will entice investors to make a decision.