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You’re a start-up, you’ve got your founding team together, you’ve spent months working on your concept, your numbers and you’re ready to reach out for funding.
Perhaps you’re a mid-stage company who has a product on the market, and you’re finally getting some traction. Revenues are starting to come in, your team is growing but what you really need in order to grow is capital.
Whatever stage you are in the life-cycle of the business, it is likely you are going to have to undertake the (sometimes) odious task of pitching to investors. And no matter how prepared you think you are, or how amazing you think your business is, the hardest part is to convince the potential investor.
Having sat on both sides of the fence – I have helped several start-ups with their pitch-decks, and coached them through the process as well as having listened to dozens of companies present their ideas – there are always recurring themes when it comes to nightmare funding pitches.
I will assume that you’ve already done your research into what type of investor you want and that their profile fits the one that you want to see putting time and money into your business. Now you’re in the room. What do you do to make maximum impact and ensure you don’t endure 15 minutes of shame.
Below are a few tips that might just help you swing one of the most vital conversations you will have your way.
1) Treat every pitch as an elevator pitch:
Investors will hear hundreds and hundreds of pitches every year, so they know what they are looking for and their attention span can be very short. Perhaps not fair but that’s the way it is. Imagine a life where almost every person you meet in your professional life is trying to sell you something and convince you they are the next big thing.
It is therefore vital for founders to be able to get their attention in the first five minutes of the pitch. Understand what your start-up is doing, what the point of difference is and how you can effectively convey that message in the shortest space of time. If you need to spend eight slides explaining the concept, then you will rightly be asked how you will sell the idea to a customer.
There is no need to be granular at a pitch. If there is interest, the detailed questions will come. Focus on getting their attention before you dive into detail. The last thing an investor team needs to see is a deck that takes more than an hour to walk through.
2) Sell your team as much as the idea:
While it’s never a good idea to put the founding team in the second or third slide, the truth is that with early stage companies, your investors are betting on the founding team as much as the idea. It’s a cliché but a great idea does not always translate into a great business and sometimes average ideas become fantastic businesses because of the founding team.
If you don’t have previous experience of running and exiting a start-up, then focus on the strengths of the team. Their experience, how they contribute to the business and how they cover all of the bases.
3) Find the decision maker:
To be prepared is to be forewarned. And one of the smartest things you can do is to do a little research before your pitch. If you can, find out who the people you will be pitching to are and understand if there are any points of commonality you can break the ice with. Sometimes getting someone from the funding team onside on a more personal level can help sway a tight decision.
When you are in the room, quickly work out who the key people to address are. Usually that would be the managing partner of the fund as they are the ultimate decision maker; but sometimes that level of person will not be at a first meeting, so figure out who the gatekeeper in the meeting is. It is usually one of the analysts as they will be most likely crunching the numbers and doing the research before recommending whether they proceed further.
4) Be realistic with numbers:
Not every company can be Facebook, Uber or Grab. If that was the case then life would be easy for both founders and investors. The reality is that most investors will never see something like that in their entire lifetime, so founder should avoid promising that.
This is more salient in an era where investors are now starting to look for companies with more solid path to revenue. It’s true that the desire to endlessly chase users as a metric is decreasing and the desire to invest in companies that won’t need endless rounds of funding is on the up.
That means, the days of predicting a few years of proof of concept before moving into unchecked and exponential growth are over. The chances are you will not hit the hockey stick and grow from 10,000 users to 10m users in the space of 12 months, so don’t predict this in your pitch deck.
Spend a bit of time modeling the potential of your business in a realistic way. That means understanding the markets you want to go into, what share you can realistically expect in the first few years. There is nothing wrong with shooting for the moon and falling short, but start-ups have had a tendency to shoot for another galaxy when pitching.
5) Stress test the worst case:
With every pitch come questions. You’ve opened yourself and your idea up for scrutiny, so don’t be offended if someone else doesn’t share your enthusiasm for the idea. It’s nothing personal and there are many reasons why a VC might not want to invest.
What you should do however, is stress test your pitch with friends, family or colleagues. They will come up with tough questions or scenarios you may not have thought about. You will be asked difficult questions. And yes, you do have competitors, your CAC will be questioned, your ability to scale to other markets will be questioned. Your assumptions will be questioned. Your defensibility and tech skills will be questioned. Your ability to run the business may be questioned too. Make sure you know whats coming and you have answers to as much as you possibly can.
Also, find out if Singapore or Malaysia has a better ecosystem for start-ups!
Adam Flinter is managing partner at Golden Equator Consulting, a company which helps start-ups, SMEs and mid-stage businesses with their strategy and growth.