The Founders Guide To Creating An Effective Investor Pitch
Whether you’re pitching investors, the press or other startup founders you need to have a solid pitch for your startup. No matter who you’re pitching to, if you can’t articulate correctly the problem you’re solving, what your business is all about in a succinct and to the point manner you’re in trouble. Why would investors give you their money if you don’t have your stuff together?
So to help tackle this issue I have written a comprehensive guide on pitching investors.
Here we go!
Before Your Pitch
There are a number of things you need to do before you give your pitch to an angel investor or VC. The more prepared you are before walking into your pitch, the greater the odds your efforts will lead to the outcome you are looking for. Let’s cover the most important things to complete before you walk through those doors.
Research the Investor
You wouldn’t go into an interview without researching the company you want to work for right? So why is it that so many entrepreneurs try to give a pitch without researching the person they are hoping invests their hard earned money into their business? Find out what is important to the investor, who they have previously invested in, what their portfolio looks like, and what they have experience in. There are differences between angels, VCs, and corporate/strategic investors, who base their decisions on their own specific criteria. Knowing and understanding exactly what an investor wants is essential to your success in raising capital.
“One doesn’t need be an expert on our history, track record, or portfolio, but a little knowledge can go a long way. Just a little awareness on our companies, professional background, and current boards, can drive efficiency for the person pitching an idea.” -Don Rainey
Have the Important Documents Ready
Here is a checklist of items you should have ready and on hand, because more than likely the investor will ask for them.
- Your Pitch Deck: Most entrepreneurs don’t realize that this is often time requested ahead of your presentation by investors. A good rule of thumb is to have it ready to go before you even start the process of contacting investors. We will cover all of the elements of the pitch deck in this guide.
- Business Plan: Although it is highly unlikely an investor is going to read through your 50+ page business plan, creating one is more important than the actual document for pitch purposes. If you have gone through the research and process of hashing out every detail of your business, you are going to have a more comprehensive understanding of your business for the pitch. And if you don’t have the business plan ready, at a minimum have the executive summary portion of the plan completed.
- Your Website: Although you may not think it is essential that you need a website, we disagree. Think of your website as supporting content and additional information for investors who are interested in learning more.
- Handout to Accompany Your Pitch: You want to have a handout that gives a lot more information, because the handout has to stand without you over here.
- Financial Documents: In these you want to cover projections to date through 4 years into the future. Items like current and future revenue projections, cash flow, number of customers, capital structure, and company valuation should be included. Know your numbers well, and be able to answer any questions around them calmly and confidently.
Prepare Your Responses for the Q&A
Before you walk through those doors get your headspace into an open and receptive state to feedback. A sure way to calm your nerves, and allow for smooth and concise responses to any questions the investor will ask is to practice answering the questions in advance. Look up common questions investors ask, get your response together, and practice them over and over until the response comes naturally to you. We have gathered a list of very common questions, and some unexpected questions you should take the time to review and answer.
List of common investor questions: (WARNING: Skip through at your own risk)
- Who believes in you and how can I contact them?
- What entrepreneurs do you admire and why?
- How do you track trends in your market?
- How do you know your business has high growth potential?
- What do you bring to the table?
- What are your sales?
- How much debt do you have?
- How much inventory do you have?
- Why does your problem matter?
- What alliances or partnerships have you entered?
- What are the primary risks facing this opportunity?
- What is your exit strategy? (bonus: common strategies include mergers/acquisition, IPO, cash cow, and liquidation)
- Why do you want me as your investor?
- Can you tell me a story about a customer using your product?
- How do you know how much money you need and could you scale with less?
- What are your costs?
- Does the company have proprietary intellectual property in the form of patents, trademarks, copyrights, etc.?
- How did you calculate market potential?
- What’s stopping a major company from copying you?
- What if 3 to 5 years down the road we don’t think you are the right person to run the business? How will you address this?
- How do you determine industry sales and growth rate?
- What will your market look like in 5 years as a result of your product?
- What mistakes have you made in business so far and what have you learned?
- How do you plan to acquire customers?
A Few More Housekeeping Items
Have Your Elevator Pitch Ready to Go: This is your 90 second or less, get to the point pitch on what your problem is, how you solve it, why it matters, and how you are different. Give a great deal of time and thought to this short summary of what you do, because you will use it everywhere. Your audience should be able to easily understand and explain what you do, who you do it for, and why you do it at the end of your elevator pitch.
