You have come up with a groundbreaking business idea, and you are ready to take the first step to secure funds in order to take the plunge. It is time to approach investors like an Angel investors or other venture capitalists. In the excitement, startup entrepreneurs may fail to take the time to prepare their pitches properly, which can be a damaging factor to securing an offer from the best players in the investment industry.
Investor Arie Cassis says in an article published on 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 will be exciting to speak to an investor about your project, but before you start sending out your pitches, 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 in an elevator, a function room or a cocktail party. 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
When you state that there is no competition in your market or that there is little competition, you give the impression that you haven’t done enough research. This goes hand in hand with not offering enough statistics to support your assumptions. Instead of putting out your project as the best out there, you’ll be more convincing by coming up with research that identifies competitors, the target market and demographics, and the felt need that your product will respond. So, you 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 short, you have to identify problems your product will be solving, express a sustainable competitive advantage, offer a description of the management team, point out the exit for investors, and explain expected costs and projected revenues for the business. These are things that should come out clear and succinct in your business plan.
Failure to Listen
No investor will be offering suggestions and modifications to your business model if they are not interested in the venture. So, instead of holding on to your pride, you should consider this as an opportunity to explore other possibilities. Listening also comes with the openness to receive feedback as insight from an investor’s perspective. 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.
In conclusion, it is best practice to always approach investors with a sense of gratitude. Never forget to acknowledge their unique contribution to the business environment and be thankful that they take the time to listen to you. After pitching an investor, it is important to get back to them for a follow-up. Especially if your first meeting with the investor went well, you should 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.