How to pitch to investors – beyond the pitch deck…
Investors will always want to hear about market insight and financial projections, but don't forget to adapt the pitch to the audience, argues Worth Capital's Matthew Cushen
Successful selling to anyone is always a result of both the message you are giving and the way you’ve chosen to communicate it. When pitching to potential investors for equity funding, you’re selling the probability of a successful exit in a few years’ time.
Whilst every business is different (and so there will be emphasis on different elements), the key content for how to pitch to investors usually covers these bases:
- Market insight: What is the problem to be solved or the opportunity that suggests there is a market for the new business? How large and valuable a market could it be? It is growing and are the participants relatively easy to find and communicate with?
- Big idea: What’s the innovation that addresses the market need? Why it is different & how can it be protected from competition?
- Commercial model: Do you have rough idea of how to make some money from the innovation? Possibly not at the stage that this is buttoned down but are there a few potential models to experiment with?
- Brand & marketing: Particularly for consumer businesses (but also for any other), how are you proposing to excite your audience and articulate your proposition?
- Financial projections: Can you provide a three-year profit & loss account and at least a 12-month cash flow forecast?
- The team: Do you have relevant experience in the market and evidence of the energy, tenacity & communication skills needed to grow a business from the ground up?
- The deal: How much is being raised and at what valuation? How are those funds are going to be deployed and what runway that will give the business until the next raise? Can you provide a sense as to how investors could expect to see a return on their investment (dividends or an exit for equity investors; interest for lenders)?
The pitch deck isn’t always the answer
However, the content is only half the story. The way that this is put across is just as important for engaging a potential investor.
The cliched communication for communicating investment proposals is the ‘pitch deck’. You can easily Google ‘pitch decks’ for various sites with lots of examples. Although it’s easy to see these are mostly for tech solutions and generally have a Silicon Valley bias.
The big watch-out… Whilst the ‘pitch deck’ has become ubiquitous because it is useful, it is not the answer for all situations. An entrepreneur should think carefully about their investor target, what would work for them and adapt their materials accordingly. For example…
If an investor is a specialist in a given market then the hook might be different to an investor that is unaware of the market. An investor that is of the target customer demographic should be able to ‘feel’ how good the solution is as a potential user (and you’ve no chance if they can’t see themselves using it). Whereas an investor that has no empathy with the market will need to be taken through a more logical explanation.
Then there are practicalities. Someone who receives dozens of pitches a week (as we do at Worth Capital) will not be reading every deck in detail. Better to give them a one or two page summary and let them ask for more. We actually ask for a two-page summary or a two-minute video as the initial entry into our competition. It amazes us that we frequently get long pitch decks or business plans – with no thought given to the impact (or lack of impact) those will make.
A pitch deck can too often fall between two stools. Sometimes it is sent for an investor to read with illustrations suitable for a stand-up pitch, but when lacking a voice-over there is no meat on the bone. Other times, a pitch deck made for reading is used for a stand-up pitch – just confusing and overwhelming for everyone.
Often a completely different format is needed. Video is a great way of showing off the characteristics and communication skills of the team. As it has ever been, every entrepreneur should have their ‘elevator pitch’ – the 30 second articulation of their idea and how it could make money – ready for whenever they are fortunate to stumble across a potential investor.
Fundamentally, when choosing the content and the method for selling their investment, if an entrepreneur can’t demonstrate empathy with an investor what confidence does that give in the empathy and effort made for their customers? Whereas an entrepreneur that has thought about their investor’s context and tailored their approach will have a much better chance of engaging them with the content and giving confidence in their ability to listen and react to their market.
Are you seeking investment? Startups.co.uk, with Worth Capital, has the Start-Up Series, monthly competitions to give a new business the chance to win equity investment of up to £250,000. To find out more visit: www.startups.co.uk/thestartupseries