Practice Your Pitch and Elevator Pitch : What is the best way to become really confident? Sorry, buy a new suit or get a fresh haircut is NOT the right answer in this case. The best way to become confident is through practice, and then practicing again, and again, and again. Practice in front of the mirror to start, until you have your pitch down. Then, practice in front of people, and ask them to repeat to you what you do, so that you can gauge if your pitch is effective and easily digestible. Make sure to practice your timing, and account for interruptions and questions.
10 Qualities of a Founder that You Must Know and Have
The entire purpose of a VC pitch is to convince them that you are the entrepreneur in whom they are going to invest their money and make a lot of money in return. So what is it going to take to convince them that you are all that and a bag of chips? David Rose covers 10 important qualities of a founder that must be conveyed through the course of your pitch, to make an investor believe you can bring them the return they are looking for.
- Integrity: The single most important quality that an entrepreneur must convey is that they have integrity. By definition, a person with integrity is honest, and holds true to their values. Investors are taking a huge risk on you, and any doubts that you might not be a man or woman of your word is going to instantly take away your chance of receiving funding.
“Sweat equity is the most valuable equity there is. Know your business and industry better than anyone else in the world. Love what you do or don’t do it.” Mark Cuban
- Passion: Just as Mark Cuban says, “love what you do”. An investor needs to feel your passion pouring from you during your pitch. It is just as important as integrity, because if you are not excited about what you are doing, why would anyone else be?
- Experience: There is a reason why VCs love serial entrepreneurs: they have built something already, and have learned lessons from previous mistakes. If this is your first venture, make sure you show your experience in creating something and seeing it through from a past experience (could be a job, project, etc).
- Knowledge: Having a great idea versus knowing the ins and outs of your industry are two very different things.
“I’ll take a bad idea with brilliant execution any day.” – Brian Cohen
- Skills: You either better have the skills it takes to get a company off the ground, or put together a team that does. Hint: It’s rare one person has all of the necessary skills.
- Leadership: You’ve got to be able to convince us that you either have developed a team that has all those factors in it, or else you can. And you have the charisma and the management style and the ability to get people to follow your lead, to inspire them, to motivate them to be part of your team.
“People buy into the leader before they buy into the vision.” – John Maxwell
- Commitment: This obviously goes without saying, and is best put by David Rose, “I want you to convey, that you are going to die if you have to, with your very last breath, with your fingernails scratching as they drag you out. You’re going to keep my money alive and you’re going to make more money out of it.”
- Vision: To guide the company to massive success you need to be able to visualize what that will look like 5, 10, to 20 years down the road.
“If you’re doing something new you’ve got to have a vision. You’ve got to have a perspective. You’ve got to have some north star you’re aiming for, and you just believe somehow you’ll get there, which kind of gets to the passion point.” – Steve Case
- Realism: In the same respect, your vision must be leveled with an honest look at the way things are going. In case you didn’t know, bad things sometimes happen, and you have to be able to plan ahead for those.
- Coachable: An investor is giving you their money, and they also know a thing or two about success. If they are going to hand over their cash, they want to know that you want their advice, suggestions, and help to move your company towards the holy grail.
It all comes down to this. The pitch is what is either going to give you the means to launch a great product and make your mark in this world, or it will convince the investor that you are not founder material and to continue their search for someone who is. There is a ton of material out there on perfecting the art of the pitch. We are going to take you through some of the most important elements of the pitch, but we also suggest taking the time to watch videos of those who have done this stuff well. Off the top of mind, we suggest, oh I don’t know, maybe people like Steve Jobs? Let’s get started.
Let’s Talk About Content
Remember the top 10 qualities of an entrepreneur we just covered that will determine if an investor believes in you? Great! So, on top of that you actually have to talk about your business, why people are going to give you their money, and what is so darn exciting about the opportunity. The content of your pitch is extremely important, and we are going to cover the absolute musts you need to cover during your pitch.
