Startups frequently prepare a “pitch deck” to present their company to a prospective angel investor or venture capital firm. The pitch deck typically consists of a slide presentation and is intended to showcase the company’s products, technology and team to the investors.
As a startup, you have to bring a fresh perspective to get your business noticed. However, it will take more than a good idea to convince a potential investor to cut you a large check.
To capture the attention of people who can accelerate your business and ultimately open their wallets, you must master your investor pitch. As an entrepreneur who has gone through the process of pitching to investors and even getting offered money, I’ve learned quite a bit of what it takes to get noticed.
In this post, I share my guide on how to share your startup vision with investors:
1. Build Relationships Prior To The Money Ask
The best funding relationships are ones that grow organically. Get to know potential investors before you ever need capital. Go to networking events, introduce yourself and do homework on them long before you’re in the process of raising money.
Every investor is different in terms of what types of companies they like to invest in, what stage these businesses must be in and their threshold for risk. Get them invested in your mission and vision first and then you can show your progress over time. Having a relationship with an investor long before you ask money is a great way to get your foot in the door. You have more power to negotiate terms and investors will be a little bit more lenient with you.
2. Identify The Right Audience
Each investor has different likes and dislikes, so you need to identify the right audience. You should research potential investors before you talk with them so that your company fits the right stage. Some investors are looking to invest hundreds of millions of dollars in late stage companies. On the same token, some investors are looking to throw $25-$100k on companies just starting out.
If you approach an investor, you must know what industries they are actively investing in and what stage companies they are interested in. If you don’t know those two things and you pitch to an investor, things will likely go downhill very rapidly.
3. Develop Proof of Concept With A Minimum Viable Product (MVP)
Before you begin securing capital for your startup, you must first determine if your company is ready for outside capital. Most experienced venture capital investors in the investing world will want to see that your business has made significant progress bootstrapping. Investors want to see something working on a smaller level and they want their cash to help scale/grow the business exponentially.
Most investors will want to see some kind of minimum viable product built with some sort of traction. If you don’t have any traction or a MVP to show, you are not ready to pitch to investors. Develop a proof of concept before approaching an investor.
4. Determine How Much Capital Is Necessary
Investors want to know how intelligent you are and how strong the founders of a company are. They will ask you how much money you’re seeking as soon as you walk into the room. You need to have a reasonable ask with a really good answer of what that money will be put towards. “I need $100,000 which will be used towards growing our development team, investing in servers and using it for marketing to early adopters to grow our company. We believe that a $100,000 investment is enough to keep us running at a high rate for 12 months.”
That would be a great answer to give an investor because it covers the how much and why that much question immediately. Do your homework, figure out what things will cost and use your proof of concept to help you determine how much capital is necessary.
5. Explain Who Your Audience Is And How You Will Reach Them
Marketing matters. If you cannot describe who will buy your product and how you plan to reach that audience, then you have not done sufficient research. Investors too often see founders come into their offices saying that with their capital, they can find the right target market.
Nope, that’s not good enough. You need to be educated long before you come into the investors room. They aren’t looking to go on a discovery tour with you to figure out your business. The expectation is that you know your business and you just lack funding to take it to the next level.
6. Know Your Numbers And Return On Investment
Investors want to know that you have a clear business model and understand the finances of your businesses. Creating a financial structure is crucial but being able to articulate it is even more important. Investors need to know how your business will make money, in what timeframe and what the return on their money is before considering an investment.
As a startup founder, you have to be diverse in your skills that you know a little bit of everything. The finances of your business in the present and future are going to be just as important. Know your internal finances better than anyone and be prepared to answer the tough questions regarding it when you step into the room with investors.
8. Show That You Are Invested In Your Business
Investors like to see that you have invested cash and not just time in your business. That shows them that you have just as much to lose as them if things don’t end up going well. Investors want to see that you are fully committed to your business.
While it may make personal and financial sense to keep your day job and work on your business part-time, investors want to see that you are dedicating all the time necessary to make your business a success. As an investor, they want to make sure that their money is in good hands. They want someone who will dedicate everything they have to make their business successful.
Conclusion
Potential investors are easy to find but it’s not easy to convince them to listen and share your vision especially if you are just starting up a business and have no value in your name yet. But with the right methods in delivering your vision, these potential investors can become your business partners. In this post, I shared with you a guide on how to share your startup vision with investors.
