When it comes to landing investment for a startup, the “pitch” is only the beginning. Once a founder enters due diligence with angel investors, they have about a 70 per cent chance of receiving funding, according to the National Angel Capital Organization. Due diligence is the process during which angels investigate their potential investment to review records and confirm the facts presented by the founder. But how should founders pitch to maximize their chances of reaching due diligence? I have four rules.
Understand your audience
A fantastic pitch can still fall flat if it isn’t tailored to the audience you’re addressing. If you’re pitching to a roomful of engineers at Samsung, you should provide a technical pitch with engineering results and details. However, if you are pitching to an audience of general angel investors, don’t assume they have the same sector expertise that you do. Assume that we have a university education but that our backgrounds are quite diverse. This means avoiding industry acronyms and jargon, or at least offering a short explanation of their meaning on first use.
When you’re pitching to angel investors, tell us the “Why?” rather than the “How?” by focusing on the benefits and impact of your product, rather than on all the technical features. Steve Jobs is an example of a great business communicator who was skilled at selling both investors and consumers on the impact of Apple’s products. As you’re preparing, watch some of his keynotes on YouTube to get a handle on how to target your pitch to your audience.
Keep it simple
I have a rule for presenters: your audience must understand the essence of your point(s) within two seconds of each slide’s appearance. So don’t lose your audience by providing overly complicated messages or slides. If we have to expend effort in reading small text on your slides or deciphering complicated graphs, you have already lost us. Always remember that you are the star of the show, and the slides are there to reinforce your key points. They are not the storyteller; you are.
When you’re telling your story, keep the flow of your narration simple, and allow each detail to unfold in a natural and connected manner. Ask yourself this: Can I insert the phrase “… and therefore. …” as a transition from one slide to the next? If you can logically insert transitional words into your slide deck, your flow should be easy for the audience to follow.
Be honest and straightforward
Founders sometimes mix their aspirational messages with statements of their current situation, and hope gets woven into fact. Logos and branding might appear on slides about partners and acquirers when in reality, the founders have not even started conversations with these parties. Make sure you’re very clear about your company’s achievements to date. If you have a projection for this fiscal year’s revenues and it’s only the beginning of the year, be clear that you’re making a projection and not describing something that’s already been achieved.
Be honest about your company’s shortcomings or challenges, as well. We don’t expect founders to have all the answers, and we certainly don’t expect the company to be perfect. It’s tough to build a well-balanced team, to create a product that works perfectly, and to find the right market fit, and angel investors know this. When founders can actually admit their weaknesses, we find that honesty refreshing. Your identification of challenges is an opportunity for investors to assist you, and some investors respond better to a chance for them to help you than they do to expectations of financial return.
If you are asked a question that you can’t answer, it’s better to say that you don’t have an answer yet and that you will address it soon, rather than making up an answer on the spot. Many investors can sense when you are glossing over a weakness or pretending that it isn’t important.
Anticipate investor questions
Investors will ask some tough questions, and founders must be ready to answer them. Questions about the shortcomings of the company and about what makes the founder uniquely suited to lead it are standard. Founders should prepare and spend time reflecting on how they’ll answer well before pitch day. These questions are not intended to trap or intimidate founders, but to help investors further understand the journey of the company to the point of investment. We need the full story on a company’s financial situation, operational dynamics, and the founder’s strengths and weaknesses so that they can use their extensive experience to help founders avoid preventable mistakes.
If you have backup slides with information already prepared in anticipation of our questions, even better. It shows forethought and professionalism on your part, and will reflect well on your ability to lead your company.
When fielding questions, give your answers directly and succinctly. Investors will notice if you evade a question, so don’t use a question as an opportunity to launch into a different topic. If you can provide a concise answer in no more than five sentences, it allows the audience to ask even more questions and creates a sense of forward momentum. The last thing that you want to do is to belabor a point so much that some investors become bored while others wait in frustration trying to ask their questions.
Remember, most investors are more interested in backing the right team of founders than they are in any particular product. We are looking for people with insight, leadership skills, and excellent communication skills. If you follow these four rules, your chances of attracting investor interest will be much greater.