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Dos and Don'ts for an Effective Investor Pitch
Published on May 6, 2012
Read 'Dos and Don'ts for an Effective Investor Pitch' at 'Time to Start Up,' the small business blog by BizFilings.
When it comes to pitching investors, you will likely develop a personal approach based on your personality and business type. Your approach may also change according to what kind of investment you're seeking and your audience. For entrepreneurs new to the game, there are a few fundamental dos and don'ts that can help shape a winning pitch - and even seasoned business owners can benefit by reviewing the basics.
Do: Be concise
You've probably refined an "elevator pitch" that you can rattle off without hesitation. Now that you're in a proper meeting with investors, maintain the punchiness of your message without racing the clock. Keep a PowerPoint deck to basics, and try to distill each point to its essence.
Do: Prepare for your technology to fail
This means two things:
1) Have your pitch deck and support materials in multiple formats. Consider a USB drive, CD/DVD or in the cloud to turn a tech failure into a chance to impress with your preparation.
2) Know your presentation. If there's a total tech meltdown, having your numbers committed to memory is essential. This means you should know the order in which you want to make your points, and should be able to unhesitatingly provide key financial data like projected revenue.
Do: Dress to impress
A no-brainer, perhaps; however, it's important to not only dress professionally, but to be comfortable in your clothes - and shoes. This will impact your posture and gestures, which should convey confidence and trustworthiness. As New York real estate mogul Barbara Corcoran told Inc. magazine, "A certain level of nervousness is expected but if you constantly shift on your feet this sends a signal that you aren't trustworthy, maybe you are hiding something."
Do: Show them the money
That is, show them how they will make money by investing in your company.
You no doubt want a healthy bank account, but you probably launched your business for many reasons:
You had a vision of how a product could change the world
You wanted to be your own boss and shape a company you could be proud of
You wanted to find an outlet for your expertise and talents
Keep in mind that investors are coming to the table with a simpler and more singular motivation. To make money.
This means they are most interested in seeing how their goal will be accomplished, typically when your company is sold or goes public. All your projections should point to this eventuality.
Do: Name a figure
Your asking for a specific amount of money is a call to action that an investor galvanized by your presentation will be eager to answer. Also, by determining what specific figure to ask for, you will be doing the essential work of determining what exactly you need money for and how it should be spent to grow your business. Potential investors will want to know this information.
Don't: Spend too much time describing your product
How your product works and what makes it special should be easily grasped so you spend more time during the presentation selling your business as something worth investing in. Given you've got something of value to offer the market, an investor is betting on your business plan and team, so this is what you need to tell them about during a pitch.
However, it's a good idea to bring in a prototype of your product, or mock-ups, models or designs. Also, be sure to note if the product is patented or trademarked, as this means you possess a hard asset that may be worth something even if the business ultimately does not perform to expectations.
Don't: Avoid talking about competitors, or mischaracterize your competitive advantages
Before there was Facebook, there was MySpace. Investors may be excited about a company that is an early entrant into a particular market, as this gives it time to corner that market, but investors expect that there is or will be competition. No doubt you know who the competition is and have thought about ways to come out on top. Potential investors will want to hear about your plan and the competitive advantages your company has.
Do: Show your passion - but don't fake it
Conventional wisdom says displaying how passionate you are about your business is key to winning investors; but, there are many ways to demonstrate your passion, and overplaying enthusiasm can backfire. One study conducted in 2009 found presenters' facial expressions, tone of voice and gestures had no statistically significant impact on whether investors had a positive or negative impression of a pitch, according to The New York Times. Substance is valued more than style, and a presentation ought to be smooth but not slick. As one of the study authors told the Times, "Being authentic is much more important. There is such a thing as quiet passion. Anything that comes across as slickness is a negative."