It’s not easy raising capital from investors. They’re picky and have short attention spans. And there’s a reason for that: They likely have other things to do like investing in businesses that aren’t yours, so you gotta be sharp to get their attention.
So here’s an expansive article on all the things you need to make sure not to do when it comes to writing and presenting your investor pitch. Allow me to emphasize that this article focuses on presenting your pitch, not just sending a slide deck. Let’s get into it.
1. Not preparing the correct format that investors expect
Presenting an investor pitch is somewhat akin to writing a job application: there’s a certain universal way to do so, and Investors, and in particular venture capital firms, will expect a certain format in which an investor pitch is presented.
If your potential investor is your average run of the mill old-guy with excess worth stashed in a mattress somewhere, maybe you can skimp on the format, but in any other case I’d be pretty stringent in terms of how I present my company, and in which order I’d do it.
The expected order is – in most cases – as follows:
- Company Overview / Presentation
- Technology / Product
- The Market Opportunity
- The Buyer / Personas
- The Competition
- Business Model
- Marketing / Action Plan
- The Ask
- Call to Action: Vision Statement
You don’t have to include everything, but the overall of your presentation should cover at least these subjects within a 3-7 minute presentation. And trust me when I say that it’s not small feat to do so, but it is definitely doable.
2. Not having a ‘Company Overview’ slide
When you work in a business and you’re presenting yourself to prospects you always do so with a function and a company name:
“Hi, I’m [NAME], I do [FUNCTION] on a daily basis at [COMPANY]”.
The same approach applies when you’re presenting your company at an investor pitch. You just do it the opposite way with a company name and a function afterwards. Cut to the bone, and tell your investor what you and your company does in one sharp sentence including your secret sauce. Try the one-sentence pitch on Pitcherific if you’re having trouble turning your one minute elevator pitch (which you of course have) into a one sentence-greeting.
Don’t skip on the introduction. You might talk to an investor who hasn’t had the time to google you, or hasn’t been able to find anything useful on you. Don’t bombard your prospect with information.
Do make your introduction brief, as if anyones interested you’ll be going over the specifics later. Just give your recipient a hook and thus a reason to listen, not a bunch of unimportant information.
3. Not making your problem clear enough
What is the current situation? What type of person suffers? What organisations are currently involved, and why aren’t their solutions good enough? What effect does this problem have if left unsolved? Why is it important to solve this? Be specific, use examples and visualize the pain points extensively.
You need to make sure that the problem your company / product aims to solve is articulated clearly. We advise all our users and customers to always spend at least one fifth of the total time set to pitch on presenting the problem. You want to build urgency in the investor, and make sure that the problem appears big enough that a solution to it will lead to substantial revenues if solved.
Don’t avoid spelling out the problem! You’re trying to create urgency for a solution: Your solution.
Do your audience the favor of spelling out the underlying problem in detail. The more they know about the problem, the more prepared they’ll be to invest in a solution for it.
4. Presenting your solution with a learning curve
You need to make absolutely sure that your product can be explained in such a way that it doesn’t appear to be a problem in and of itself to apply it.
Let’s say you have a product that’s basically plug and play: You plug it in, and then it works. No introduction needed. Don’t spend time on explaining how it works – just stick to the fact that it works.
Now let’s say you have a product with a learning curve: Your users need a manual or a tutorial to get started. Don’t spend time teaching your investor all your features, once again just stick to the fact that it works.
And don’t just present it in a logical manner, tell a story or create something that the investor can see and physically feel. You must present your solution in such a way that everyone can see that you either cater to an unattended audience, or that your solution is better than what’s currently being offered.
How are you going to solve the giant problem that you just outlined? How is your solution different from everyone elses? Does your solution have better features, more functionality, ease of use, less costs or anything else that gives it an edge?
Don’t present your solution in such a way that it appears to be a problem in and of itself to apply it.
Do present your solution in a simplified manner as a better alternative to what’s currently being sold. It’s supposed to be.
5. Not showing why your technology or intellectual property is valuable
Intellectual property is good, but not important in e.g. a lot of software that relies on service, availability and affordability instead. But if you have a physical product that’s brand new and has never been seen before, do you then have any (pending) patents, a copyright or a trademark?