Contact information, logo
- A Bold and Strategic Opener: In 60 seconds, you need to grab an investors attention, and continue to build an exciting and riveting momentum from there. The opener needs to make them say “wow”. If you are doing $100,000+ per month in sales, start with that. If you have an incredibly large user base, or impressive partners, use that. Your goal is to prove that people want what you are offering.
- The Problem You Are Solving, and the Opportunity You Are Creating: The investor wants to know what pain you are alleviating, and the opportunity you are creating by doing this. To show the significance of solving the problem you want to talk abou the market (which is up next) in a way that is intuitively obvious if the market is not obvious. Telling a story, making the problem relatable, using a case study or a client story are great ways to cover this portion.
- The Market: Again, you must cover your market size and opportunity. You need to prove the size is large enough to care, but not throw out ridiculously high numbers that no one is going to believe. The goal is to talk about how great the opportunity in the market is, not confusing or using large numbers to prove the market is worthy.
“It is a new product or service that creates or dominates a significant market. If the market is small or your product is only a marginal improvement over what is already available, you will be taking the same risks but for a much smaller potential gain.” – Reid Hoffman
- Unfair Advantage: Here is where you tell the investor what you have that will not only allow you to make this a success, but what you have that no one else does.
Absolutely AVOID saying things like:
“Well we are the first to market” (No, you probably aren’t)
“We have are patent pending.” (Oh good, so in the mean time your idea is up for grabs)
“We really believe in what we are doing.” (I sure hope so, otherwise why the heck are you here?)
Things you can (and should) say:
You are connected to major strategic partners.
You have a PhD in chemistry that gives you key knowledge on your product.
You launched a highly successful marketing campaign at a well known brand.
And if you don’t have anything that really stands out, take your best shot and move on quickly to your demo that better be mind-blowing!
- Your Product/Demo: This is your time to show the investor what you have created and how great it is. If you can’t do a live demo, make sure you are able to give a virtual one through photos/live screen demo.
- Business Model: How are you going to make money? This is absolutely vital, and the reason an investor is even interested in handing you over money. Stick with proven models, rather than trying to do something brand new, and only choose one or two at most initially, rather than 35 ways you can make money.
- Sales/Marketing: Investors need you to prove that people actually want to buy what you are offering, and sales is the only true indicator. If you don’t have sales yet, you better have a large user base or following to back up your claim. The investor also wants to know how you are going to reach your customers, and that you have a good plan to do so.
We need to make a very important comment here. Never, never, never tell an investor that your marketing plan is “a viral strategy”. Stop and think about that. Everyone’s goal is to go viral, and viral is mostly based off of shear luck! Essentially you would be telling the investor that your business strategy is pretty much based on an unlikely chance you get lucky.
Things like having contacts with large buyers or strategic partners, high traffic PR connections, large customers, email databases you have already gathered from your users,
opportunities at an upcoming large event to share your product, and things of that nature.
- Competition: You have competition. If you tell the investor you don’t then you might as well just stop right there, and leave. Everyone has competition, and if you don’t then that indicates that the market isn’t of any value. Competition proves your market is attractive. Once you talk about your competition you need to provide their weaknesses, and your strengths that are going to give you the upper hand. We suggest doing a thorough competitive analysis to get your content for this portion. The most important thing is to be honest.
And remember, if you tell people what you cannot do better than your competition, they will believe you when you tell them what you can do better.
- Financial Forecast: This is the portion where everyone knows you have to make the numbers big enough to care about, but also keep them realistic enough so that the investor doesn’t laugh in your face. A great tip for entrepreneurs if you don’t already have sales in your first year is to make them $0 the first year, and make sure the numbers in the $50 to $100 million range by year 5 (if you are raising VC money). Your sales forecast should be based on the forecast of how many customers you think you will have, your pricing, and your estimated costs.
Also in the financials, you need to tell the investor how much money you are looking to raise, and more importantly why you need that amount, where it will go, and how will it get you to the sales numbers you just talked about. Have numbers for your company valuation, capital structure, who has already invested, and if you have personally invested (which an investor really hopes you have).
- Team: “What you should really be focused on when pitching your early stage startup is pitching yourself and your team. When you do this, remember that a startup is primarily about building something. Hence the most important aspect of your backgrounds is not the names of the schools you attended or companies you worked at – it’s what you’ve built.” -Chris Dixon
This might be one of the most important pieces you cover for an investor. You need to show them things you have already built, how together you possess all of the skillsets required to make the company work, and that your experiences are relevant to the market that you are serving, and any technology you need to build.
