How to Pitch Potential Investors? 11 Smart Winning Tips for Fundraising
Updated: Oct 14, 2022
If you are a startup founder, or if you work in the venture capital world, you know that fundraising is always a challenge.
The process of raising money requires some time, and it can be very stressful. The best way to secure funding is to have a strong pitch. You should never underestimate the power of convincing someone to invest in your idea.
So, how do you get started?
The first step is to create an elevator pitch that describes your business in 30-60 seconds. This will help you get started with the process of pitching potential investors.
Your pitch should do most of the work for you since many investors are busy and have lots of pitches to read. The investor needs to be forced -by reading your pitch deck- to ask for more information. So how can you communicate your great idea clearly and compellingly? Even in such a short form like a pitch?
Table of Contents
Why Understanding the Pitch Deck is so Important?
Your pitch deck, also known as a "business plan" or "investor presentation," is the first impression that you make on investors. It's the document that will give them an overview of your business, who you are, and why they should invest in you. A pitch deck summarizes your company's product or service and your business model and shows how you plan to use the money from an investor.
You may have heard the saying "A picture is worth a thousand words," and this applies to your pitch deck. The best pitch decks are visually appealing and easy to understand. They contain charts and graphs that help illustrate key points. And they use simple language so that anyone can understand what you're saying without having to read between the lines or ask questions to clarify anything during your pitch meeting.
A pitch deck is the most crucial part of fundraising because:
It visually communicates the business model, mission, and goals of your company.
They allow you to tell your story in a concise manner that focuses on key aspects of your business to investors and why should they invest in your company.
They also help investors understand how you've grown so far and where you plan on taking your business next.
The right pitch deck will get investors interested in what you have to say without making them feel overwhelmed or bored by the information they don't care about just yet (or ever).
For example, if Ola Cabs wants to raise money from investors, then instead of giving them files and records of their startup, telling them why they need funds to grow and how they will do it they can share the pitch deck with them that will give useful insights about the startup in a short time and will be easy to understand.
What to Include in a Pitch Deck?
It's important to remember that the quality of your pitch deck can make or break your fundraising efforts. If it's not well-designed, it could give investors the impression that you're not serious about your business. And if it's too long and complicated, it will be difficult for them to follow along with what you're saying.
Here are some tips on what to include in a pitch deck:
Start with an overview of your product or service.
Explain how it will improve lives or solve problems for customers. What solution do you provide?
Provide details of how is your product unique? What are the key features and value proposition?
Showcase how much money you need, how you'll spend it, and why you're asking for it now instead of later (if applicable). The answer should be specific investment usage and measurable. For example, if you want to hire more employees, it’s better not just say that “we need more people” but rather “we need three engineers” or “we need five salespeople” etc.
Give them a brief about the market opportunity for your product. To understand how to do market opportunity analysis read our blog
Market Opportunity: A Complete Guide in 2022 Covering What, Why, and How
Your pitch deck should give a deep insight into the traction of customers. How much market you have covered and who are your early customers?
Understand your competition. Who your competitors are, what do they do and how do they do it? Discuss where do you stand with respect to them and what are areas to work on.
Evaluate the Financials and the goals you have for the next 3 years. Where do you see the startup revenue in the coming years and how do you plan to monetize it?
Include details about the team working on the project, their experience, and backgrounds, as well as their roles within the company.
Common Mistakes to Avoid in a Pitch Deck
The most common mistake people make when creating their pitch deck is trying to cram too much information into one slide. This leads to information overload, which makes it hard for investors to understand the company's value proposition.
You should avoid including any of the following elements in your pitch deck:
Technical details on how your product works—can be included in an appendix or appendix B of your deck.
Financial projections beyond three years—three years is enough time for investors to see if they can get a return on their investment by selling their shares at an exit event (such as an IPO).
Price sheet – Pricing is the investor’s job — not yours.
Customer testimonials – They can be distracting from your core pitch, and they don't speak as loudly as data.
Data from unreliable sources can hurt more than help. Make sure that any data used in your presentation is verified and up to date.
Don’t use generic slides with stock photos or images from Google images instead of original content created by your team. This can also come across as lazy and unprofessional by investors who are looking for a unique approach to their investment decisions.
Don't spend too much time on "background" information or telling the story of how you came up with the idea or how it's going to work. Investors want to know what makes your business unique and why it will work. They also want proof that there is demand for what you're selling.