Anyone interested in your startup will be happy to know if your product is protected from being copied months after release. Make sure it’s abundantly clear why your technology differs from others, and how that makes it superior.
Don’t be that guy with a unique product with intellectual property who didn’t research whether or not it could be patented. As a side note to this: don’t ask investors to sign an NDA before hearing you pitch – very few will be interested in doing so and it’s a lost opportunity.
Do your due diligence. If you have something that can be patented, research it and get it done.
6. Not declaring your competition
Unless you just invented time traveling, and you’ve got a functional prototype ready for consumer-use I can honestly say that you’re not alone in whatever field you’re working in. Everyone has competitors. Telling your investor that you don’t have any competition will either make you look uninformed or lazy. Do your homework, and present your competition. Remember, that indirect competition (substitute solutions or intermediary solutions) also counts as competition.
Don’t think you’re alone in solving a problem. There’s always someone out there who’s doing something similar to what you’re trying to do or fill the same need in some other way.
Do your research. Ask a professional market researcher for tips, or buy their services – it’s not hard or expensive to get done.
7. Being naive about the market opportunity
You might have a spectacular product that you believe everyone on the face of the planet will benefit from using. But you have to narrow it down to those who would actually pay for and use said product. So don’t start at 7 billion people and then narrow it down to your expected market share – start from the bottom instead – with one 1 person:
There are two ways to get your market size. If you’re entering a pre-existing space you can research it. If you’re creating a new product or space (like Pitcherific is) you can estimate the number of customers that would want your product and approximately how much you charge them.
When you’re estimating market size and percentage you could own, there are two methods: top down and bottom up. With the top down approach you determine the total market and estimate your potential share of it. With bottom up you figure out where comparable products are sold, how many of them are sold, and what percentage of those sales you could take. I prefer the bottom up method because it helps you avoid a common top down pitfall, which is narrowing down the customers enough. That could for example mean that you assume all customers are in your market, no matter their age, gender, nationality of profession when it wouldn’t be the case.
Investors want big opportunities with large addressable markets where their investment can bring about a large return. But you have to remember that just because your product can be used by the entire population on planet earth, that doesn’t mean that everyone will be onboard and actually buy it. So be real with yourself and your potential investor.
Don’t simplify your expected market reach to excessive numbers. It makes you look like – for a lack of a better word – an idiot.
Do yourself a favour and be honest about your numbers – how much can you service, and how much will you service.
8. Not showing what traction the company has already obtained
It’s extremely helpful for anyone involved in a potential investment to know what traction your company has had since its inception. ‘Traction’ shows the progress the company has made so far in terms of revenue, partnerships, testimonials, customers, products sold, product development and so forth.
The reason you show that you have some traction is to avoid having someone invest in an idea that will never come to fruition. You have to have made the legwork first to prove that your product is a viable one.
Don’t forget to show that you have something similar to a solid startup in it’s making.
Do show any kind of traction. Testimonials, sales, business partners, launch schedules etc.
9. Not showing a clear action plan
Whether it be a marketing plan, a development plan or a company expansion you need to coherently show how you plan to do it. Investors will want to dive into your understanding of the underlying problems in customer acquisition and know how you expect to be growing your company.
Will you invest in outbound or inbound marketing? Content or Search Engine Marketing? Will you do it yourself or hire an external company? How will you guarantee a funnel of new customers and how much will each customer cost you?
How long will the lifetime value of your customer be? What’s your typical sales cycle between contact and closing? How long does it take you to acquire new leads, to act on then and how will you convert them?
If you’re developing your product or company, will you be doing it yourself? Will you hire an external contractor? What’s the cost and expected timespan? What’s the end goal and how will it help you drive more sales?
All of these things are regular questions you might be asked, so make sure you show it in your presentation.
Don’t be vague about how you will create and run your business. Nobody wants to invest in someone who’s just winging it.
Do yourself a favor and be specific on your marketing, sales, product and development areas, and how you’re going to convert all of these into profit.
