When planning to pitch to prospective investors it's usually a good thing to ask yourself the following questions:
1) What’s in it for your investors?
Occasionally an entrepreneur hoping to launch their first business puts so much thought into the concept that he or she neglects the financial and legal plan – and unfortunately this often becomes apparent early in a meeting where an investor can lack clarity in what exactly the proposed deal is going to look like. Your potential financier will likely ask these questions, so be ready to give clear well-reasoned answers:
- · Will there be money received in exchange for a stake in the business or does it make more sense to take out a loan?
- · What conditions will the entrepreneur be willing to be tied to those investments?
- · How much in terms of shares of the company or of its future profits would you be willing to give up in return for start-up financing?
And as you prepare your presentation, remember that your future backers will want to know how soon they can expect to see a return on their investment as well as possible exit strategies.
2) Be concrete
Winning the trust of an investor means demonstrating a thorough knowledge of your concept or industry and laying out your step-by-step plan for offering something that’s new, innovative and will deliver healthy returns on their investment or ROI. You need to explain how you will turn your great idea into a terrific service or lay out your manufacturing plans in detail. Demonstrate how your approach will provide this for less than people are willing to pay, thereby covering your costs and turning a profit. Look them in the eye and inject lots of positive language like, “we will deliver” and avoid phrases such as “it is hoped that”, “this should with luck” or “could well result in”. When you use such phrases it automatically means that you do not believe in your own product or service so why should someone else invest in it? Their conclusion will be based on your confidence.
3) Be unapologetically disruptive
Emphatically explain how your new company will give your customers a better deal than your competitors. And if you think that you don’t have any competitors, think again. If there is true potential for your concept then you can count on someone else rapidly jumping in to try and exploit the same opportunity. If a bank or other investor is looking at your business they have almost certainly looked at your competitors as well. In your presentation it is therefore imperative that you understand your competition and irreverently explain why your business will do better. Blow your investors away! Avoid being overly negative. At best you will seem humourless and self-important, and at worst like you don’t take your competitors seriously enough.
4) Prove that your growth is sustainable
There will always be new markets and new sectors emerging as change occurs and old businesses reach their life-spans. Nothing remains the same for long so explain how you plan to tackle the inevitable technological changes and market shifts that are heading your way. Infinite growth may be impossible in a world of finite resources: so discuss your challenges in terms of resources and waste, and present a plan that inspires confidence in your new venture’s ability to sustain the community and the environment.
5) Demonstrate bench strength
You need to show prospective investors that you have found the right people to work at your new company. Your investors need to know their money is in good hands. You also need to show that you have someone on the team who can take over from you the day you decide to move on to your next brave new venture. The gloom about the global economy means your competitors may be scrambling to hold onto their customers – be innovative.
If you don’t have a good support network that is both technical and knowledgeable it will be difficult to convince an investor you will deliver and that there is business continuity when you decide to leave your business.
Here are some practical questions you should address and answer as you source capital from investors:
- · How much of your own capital are you willing to put into the venture?
- · How much debt can the business take? Consider the repayment period and cost of capital as critical.
- · Can you clearly articulate the benchmarks for growth?