Nail your funding pitch in 10 easy steps
Looking for investment? Here's our guide to making sure your pitch is a stroke of brilliance
You’re about to try to persuade investors to part with thousands, if not millions, of their hard-earned cash. Growing Business speaks to veterans of the investment circuit to discover how to pitch perfectly
We’ve all seen presentations go to pieces on BBC’s Dragons’ Den, but most pitching failures are far less spectacular. If you can’t convince an investor, they are unlikely to give you a dressing down and there are rarely any cameras rolling. In reality, pitching is about giving an overview of your business that’s strong enough for an investor to want to spend more time with you discussing a deal in detail.
If your business is worthy of investment, you should be able to get backing. But don’t be tempted into thinking it’s easy. Investors are often risk averse and can be easily put off. At the same time, having more offers than you can accept is a problem worth having as competition can help you drive a good bargain. Here’s our 10-step guide to pitching:
1. Make sure your figures are right
Before you are ready to pitch, you need to work hard on your business plan and get your numbers in order. Investors need to know key figures such as turnover, profit/loss, cost per unit, etc. Projections are necessary, but don’t get carried away. Most investments are made over a three to five-year period, so you’ll need to give investors an idea of what their return will be. The break-even point and general cashflow projections are crucial. You probably know your key numbers already, but pitching isn’t about rattling off a long list of figures, it’s about telling a story about future growth. Bob Taylor of Envestors, which vets companies for its network of investors, says: “I’m always keen that the financials show a story. This is about communicating your business plan through simple numbers.”
2. Know your market
“You should know your competitors and there is always a competitor of some kind,” recommends Ian Shields of Gateway2investment (g2i), which coaches technology businesses in London for investment. Also, many pitches fail because entrepreneurs don’t have enough detail about their customer base. As Shields says: “If you are in the field of mobile phones, it is no good saying that, because there are three billion globally, that is the size of your target market!” Simply put, investors are looking for businesses that are scaleable and this must be demonstrable.
3. Focus on business, not product
You probably know your business so well that you can recite its merits standing on your head, but pitching to investors is different from selling to customers. As Taylor says: “Entrepreneurs often talk about the product and fail to articulate the market need. I’d prefer to hear about demand initially, then hear about the product that addresses it.” Investors want to know how you are planning to make money from your idea. Once again, the scaleability and how you are going to deliver your product or service is key.
4. Keep it simple
Most investors can understand a business plan without the need for exhaustive detail. Boil your plan down to a handful of bullet points that will grab their attention and force them to ask questions. If investors are curious, they will want to speak to you in more depth later.
Key things to include are: patents, copyright, break-even point, track record, contracts, letters of intent, management team, the amount sought and, briefly, what you actually do!
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5. Communicate with passion
You love your product and your business, so don’t be afraid to show it. Investors are looking for someone they want to spend time with and who will work hard to ensure the plan goes ahead. Energy, drive and ambition are all infectious qualities, and if you can show you have them, investors are more likely to have faith in you. But don’t let your passion boil over. “Don’t take questions personally,” warns Michael Weaver, chief executive of business angel network Beer and Partners. “Remember, it’s not personal, it’s business.”
6. Know your investors
Whether you’re pitching to venture capitalists (VCs), angels or banks, they all want to see a well thought out, thorough business plan and a case for investment. “It is exactly the same pitch,” says Weaver. “Most angel investors ask the same questions as VCs. Banks tend to focus on security, that’s the only difference.”
7. Talk about the team
You might have the best product in the world, which addresses a clear market need, but if you lack the team to carry it out, then you shouldn’t expect investment. Plenty of businesses get backing not through originality, but because it is clear that they have the business acumen to make the project work. “If I like a business, I don’t look at unique selling points at all,” says Weaver. “It can be a ‘me-too’ business, if the management team has drive.”
Shields adds: “Investors invest in people. You need to inspire confidence in investors that, when things go wrong (as they will) the management team are able to deal with it, come up with a solution, take another path.”
8. Be yourself
Marc Lewis, founder of retail technology provider the Light Agency, attracted £6m of funding from Living Capital. The company now has 20 staff, and Lewis has stepped back from the day-to-day running of the company. He did so with the backing of his investors.
He says one of the most important things when talking to investors is honesty. He is a creative person, but admits his weaknesses; he is not a manager or a financial expert, but very much an ideas person.
“One of the big problems with UK businesses is succession planning,” he explains. “Entrepreneurs need to put people around them who can do the job as well or better than they can. I’m not a very good manager. I’m open about it and it makes it easy for my investors to raise the subject of succession planning.” Lewis’ message is clear: be yourself or regret it.
9. Be realistic
There are some legendary stories of how intrepid entrepreneurs continued to struggle on after being turned down by virtually everyone before eventually finding the cash. Innocent Drinks is one famous example. The company was rejected by a series of bank managers before getting £230,000 worth of backing from American businessman Maurice Pinto; it’s now a £100m-turnover business. However, investment is tough to gain and some plans just aren’t good enough.
Also, some amounts are very difficult to obtain. There is an ‘equity gap’ for amounts below £5m (the level where VCs begin investing) and above £2-3m (roughly the level where angels stop). Finally, you are going to have to offer some equity to both your investors and management team to make the deal work. Weaver says that the standard equity breakdown is a three-way split between the inventor or originator, the management and the investor.
10. Seek good advice
There are some excellent companies out there that can help you prepare for investment. Here are the details of those featured on these pages:
Beer and Partners (www.beerandpartners.com) is one of the UK’s longest standing angel networks. Its associates are to be found across the UK and can help with angel, VC and bank finance.
Gateway2investment (www.g2i.org) helps technology businesses in London prepare for investment through workshops and seminars.
Envestors (www.envestors.co.uk) vets and screens business plans of emerging companies and uses its network to put companies in touch with investors as well as lawyers and accountants.