You have come up with a groundbreaking business idea, and you are ready to take the plunge. It is time to approach Angel investors or other venture capitalists to raise funds and get the ball rolling. In the excitement, many startup entrepreneurs fail to take the time to prepare their pitches properly, putting their odds of securing an offer from the best players in the investment industry at risk.
Investor Arie Cassis says in an article published in Entrepreneur that most entrepreneurs do not exert the same effort in preparing for the initial meeting with investors as they do in securing that meeting. Here are some of the mistakes entrepreneurs make when pitching investors.
Pitching the Wrong Investors
It’s certainly exciting to speak to an investor about your project for the first time, but before you start sending out your pitch, it is important to do your homework and know your audience well. What is the investor’s profile? At what stage do they come in when they accept to work with a first-time entrepreneur? Are they active in investing in your sector? When you know how a particular investor works, it saves you time and allows you to personalize your pitch to meet their interests. Investors will know when you have done your homework, and it is one of the elements that set you apart as someone who is serious and who knows what they are doing.
Relying Solely on the Deck
Although a terrific deck can tell your story, being prepared for conversation can be very rewarding as well. Have a deck handy for your meeting with prospective investors; however, focus on creating an effective elevator pitch. The elevator pitch is the most creative part of the process of winning a suitable investor over. You should be able to pitch in a way that is concise, effective, and compelling when the opportunity arises to speak briefly with a key decision maker at a VC firm. This means that your pitch must not be longer than a minute and should be written to showcase your knowledge and expertise. You want to deliver a well-written pitch in a well-practiced and unhurried manner.
Assuming That There Is No Competition
One of the most damaging statements is that your product is “sans pareille”, having no competition. Saying that you have little or no competition in your space gives the impression that you haven’t done enough research. This assertion is typically accompanied by an alarming lack of statistics. Instead of just claiming your project is the best, present research that identifies your competitors, the target market, audience demographics, and explain how your business will address their needs. You will also want to show that you have mastered the basic principles underlying the framework for your revenue model, including churn and lifetime value, customer acquisition costs, and others. In other words, you need to clearly and succinctly identify problems your product will be solving, express a sustainable competitive advantage, offer a description of the management team, point out the exit strategy for investors, and explain expected costs and projected revenues for the business.
Failure to Listen
Investors won’t offer suggestions or modifications to your business model if they aren’t interested in the venture. Sometimes that takes the form of a bit of criticism, so don’t let a stung sense of pride distract you from this important signal. Being open to hearing an investor’s feedback lets them know you are capable of listening to direction and won’t go rogue with their money. The willingness to listen and to acknowledge an investor’s take on your project can be one of the determining factors as to whether they will work with you or not. Investors want to work with people who are open to receive feedback and who can take advice positively.
Lastly, always approach investors with a sense of gratitude. Never forget to acknowledge their unique contribution to the business environment and be thankful for the time they’ve taken to listen to you. After pitching an investor, it is important to get back to them for a follow-up. Ask them if there is any other information they would want to get from you or anything they would suggest that you do to improve on the process. Finally, ask for their permission to include them in future business updates.