The leading lights of the business world have got where they are by understanding the needs of their customers. When preparing for a funding pitch, aspiring entrepreneurs need to follow suit, taking care to comprehend exactly what investors want and need to know. Pitches are often thought of as grilling exercises, but a thorough approach is required due to the risk that startups and budding entrepreneurs represent. Angel investors and venture capital firms are searching for potential and the opportunity for growth, but this often comes with risks attached.
As a startup founder, you need to be prepared for your pitch and make the most of the opportunity to impress, but how do you go about doing this? What should you include in your introduction, why do you need money, and what problems are you solving? If you’re gearing up to try and secure funding, here’s a useful guide to help you structure your pitch and maximise your chances of success.
How to structure your funding pitch
Your pitch is a once in a lifetime opportunity to showcase your startup and encourage a panel of investors or a VC firm to back you. Typically, a 20-minute funding pitch should follow this structure:
1) Your introductory slide:
This slide should provide an overview of the presentation with numbered sections and a clear outline of the structure.
2) Identify the problem you’re tackling:
This is your opportunity to highlight the problem or issue you’re solving, show that there’s a gap in the market for the solution, and demonstrate that you have an in-depth understanding of the marketplace in which you plan to trade. Explain how your startup provides a solution, and identify potential for growth and adjustment to cater for changes in the market in the future.
3) Explain your solution:
You’ve highlighted the problem, now explain exactly how you’re going to solve it. Talk about the product or service in detail, making sure that everything you say is relevant to the fundamental problem. Show that your company is different and outline your USPs. Use case studies and facts and figures to back up your points and provide specific details about your target market.
4) Talk about alternative solutions:
At this point, you can cover alternative options and solutions customers could use to approach the same problem. Consider your competitors, review the landscape, and explore other avenues. If you consider a chocolate bar, for example, this is not a novel product, and competition doesn’t just come in the form of other bars or bags of sweets. It also comes in the shape of alternative snacks, for example.
5) Introduce your team:
Every successful business is reliant on an effective team. Take a moment to talk about your team, your vision, and how you plan to work as a unit to achieve objectives. Be prepared to answer questions about recruitment and your role within the business. Would you be prepared to appoint a new CEO to optimise growth, for example?
6) Explain your business model:
Provide a detailed, but succinct description of how your business model has worked up until now, how it will evolve in the future and how you plan to alter the structure if this is applicable. Cover all bases, highlight the most pressing or complex difficulties you face, and show investors how you plan to solve or overcome them.
7) Discuss forecasts and provide numbers:
Discuss forecasts, provide honest projections, and back up what you’re saying with facts and figures. Be realistic, and provide an insight into how much money is needed to take the business to the next level and when investors could expect to see returns.
8) Your valuation and how much money you need:
At this point, you should cover the valuation of your business and how much money you need from the investor to make the venture work. Explain how you calculated the figures and how much cash is needed to take the business to specific points or milestones. It’s also wise to discuss what happens if there is a problem, for example, a product is delayed. Investors will almost certainly have more knowledge about this area than you will, so it’s crucial to seek advice and make sure you’re ready for tough and awkward questions.
Lay out the major milestones and discuss how you’re going to ensure you reach them. This should include plans like hiring extra staff, and also any evidence you have from past achievements, which could further your cause.
9) Outline the exit strategy:
Investors want to make money, and they won’t sign up to anything without having a plan in place to exit. Explain your strategy, showcase the idea in all its glory, and make a final push to persuade the panel that this is the best opportunity out there.
When you’re pitching to investors, it’s vital to remember that people talk. If you make a good impression, this could open doors for you. Take this structure as a guideline, use imagery and clear bullet points to make the information you provide digestible, and highlight your best points first. Be passionate and enthusiastic and really sell your idea.
How NOT to conduct a funding pitch
Just as there are good practice guidelines, there’s also a template to follow to ensure you don’t fall at the first hurdle. Here are some errors to avoid:
- Not answering key questions: investors will go into a pitch wanting the answers to a handful of crucial questions. At the very least, your pitch should tell them how much you plan to sell your product for, how much it will cost to get the product to market, how long it will take to generate profits, and what kind of competition you face.
- Not providing accurate or realistic figures: an investor will spot inflated forecasts or fantasy profit margins from a mile off, so don’t try and exaggerate or embellish anything. Use accurate figures and make sure you have a firm grasp of the numbers before you go into a pitch.
- Not providing context or detail: many startup owners will breeze into a pitch with what they deem to be a great idea, but when it comes down to it, there’s a severe lack of detail and depth. Having a good idea is not enough for an investor. You need to provide a back story, context about the problem and how the solution will work, information about the target market and the competition, and a grasp of the numbers involved.
The perfect formula for a successful pitch
It’s always beneficial to bear in mind that investors hear pitches day in, day out. While this marks a momentous occasion in your life, it’s likely to be just another pitch in the minds of an investor. Your quest is to change their mind, to excite and intrigue them, and ultimately, to encourage them to have trust and faith in you and your business model. Here are some steps you can take to perfect your pitches:
- Don’t be boastful or arrogant: investors don’t want to hear people ranting and raving about concepts or ideas that are untested and poorly researched. There’s nothing wrong with being confident and passionate, but don’t cross the line and be arrogant. Remember that you’re at the beginning of the journey, rather than in a position where you’ve made millions from an ingenious invention. Don’t sugarcoat the facts or create hype around figures that are based on metrics that don’t exist. It’s much better to be honest than to present graphs or charts that showcase completely unrealistic growth curves, for example.
- Don’t engage in heated debate or arguments: it can be difficult to listen to an investor criticising you or your idea, but resist the urge to get involved in heated conversations. Keep your cool, think before you speak and try not to get defensive. If flaws are identified, accept that your pitch has holes, and focus on working on them and offering solutions. Try not to get too involved in the idea or take comments personally. It can be beneficial to treat the pitch as though it were somebody else’s baby, rather than your own.
- Make sure you ask for an appropriate amount of money: all too often, entrepreneurs go into a pitch asking for money that they don’t necessarily need, and this causes investors to question what they’re going to use the cash for. Calculate how much you need and provide a clear outline of where the money is going. You should never go into a pitch asking for £250,000 if you can only explain how you’re going to spend £25,000, for example. Think about how much money you need to achieve your primary objectives, and balance this figure with the portion of equity you’re willing to give away. It might be better for you to ask for less and retain more of your stake.
- Provide facts, rather than promises: when you’re pitching, you want investors to trust what you’re saying, so avoid making promises, especially if there’s a high risk you won’t be able to deliver on them. Use facts and figures to back up what you’re saying and try and avoid statements like ‘we will do this.’
- Be true to yourself: it’s very common for people to take on a persona or a role when they’re standing in front of a panel looking for an investment. Try and avoid any kind of metamorphosis, which sees you transform into a caricature. Be true to yourself, tell your story, be honest, and let the people in front of you get to know you. If you suddenly switch off the bravado and become a different person when the pitch is finished, a panel might question how genuine and trustworthy you are. Investors are looking for ground-breaking, interesting ideas, but they’re also keen to invest in people.
Pitching is not a simple task, but it offers a platform to show off your ideas, and try and get a business venture off the ground. To make the most of this opportunity, make sure your presentation has a clear structure, outline your main points at the beginning, and focus on facts and figures. Make your pitch captivating and engaging, provide detailed information, and be honest. Be prepared for questions, take time to listen as well as to speak, and stay true to yourself.