Do not include any personal information about yourself or your team members - especially photos! This includes links to social media profiles (Facebook pages, Twitter accounts, etc.) It doesn't matter if someone wants to find out more about you - investors aren't interested in doing this during due diligence and it will waste their time if they have to go searching for it themselves after receiving your pitch deck.
Don't use big words or jargon. Investors want to feel as though they can relate to you and understand everything you say. It’s better to keep it simple.
Be honest about your numbers! One of the biggest mistakes startups make when presenting their financial plans and projections is that they usually underestimate their expenses or overestimate their revenue growth rates by choosing unrealistic assumptions (such as "100% annual growth rate).
11 Smart Winning Tips for Fundraising?
The art of pitching is a skill that every entrepreneur needs to master. It's not just about selling your idea or business — it's also about convincing an investor that you're the right person to lead the company. Investors are looking for more than just a good idea and solid metrics; they want to see that you have what it takes to make their investment pay off.
When you're pitching potential investors, it's important to tailor your pitch to their unique needs.
That might sound obvious, but it's surprising how many entrepreneurs fail to do so. They make the mistake of delivering the same pitch to everyone they talk to — even if that person has no interest in what they're selling.
This approach doesn't work because it leaves little room for customization, which is key when pitching investors. It also shows that you haven't done your homework on who might be interested in your business.
So here are some tips for tailoring your pitch to investors:
First and foremost, an investor wants to know how your business will make money — and how much money it will make over time. So open with an overview of the entire business model, including its growth projections and key metrics like sales volume and profit margins. This will help set the stage for how you plan to grow in the future and why this investment makes sense now.
Be specific about who you're targeting as customers or users — and why they'll want what you're selling.
Explain why there's space for growth — despite competition from other companies offering similar products or services. Highlight any distinguishing features or advantages that set your business apart from others in the same field (e.g., better technology or more skilled employees).
Know the investor’s background. If an investor has worked with companies like yours, they will be well versed in what they need and how much time it takes for them to decide. If an investor has experience with startups like yours but doesn't have deep knowledge of the industry, it’s even more important for them to understand why this opportunity is unique and exciting for them.
Know what kind of investor they are. Some investors are interested in companies that may not turn into unicorns; others want you to take over the world with your idea; still, others will invest only if there is a clear exit strategy (they can sell their shares at some point). Knowing this information will help you tailor your pitch accordingly.
Practice your pitch until it feels natural, but don't overdo it. It's tempting to spend hours rehearsing your presentation, but don't waste time practicing for hours on end — it'll only make you feel more nervous when it comes time to deliver your speech. Instead, practice just enough so that you feel comfortable delivering it naturally in front of others. Practice with others, if possible (this can help with nerves), or at least record yourself so that you can hear how it sounds and see where there may be areas for improvement.
A good pitch should be short and sweet. Keep in mind that you only have a few minutes to convince your audience that your idea is worth backing. The key is not to talk too much, but rather to focus on making a strong point and then moving on to the next one.
Be interesting. You may have a great business idea, but if you can't describe it excitingly, potential investors won't be interested. A good way to do this is by focusing on the customer experience or problem that's being solved.
Be prepared. Make sure you have all your materials ready and in order before you start your pitch. Have a copy of your deck in front of you so that it's easy to refer to if needed — don't rely on memory alone! And make sure everything is as professional-looking as possible; if it looks like something is thrown together quickly, it will give the impression that you didn't take enough care with your business plan or idea.
Tell a story about your business. People love stories, so if you can tell a story that encapsulates the essence of your business and what it does, then you're likely to win over the listener.
Don't be afraid to ask for advice or feedback from those who are more experienced than you are in business (this includes family and friends).
How to Present Startup Financial Plans and Projections for Pitching Investors?
When you're pitching an investor, present your financial plan and projections as a simple chart. Here are some tips:
Use a chart template with rows for each month, columns for expenses and revenue, and totals at the bottom.
Include a column called "change" that shows how your projected revenues will change over time. Use percentages instead of dollar amounts so that the number is easier to read.
Include a column called "net change" that shows how much cash you expect to have at the end of each month (or quarter). This is the most important number because it tells investors whether you can pay them back. If your net change is positive (more cash than expenses), it means you're profitable; if it's negative, then you will eventually run out of money.