- Status and Milestones. Here is where you let the investor know where you are at, and what you have already accomplished. Make sure that the milestone is so big that you would call all of your family and friends to tell them. Things like sales, user growth, and the launch of an app or new website can be used for this section.
Slides in Your Pitch Deck
“To cut to the chase, there are two extremes in online dating: eHarmony and Hot Or Not. When you use the former, you provide the data along twenty-nine dimensions to find your soulmate. When you use the latter, you look at a picture and decide if the person is “hot or not” in a few seconds. When it comes to PowerPoint pitches for your company, think Hot Or Not, not eHarmony.” -Guy Kawasaki
We couldn’t put it any better ourselves! In the world of slides for your investor pitch needs, always remember that less is more.
Here is one reason why this statement is true:
Investor, Fred Wilson, spoke about the power of one slide. When SoundCloud’s CEO pitched to Wilson, he presented the entire concept of his company using only one slide. Wilson was sold.
Guy Kawasaki is an advocate of something called the 10/20/30 Rule of PowerPoint, and so are we because it’s effective.
In essence the rule states that a pitch should have no more than 10 slides, last no longer than 20 minutes, and contain a font size that is not smaller than 30 point.
Some reasoning that backs this rule is pretty straightforward.
- Can you digest more than ten things in the course of 20 minutes? Most of us either can’t or just wouldn’t want to, so sticking to 10 slides is ideal for any pitch. If you can’t explain what you do in ten slides, then you might as well start over.
- Most people start zoning out around 15 to 18 minutes, so setting a 20 minute maximum is ideal so that you don’t lose your audience. This also leaves more time for Q&A that isn’t rushed.
- Lastly, no one wants to have to squint to read all of the information you crammed into your slide. They should be focused on YOU, so use your pitch as the main source of information, and your slides as enhancers.
Again, Kawasaki has a brilliant and simple layout for your 10 essential slides. Below is a list of the 10 slides you can use to cover all of the important content in your pitch.
- Title Page: This should have your company name, logo, and contact information
Tip: Spend some money to create a nice logo
- Problem/Opportunity: Here is where you explain the pain you alleviate and the opportunity arising from it
- Value Proposition: What is the value from the problem you solving and opportunity created?
- Underlying Magic: This is your product or service. Demos and pictures are great here.
- Business Model: How are you going to make money? Who is going to give you money?
- Go to Market Plan: How are you going to reach your customers?
- Competitive Analysis: Who is your competition, how are you better, and what makes your different?
- Management Team: Make the investor believe in your team’s ability to bring the product to market successfully.
- Financials: This covers your sales forecasts, company valuation, corporate structure, investments, number of customers, pricing, costs, and all of that good stuff.
- Current Status, Accomplishments, Use of Funds: This tells the investor where are you at right now, what you have you done, and where their investment will be going and why.
A final “food for thought” is that each company is different, and has different priorities and elements that make them shine. Remember that the overall goal of your pitch content and slides is to prove to the investor that you really understand your business, are passionate about your business, and that you can prioritize what is important. Use the above suggested slides as a customizable template, and create your pitch around what is important in your business.
The Pitch Structure
“If you’re constructing a way to present your story, you should be aware that most investors have small attention spans. They may be late to the meeting, they may be reading other stuff on their iPhone. So you want to organize your information in a way that allows them to process it more efficiently.” – Dave McClure
Timewise, your pitch should stay in the range of 15-20 minutes. From there you can think about the overall pitch as a timeline from when you walk in the door, to when you leave the room. Pitches are all emotional to some degree, and your job is to take them on an emotional uphill ride, that consistently gets them more excited and more intrigued as you continue forward.
This process starts with capturing their attention at the very beginning. You really have about 30 seconds maximum, to grab their attention. If you don’t, then you have lost them for the remainder of your pitch, and they probably won’t hear another word you say.
You can use a story or experience to do this, but what you say must be intriguing, relevant, and relatable. Then you continue taking them on an upward path, and keep going until the end, and at the end you have got to knock them out of the park with a homerun. The goal is to get them so excited and give them such a rush that they write you a check on the spot.
