The most pressing issue facing startups today is a lack of finance and almost 30% fail every year in the UK because of this. With that in mind it is imperative that when you are looking for investment you give yourself the best opportunity of success by being totally prepared for the whole process.
Pitching your business to potential investors can be daunting. Any type of business presentation to strangers can be nerve wracking but there is added pressure when the success or failure of your startup depends on the outcome.
So, here are some key pointers to help to improve your chances of success.
Research prospective investors
Firstly, you need to seek out the right type of investor. This means you should target investors who have recently invested in the sector you operate in, after all there is no point approaching investors in the manufacturing industry if you’ve got a tech startup.
Once you’ve compiled a list of potential investors in your sector you should check they invest in the stage that your business is at right now – pre-seed, seed, series A, series B etc. The stage you are at will determine the size of investment so this is important.
Now you need to reach out to them with an email, or via LinkedIn, or even better through a connection who knows them. This is your one-off opportunity to grab their attention, so draft a few versions of your message, proof it and show it to friends and colleagues until you are satisfied it communicates exactly what you want to say in a professional, polite and concise manner. Remember to include a link to your website in the message.
Wait a couple of days before sending a polite follow-up asking for a meeting but don’t be rude or sound too pushy. Patience is called for here because investors are busy people with numerous requests for their attention from budding entrepreneurs just like you. Keep trying and don’t quit until you get a reply.
Fine tune your elevator speech
Your elevator speech should be a clear summary of what you do and shouldn’t last longer than 30 seconds. In that time you should be able to tell a person you’ve just met everything about your business. Don’t be put off by the time limit, you can cover a lot in 30 seconds. The purpose of the elevator speech is to provide enough information to generate interest and a desire in that person to find out more. If all goes well they will be intrigued and start asking questions and then you can really impress them with your startup.
Your speech needs to answer three main questions:
1. What do you do?
2. What problem do you solve?
3. Why you are different?
Once you have spoken, try and connect with them by answering any questions and asking a few relevant ones of your own. Most importantly, stay in touch.
Do the maths
Investors are not going to let go of their hard earned money easily and they make a living out of shrewd investments. This is why when you quote any financial figures they must add up. If you’ve ever watched Dragons Den, the main frustration of the investors always centres around contestants not knowing their figures or failing to justify their over-inflated projections. So remember to be realistic and accurate with your financials because you will be asked how you came up with your valuation and any other data.
Prepare a persuasive and engaging pitch deck
OK, great, so now you are making progress with your prospective investors but you still have a lot of work to do because you don’t want to get this far only to be let down by a poorly devised pitch deck.
The deck is all about the quality of content and you should focus on making sure it is engaging, easy to read and flows smoothly. This is more important than worrying about the number of pages, but to give you a rough idea, anywhere between 10 and 20 pages is fine.
Don’t clutter the pages with too much text, they need to be readable from a distance. Its purpose is to give the audience a summary, allowing you to elaborate on each point. Add graphics and images to substantiate your statements and where possible add case studies to give context and keep everyone focused and interested.
Key components of a pitch deck
1. One liner – taken from your elevator speech
2. The management team – experience and skills
3. The market – size, problem
4. The product - solution
5. Competition – leading products and comparison
6. Financials – summary of three year and five year budget plans
7. Equity – the amount being raised and use of proceeds
8. Marketing strategy – how to scale
Finally, once all of your rehearsing is over, you should know your pitch deck off by heart and you will also be ready for any awkward questions that investors are bound to challenge you with. So on the day of the pitch, dress smartly, relax, smile and enjoy and let your passion blow them away.
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