The Investor Pitch: Set the right objectives

September 16, 2010

Picture this: you have managed to get a ten-minute slot with a potential investor in your start-up. So far, so good. But what are you going to say in that time?

First, here are some things you are NOT trying to do in your ten-minute pitch.

WRONG OBJECTIVE #1: Convince the investor to invest

Er – what? Surely that’s exactly what you should be aiming to do? Well, no. Any investor who makes a decision to invest a large sum of money in someone they have only known for ten minutes is not a smart investor, or they have enough money that they can afford to take a wild risk. Unless you know your investor is either dumb or rich and crazy, you should not expect them to be ready to sign a cheque (US: check) within ten minutes. It takes longer to get a “yes”. Equally, you can get a straight “no” in much less time than that…

WRONG OBJECTIVE #2: Tell them everything about your company/product/service

You have ten minutes (in this example). Remember that – ten minutes. Six hundred seconds. That time goes very quickly, especially if you don’t start on time, which you almost certainly won’t. If you can tell everything there is to tell about your company in ten minutes, it’s not worth hearing. Don’t try to cover everything lightly, saying too little about too many things. Choose the few messages you need to get across, and get them across well.

WRONG OBJECTIVE #3: Make them want to buy your product/service

You’re not making a sales pitch. An investor expects something different. He or she will want to be sure that people will buy what you’re offering, but you won’t convince your investor to part with his or her cash purely by convincing him or her that they would want to buy your products. Victor Kiam liked Remington shavers so much, he bought the company. That was such an amazing story because it was so exceptional. Your investor doesn’t need to want to buy your products. Don’t explain why they should buy them – explain why you are sure other people will buy them. Remember, you are selling an investment opportunity here, not a product or service.

That’s enough wrong objectives for now. Yet how often do investors complain about entrepreneurs who make those basic mistakes? All the time.

Here are some key objectives you should have for your investment pitch.

GOOD OBJECTIVE #1: Be memorable

So you have ten minutes on this investor’s agenda. How many other pitches will he or she have to sit through? Often a dozen or more in a day. One of those pitches is going to be memorable, and that’s the one they will consider calling back. Make sure it’s yours.

If you give a fine performance and the investor seems happy, but they can’t remember you or your pitch the following morning, you’ve failed. If you had to choose between being convincing and being memorable, you should choose memorable every time. That way you’ll at least have a chance of being called back for a second, probably longer presentation.

GOOD OBJECTIVE #2: Be professional

An investor judges the team as much as, if not more than, the idea or project itself. A great team with an average idea will be more attractive than a poor team with a great idea. It’s important therefore that you look and sound professional. Look and speak as if you already are a successful CEO, because investors will be sizing you up and seeing whether they can imagine you as one. Looking and sounding professional means many things, and it will be the subject of another post, but it runs from mastering whatever technology you are using through mastering and preparing your subject, all the way to the way you stand, the clothes you wear and the way you speak.

GOOD OBJECTIVE #3: Answer the key questions

An investor does not need to know everything about you and your idea in the first ten minutes. However, there are some key questions that you will need to answer – otherwise, either the investor will ask (and resent the fact you didn’t communicate better), or, worse, they won’t ask because they have given up caring.

The first thing to remember is the number one question asked by investors AFTER a pitch: “So what do you do exactly?” If you’ve gone through a detailed study of your market, the competitors and the opportunity, but you’ve failed to explain what you are actually planning to do, then you’ve failed – big-time. Here are some of the key questions you need to answer:

  • What do you do?
  • Who are you (and why should I trust you)?
  • How will you make money (and how much)?
  • How long will it take?
  • What are the risks (and how do you plan to address them)?
  • How much cash do you need (and what will you spend it on)?
  • Do I have a good feeling about you?

How to answer these questions would be the subject of another post (and also form a key part of the Ideas on Stage course “Winning Pitch”), but you can probably work out why each of those is important, and what you can do to weave the answers into your pitch. The last one is not so easy, however. At the end of the day, investors are individuals, and they make decisions which are neither 100% objective nor 100% rational, just like you and me. You could have the greatest credentials and a rock-solid business plan, but if the investor doesn’t feel like they want to do business with you long-term, the answer will be no.

All I would say about this is: research your investor, be professional, try to make a connection, have a great answer ready to the question “why do you want me as an investor?” (other than “well, you’re the only one who returned my call…”), and do your best to get along with the investor, but if you don’t hit it off, walk away and find another one. You don’t want to be stuck doing business for years with someone with whom you have a tenuous relationship, any more than the investor does. Some personality types just don’t get on well with each other. Better that you find that out now.

GOOD OBJECTIVE #4: Make them want to know more

Here’s the final objective. In ten minutes, you only just have time to answer the key questions above, ideally in a particularly memorable and professional way. You have learned not to expect a decision there and then. Your ultimate aim is to be called back for a longer chance to discuss your business opportunity. Therefore you need to make sure they are interested enough in three things to want to know more about them:

  1. The team
  2. The business plan
  3. The chances of a good return on investment (RoI)

If they are interested in the business plan but not you, they won’t call you back. If they are interested in you and the business plan, that’s fine – but if you can show them a chance of a good RoI, and make them feel there’s a chance this could be a very good deal for them as well as building a business, then they will at least want to know more about it. Just make sure your financials are based on clear and reasonable assumptions which don’t fall apart when the investor asks the tough questions.

RECAP

Don’t expect to raise cash in ten minutes. The best you can hope for is to get a call back. The way to do this is to be professional, make your pitch memorable so it is the one they remember the following morning, answer the investor’s key questions, and make them want to learn more about how this could be a good business, and more importantly, a great investment opportunity.


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