Several years ago, I was trying to raise capital for my business. I spent months working with a particular venture capitalist. After months of runaround, we ultimately got nowhere with the VC. Emails went unanswered and we were back to square one. As it turns out, I wasn’t the only entrepreneur to have this experience with said VC. That’s why I went on to create my company to help entrepreneurs make more informed choices with their investors.
I want to help other entrepreneurs avoid the mistakes I made during the pitching process. Although choosing the right investor is a huge factor, preparation is also key. Here are a few essential ways to prepare for your investor pitch.
Offer three funding scenarios
Here’s the thing about investors: They want to know you’ll make it without them. Investors don’t want your startup’s very existence to hinge on their funding. If anything, you need to demonstrate that their investment merely speeds up your timeline.
Go into your pitch with three funding scenarios, and document them visually to show your investors.
Make a plan for what you’ll do with zero funding (scenario one), with half your requested funding (scenario two), and what you would do with all of the requested funding (scenario three).
There’s a chance your investor might not want to invest 100 percent of what you’re looking for. Contingency funding plans show you have the tenacity and strength to gain traction in your market.
Build it and they will come
Have you ever heard the saying, “Perfection is the enemy of progress?”
I’ve seen this happen many times to startups. Many companies wait to seek investors until their product is completely built and ready to market. But you know what? That will only delay your success. It’s okay to release an imperfect product to your customers. This is essential proof of concept that your investor will want to see.
Long gone are the days when VCs invested in concepts. Today, they want to see not only a prototype, but also sales figures. Remember, these folks care about getting a return on their investment. They need proof there’s a demand for your product.
Build a product and get it on the market. Put it on a simple WordPress site and start collecting early customers. This data will help your pitch go more smoothly.
Most investors understand your business isn’t perfect. That’s why they care more about investing in you and your resources instead of a perfected business plan.
The key is to be trustworthy. Build trust with your investor by:
- Admitting what you don’t know. Nothing ruins trust like a lie. Your investor needs to trust you completely. Fudging information will ruin that hard-earned trust. If you don’t know something during your pitch, admit you don’t know it.
- Showing your reasoning. In other words, show your work. Let investors know why you chose a certain valuation or why you’re seeking a certain amount for their investment.
- Relating to them on a human level. Investors have to understand you on a personal level. Talk about your challenges and how you overcame adversity with your investor. Chat about how you envision the entrepreneur-investor relationship, and how you’ll work together. This gives the entrepreneur an idea of who you are, as well as what you’re like to work with.
- Speaking with the investor, not at them. I know it’s a pitch, but that doesn’t mean you’re speaking at the investor for an hour. If anything, treat the pitch like a conversation. Welcome the investor’s insight and advice. Answer their questions instead of giving a robotic speech. This helps them see their opinions are valued, and that you welcome collaboration.
Accept constructive criticism
A good investor will give you feedback during your pitch—both about your business and the pitch itself.
This sounds daunting, and I know it can feel intimidating. However, most VCs don’t offer feedback to hurt you. If anything, they offer criticism to make you stronger. Critique can also be a test to see how well you respond to challenges.
Don’t feel offended by criticism. Always stay professional and keep the lines of honest communication open.
That doesn’t mean you should stand for poor treatment, though. While rare, some investors can display bullying behavior. If you feel genuinely disrespected by the investor, you do have the power to politely end the pitch.
The bottom line
Don’t fumble an important meeting with a pitching pitfall. Embrace these four tips to better prepare for investor meetings and find the right partner to grow your business.