As you move along you want to use examples that the investor can relate to, like references to companies they know or stories they can imagine. Along with these you need to throw in validation, showing that someone else thinks your idea is worthwhile, such as awards, sales, etc.
Now let’s switch it up for a second and go into what to avoid. At all costs avoid things that bring down emotion. These are things the investor knows are not true, yet you say them anyways, such as “I am the only person to make x” or inconsistencies in your numbers, and worst of all spelling or typing errors. If you can’t even make a decent presentation, how can you run a company?
Here is a quick example of one way you could structure your pitch.
You start your pitch with your logo up on the screen and go through your “wow” opener, and give a quick couple sentence business opener explaining what you do, and for what market. Then you delve further into your market, including the size and why it’s worth the risk. Next, you talk about you and your team, and why you are the best to bring this idea to market, and follow that up with delving further into what your product is with a short demo. You share why people will buy it, and go into the customer and business model you are utilizing.
Next you discuss your competition, saying who they are, and why you are special in comparison to them. Once you explain why you are providing a new solution that your customers are not, you delve into the financials. You lead into how much money you are looking to get, followed up with where you are now. Finally you end on your last slide, which is just your logo, and end with the “BOOM!” (aka the call to action).
A Look Behind How Our Brains Interpret a Pitch
Oren Klaff wrote a book called “Pitch Anything,” that talks about some key insights behind how the brain interprets any kind of pitch from sales, to marketing, to an investor pitch. We believe it is important to understand this to be able to craft your words and delivery to your benefit and not your detriment.
Klaff mentions how you can make your most important point clearly, passionately, organized, and do everything right, but still not be convincing. The greatest pitch happens by getting and keeping the audience’s attention. Keeping attention is about owning the room (what Klaff refers to as “frame control”), driving emotions with intrigue, and making your point quickly.
Your brain has a neo cortex where higher level thinking and problem solving happens, and it also has a more primitive part often referenced to as the “croc brain”. Your pitch is crafted from your neo cortex thinking, and your audience needs to process this message in their neo cortex. However, a message must first pass through the croc brain, which is focused on survival, and the mid-brain focused on social context, to finally be interpreted by your neo cortex of higher thought processes.
You begin your pitch, and this is how your audience‘s brain is processing what you say:
The croc brain receives the message first and thinks “Is this an emergency? “ and “If this is not an emergency, how can I ignore this or spend as little time as possible on it?”
Essentially it does the following:
- If the ideas are not dangerous, ignore it.
- If it’s not new and exciting, ignore it.
- If it is new, summarize it as quickly as possible and forget about the details.
- Do not send anything up to the neo cortex for problem solving unless you have a situation that is really unexpected and totally out of the ordinary.
Essentially, your brain discards about 90% of the message before it goes up to your mid-brain, and finally your neo cortex.
So what works well to get through to the croc brain? The answer: Big, obvious chunks of concrete data that is presented in a way that is new or exciting.
This is why keeping your pitch simple, with easy to understand language and visual cues works the best. Any kind of complication is perceived as a threat. If your pitch is perceived as a threat then you are basically done for, as it routes your message to the amygdala. This part of the brain is where fear and anxiety happen, and causes you to want to escape. This part of the brain also decides if the information is boring, and if it decides the information is boring then your brain immediately begins ignoring it.
Don’t panic! There are ways to add enough intrigue to get your message heard.
One of the most effective ways to create intrigue and keep attention is by making your point with a personal story you’ve prepared in advance. YOU must be at the center of the story you choose to redirect the attention back to you. People will listen because you are sharing something personal. There also has to be suspense.
The trick to keeping the story suspenseful and maintaining audience attention the entire pitch is this: Stop the story once you get to the intrigue point, and resume the story and its conclusion at the very end of your pitch.
More Presentation Tips
Another way to hold audience attention, or bring the energy back up in the room is by using the right amount of humor. Everyone likes to laugh, and the act of smiling immediately sends away any feeling of fear, anxiety, or boredom.