Be sure to include a balance sheet and cash flow statement along with any other relevant documents about the company's financial situation (e.g., tax returns). If there are any significant changes since last year's numbers were calculated (i.e., if expenses increased significantly or revenues decreased), then explain these changes as well so there are no surprises during the meeting.
What percentage of ownership your investors will receive in return for their investment money (and how much of their investment money they'll get back after the company has been sold or liquidated)?
Know your burn rate. Your burn rate is how much money it costs you each month to run your business. It's a combination of all operating expenses, without considering any capital expenditures (new assets). Think of it as how much cash you need each month just to keep the lights on.
Calculate your unit economics. Unit economics is an important metric for measuring how well a company makes money from each customer. In simple terms, it measures how much profit comes from each unit sold and whether that amount covers all expenses associated with selling that product or service (including marketing). The higher the unit profit margin, the better off you're likely to be.
What do Investors Want to See in a Pitch?
Think like an investor. When writing your pitch deck or presentation slides, think like an investor would — i.e., focus on what matters most to them and cut out anything else that doesn't drive home key points about why this investment is worth their time. Here are some tips about what investors want to know:
What kind of company is it? Is it a technology company? A retail store? A healthcare startup? The project’s goal. What do you want to achieve with your project? Investors typically invest in industries they understand, so they'll want to know if their expertise is relevant.
The investors are looking for whether you have a proven idea that works. They're not interested in hearing about a concept unless it already has traction. If your business is just an idea, save yourself some time and skip pitching until it's more mature.
They want to know that you've thought through all the details of the business plan and have done enough research to ensure that this isn't just a pipe dream. This includes understanding how much money you'd need to launch and scale up the business, what kind of team you'll need (including co-founders), and how much time it takes for each step in the process before revenue starts coming in.
Investors want assurances that you can execute your plan. They want to know that you have what it takes personally (e.g., experience running companies) as well as with your team members (e.g., people who have worked together previously).
They also want to know how much risk there is involved with investing in your company, so be honest about the risks and rewards when pitching to potential investors.
Your track record of success. What have you done before and what were the results? A good pitch will show that you can deliver on promises made in your pitch deck.
Tell them what makes your company unique and valuable. What makes it easier, faster, or cheaper than others? How will it disrupt an existing market? Why is it better than the competition?
How Long Should an Investor Pitch be?
Keep it short and sweet. Most investors have little time and patience, so your pitch needs to be quick and concise. The ideal length of an investor pitch is between three minutes and 10 minutes, but the shorter the better — especially if you're competing with other startups at a pitch event or conference.
Focus on benefits, more than features. If you start talking about what you do, people will tune out almost immediately. They're not interested in what you do; they're interested in what they get out of it.
Check the ideal time limit for each concept here:
The problem you are solving (1 minute)
Your solution (1 minute)
Your team and how they will execute the plan (2 minutes)
How much money do you need and why that amount makes sense (3 minutes)
Your traction so far (2 minutes)
Your unique value proposition to investors (2 minutes)
Important Questions Asked by Investors During a Pitch Deck
There are many questions that investors ask during a pitch deck, but here are some important questions are:
Why should we invest in your company?
How much money do you need?
Why do you need this money?
What is your business model?
What is your competitive advantage?
Are there any risks involved with investing in you and your company?
How big is the market for that problem?
Who are your competitors? How do they stack up against each other? What makes them different from each other?
Why does your product stand out in this crowded space? What is it that you understand about your segment that others don’t?
What is your plan for scaling up?
How long before we see a return on our investment?
What are the milestones we should expect?
How many customers do you currently have?
How much money have you raised so far?
What stage is this company in?
How much equity are you willing to give up?
Conclusion
Winning investors over is no easy task. You need to make your case, and that's where the pitch comes in. A good pitch will help you show off your business, its market opportunity, and why it's a good investment.
Get comfortable talking about your business. Practice telling your story until you can tell it confidently and clearly with enthusiasm and confidence. Keep the story brief and focused on the most important aspects of your business so investors don't get bored or confused by details.
Be prepared for questions from investors during the meeting, which may include inquiries about technology or industry trends that could affect your business plan.
Use visual aids during the meeting if they help illustrate key points in your pitch, such as financial projections or market research data.
You can read our other blogs here:
7 Stages in Startups-When is the best time to raise funds?