10. Not showing how you’ll be spending your investment and how long it will last
Investors will want to know how their capital will be invested, and the rate at which you expect to burn through the investment, so they can anticipate and plan your next seed round if needed. Telling your investor how you expect to spend their investment, will often give them insight into whether your fundraising plans are reasonable or not, given the requirements you claim to have for further success. It will also allow the investor to see if your estimate of costs is reasonable, given their experience with other companies. You also need to show the milestones that are expected subsequent to the investment, so the investor can see whether or not those particular milestones will be a sufficient enough goal to raise the next round of seed.
Let’s say you’re asking for $200.000 in total to expand your clothing brand and it’s exclusive platform. It’s an online platform, and you need to make some adjustments to your distribution and your website. You run your own storage on-site, but it’s too small and you want to expand it.
You’ll need $50.000 to rebuild your platform, and $150.000 to expand your distribution. You’ll most likely be needing additional financing further down the line.
Based on this the investor will most likely counter you with a $100.000 dollar investment, and ask that you find the remaining $50.000 for the expansion yourself, and suggest that you either rebuild your website yourself or find an alternative way to do so, because a developer isn’t needed for webshop development.
This isn’t the amount of funding you hoped for, but the investor is willing to grant you the rest of the investment in a second seed round, once a number of milestones (that you’ve set out) has been fulfilled.
Seems reasonable enough, doesn’t it?
Another example is the ooposite: You’re still asking for $150.000 but this time the investor offers you $300.000 for the same expansion plan, but they want twice or thrice the amount of the company that you offered to begin with. Will you accept the money and give away 30% of your company, or will you decline and find someone else?
These are questions you need to have answered in the back of your mind before you go into a meeting.
Don’t walk into an investor meeting half-cocked with a half-assed plan of approach to how you’ll be spending your investment. And don’t just agree to anything at the spot, make well-rounded decisions on your own time.
Do expect the investor to dig into details concerning your spending. It’s not your money after all. And do expect them to counter your request with something totally unexpected – it’s not a yes/no scenario after all.
11. Showing unrealistic financial projections
It’s great to have strong ambitions, but if you only reach 50% of your goals you’ll end with unhappy investors.
If you’re just starting out you need to make a fair projection of how your business will be generating revenue, and how much it will have generated over the span of 3-5 years. It’s better to be realistic and set a reasonably low number, than a number in the hundreds of millions without any substantial evidence.
If you’ve already had successful business ventures then show your numbers and add them up and make a prognosis. If your numbers aren’t that impressive then be honest about why, so the investor can see that you’re not ignorantly bashing your skull against a wall day in and day out. Instead, show your plan and show that you’re working your way out of your drought – you just need a helping hand getting there.
Don’t be dishonest or naive when it comes to your finances. It’s better to show a small number than it is to show an unrealistic number.
Do show a prognosis of your current numbers if you have them, even if you only have 100 customers and your business is just staying afloat. Someone else might see it as a massive opportunity for a turnaround.
12. Presenting unrealistic valuations
Valuing a company can be difficult because it requires a degree of forecasting future business, competition, growth, and ultimately the profits of the organization. And if you just started out it’s obviously hard to forecast growth and profits.
There’s a wide range of different ways to valuate a startup, most of them take the human and monetary elements into consideration, and some only take the monetary elements. I of course recommend that you make both human and monetary considerations when you spend hours on cap tables and calculations to get a valuation.
One of the best ways to valuate a startup is to use the Human Capital plus Market Value Method. The multiple typically ranges between 3 to x5 of of the past three years average profit (yearly), but in SaaS businesses ranges may fall in the 8 -10x range. Second, you calculate the value of ideas, know-how and potential of the team. You can do so objectively based on expected salary and expertise which is a fairly simple task if the people attached to the project work in common sectors like economy or IT.
You can use any small business valuation tool out there, but for your comfort, I’ve gone ahead and linked Bizex’s own. You should always use a valuation tool in your own country if that’s where you’re applying for an investment.
Don’t enter into a discussion or explanation of your valuation unless directly asked. Instead…
Do the best you can throughout your entire pitch, to use your core numbers in sales, market, sales estimation, expenses, competitors and so forth to indirectly show that your valuation makes perfect sense.
13. Making a text heavy pitch deck
Unlucky number 13 fittingly brings us to the slide deck.