Here is a great take on the use of humor:
“A number of entrepreneurs used humor in their presentations in just the right amounts. Too little and the presentation can by dry. Too much and it’s just, well, a joke. But the right amount is a wonderful way to engage your audience,” writes Sabet. “It’s obvious that Paul Graham, the founder of YC, plays a huge role in helping these (mostly) first time entrepreneurs find their way and put together their presentations. And it’s also obvious that these founders practice their pitch over and over again so they can nail it in a room full of strangers.” -Bijan Sabet
Finally, here are some suggestions on using Powerpoint effectively:
- Always use presenter mode. This lets you see your slides ahead of time. Keynote on Mac and Ovation also have this feature. It also gives you a timer to make sure you stay on track.
- Always use a remote control.
- Your handout is not your Powerpoint.
- NEVER read your presentation
- Don’t look at the screen. Speak to your audience and leave your slides in the background as a compliment to what you say, instead of replacing you.
- Long Bullet Points = bad
- Short Bullet Points = better
- Just headlines = best, especially if you just use an image
We often forget that our body says a whole lot more than our words. If your body language does not match what you are saying, your entire pitch will seem inauthentic. Here are some body language tips to make sure that doesn’t happen.
- Stand still when making key points,
- The most effective “pitchers” send two sets of body signals. The first set conveys status, authority, and confidence. These are through standing tall, holding your shoulders back, keeping your head straight, speaking clearly and using lower vocal range. The second set conveys warmth, empathy, and likeability. For these use open palm gestures, lean slightly forward, give people eye contact, smile, and use mirroring.
- Make sure your body language matches your words.
- Monitor your audience’s body language to see if they are engaged. Look for nods, open posture, and make sure their bodies are pointed towards you.
Congratulations! You have made it to the Q&A of your pitch. However, you aren’t quite done just yet. Hopefully, as mentioned in the section about prepping before your pitch, you have reviewed and have excellent responses ready to go for commonly asked investor questions. During this portion of the pitch, also remember to be open to feedback, and really listen to what the investor has to say.
A part of the Q&A many entrepreneurs forget about is to be sure to ask the investor questions when he or she gives you the opportunity.
“I like those kinds of questions because it shows the entrepreneur is sizing me up and is interested in finding the right fit, not just someone to write a check. They want to make sure this match makes sense so they aren’t spinning their wheels.” – David Cohen
If you are wondering what kinds of questions you should be asking the investor, don’t worry. We have curated a list of questions for you!
- How do you support the companies you back, beyond providing money?
- What is your relevant experience around my company?
- What excites you about my company?
- What do you know about the world I’m living in?
- When was the last time you made an investment?
- What is your typical bite size?
- What’s your process like? How do you make a decision?
- Who else do you co-invest with?
- How does our business fit within your portfolio?
- How do you interact with founders after investing?
After Your Pitch
You gave it your all, the investor seemed excited and said they would be in touch soon, and now it’s a few days after and you haven’t heard anything back.
This is the point of the deal where many entrepreneurs mess up. Remember that it is YOUR responsibility to follow up. VCs are extremely busy, and are notoriously bad at follow up. Sending one email isn’t going to cut it. If your persistence only involves the effort of one email, then the investor knows better than to trust you to persist in your business endeavors.
Some ways to keep the momentum going are:
- Making sure you stay on their radar. Remember to send a thank you email the day after your pitch, follow up on any actions discussed, etc.
- Find a way to help the investor, if at all possible. If you know a great event and can offer them access, or have a great company intro for them, make sure you offer.
- Keep them intrigued by showing momentum., such as emailing them with exciting news or updates. This keeps you at top of mind.
- Find out who influences them, and find ways to get those people or outlets to mention you.
- Create a scenario where you have multiple interested parties. This puts some leverage back into your hands, while also creating a sense of urgency on the investor side.
- Do some of the follow up work for them, such as having references proactively reach out to them, if they were worried about competition, send them a competitive assessment, etc.
- Let some time pass, and remember that this is more than an investment of money. It is also a relationship. Relationships take some time.
- Remember that if the answer is no, accept it. Be polite, and it is okay to also inquire if they know another VC or angel that would be a better fit.
A Final Note:
This pitch guide will push you in the right direction to raising the capital you need to bring your idea to what you envision. Along with everything we have covered, remember to have an unshakeable faith in yourself, your team, and your business. If you are about to pitch and have questions, or have pitching experience and have some tips of your own to share, please leave them in the comments below!