We here at Pitcherific don’t really spend a lot of time on slide decks, as we’re more concerned with the (spoken) pitch itself and basically only have one rule: Keep it simple and stupid. The same rule applies here: You don’t have to create a thesis on space travel every time you make a slide deck, so leave out as much text as possible and focus on your presentation.
To do so, you need to create your slidedeck after you’ve written and rehearsed your pitch, that way it’s easy to remove as much text as possible and instead add as many visuals as possible.
But why would you not want to add a ton of text to your slides? You have a ton of thing’s to say, dont you? Simple: You want your audience to be listening, not reading.
But in the case of an investor pitch, you need to walk both lines.
One of these lines here being the fact that if you’re the type of person who creates 10 slide decks with five bulletins on each slide for a three-minute pitch, you should really learn how to narrow down your message. But on the other hand, if you’re walking into an investor pitch meeting with 4 slides, where one of them is a team-slide, then you’re very likely to waste a great opportunity illustrating your story, or at least face a ton of questions on how your business operates.
You only need to have the bare essentials on text, such as dates, sales, graphs, charts, diagrams, overall numerals and core information. The less written text you have the better you’ll present. It’s like an unwritten law of pitching – keep your audience engaged by being the focus of their attention.
I’ve written an article on How To Build and Investor Pitch, which I think you should read if you fall into either of the two categories mentioned above.
However if you still feel the need to create unnecessarily text heavy slide decks, I strongly suggest you take your habit of writing painfully text-heavy slides and convert it into something positive: Making an appendix titled “Additional information” and adding that to the last part of your slide deck. So if you want to explain your financial forecast, planned expansion or product technology in detail you can send this (as a PDF file) to your investor as a “Thank you for your time’’- email instead, which in turn is also a great way to casually reach out after your meeting.
At least that way you won’t run out of time when ‘on stage’.
Don’t rush through your presentation or skip on themes entirely for fear of running out of time because you filled your slide deck with long sentences and unnecessary information.
Do your utmost to only include the most important information as illustrative as possible. You want to tell a coherent story when you’re presenting.
14. Having a weird slide deck format
Some common mistakes regarding the format of your investor pitch always relates to the slide deck looking wanky, out of place or hastily thrown together.
You don’t have to be a graphical wizard to create a neat slide deck, and there’s a ton of options out there for you to make a beautiful slide deck with a great layout, soft looking graphics and consistent font sizes.
You’ll need headlines, and there’s no point in making up your own. Make sure that you stick to the format as listed previously in the article.
Stick to charts with core information on them, and unless you’re comparing them to each other only ever add one chart per slide.
If you’re using visuals, then source some that are of high quality. Don’t add pictures of people sitting in a meeting in 480p resolution. And don’t just copy/paste someone else’s graph and add your own numbers – It looks sloppy – make your own!
Avoid having slides with less detail, and slides with a lot of detail – be consistent. Are you using shapes to make things look neat? Make sure they’re on the same level and the same size!
Consider fading out the bullet points you’ve already touched on to avoid confusion once you’ve presented them.
Make sure your font and text-size is consistent throughout the slide deck.
When adding text you should stick to bullet points that say one thing each, and for the love of anything holy: avoid writing whole sentences! Nobody cares to read them.
Be thematic. Colors can improve learning performance, but then can also conflict with our emotions, so stick to the same color scheme through your slide deck to avoid ‘upsetting’ your audience. And stick to one color-theme throughout your presentation so it’s easier for the audience to remember “that orange-green presentation”.
And the final thing: Make it easy for the investor to get access to the pitch deck.
If for some obscure reason you can’t send your slide deck via email, you can upload it on google drive and make it public, then short the address to it through bit.ly.com[link], or add it to a dropbox folder and invite your prospect. Just make it easy for the investor.
And remember to save it as a PDF file, so it’s easily redistributable and everyone can read it. There’s literally no person on the face of the planet who doesn’t have a PDF-reader.
Did I miss anything? Did you want something elaborated on?
Send me mail at Chris@Pitcherific.com, and I’ll do my utmost to not only update the article but also help you reach your full potential.
I believe in you frendo.