Ten Tips for Pitching your Startup to Investors

I volunteer at a couple of small business incubators and programs.  I was sitting in on a mock pitch last week and giving some pointers on how the entrepreneur could polish their pitchdeck and overall presentation. I figured I’d put these up so people can take a look.  The below are offered to any startup looking to raise money:

  1. Know The Numbers Inside And Out. This goes without saying. Know your company’s existing financials and future projections cold. Know it all on a macro and micro level, and be able to talk about it from either end.  Know your overall financials but also know what your profit margin is on a single sale of your product.  If you are using projections, make sure you have solid backing for how you came up with the numbers. There’s a difference between realistic optimism and naive exuberance that investors can smell a mile away.
  2. Sell The Company’s Culture.  Your startup is likely selling something, whether a good or service.  Whatever it is, use the same type of sales techniques you use to sell your good or service to sell the company itself to investors.  If there’s something the investors don’t like about the way you are selling your product, they likely won’t invest anyway, and even if they did the relationship may be rocky from the start.
  3. Talk About Customers As Opposed To Users.  Customers are the ones that pay you.  Users are the ones that use your product, but may or many not actually pay you for it (if they do they are both a customer and a user).  I’ve heard plenty of pitches about getting users, but when the monetization question comes up (it always does), the entrepreneur will give a canned answer about something like possibly selling ads in the future, making it sound like the company’s goal is too lofty to actually make money.  No for-profit company is below making money, and making that money needs to be part of your business plan today, not when you have 1,000,000 users.  Even if the short term goal is all about getting users, figure out the long term play and make sure its a viable way to get paid.
  4. Take A Team Approach.  Tout your own and your business team’s experience. Investors are investing in the team as much as the company and product.
  5. Know Who You Are Pitching To.  You likely wouldn’t have gotten to the point where a VC or angel was talking to you unless they had some interest, but you should do your homework on them and their backgrounds prior to the pitch and tailor the pitch accordingly.  Its also not a bad idea to have multiple versions of a pitch, some examples are: (a) short to the point market overview, niche your startup is targeting in the market and how you can exploit it (b) overly technical presentation if the VC group is made up of PhD types (c) detailed financial presentation, or (d) a combination of the above or different points to stress.
  6. Be Able To Explain Your Company And What It Does On A Basic Level.  I’ve had plenty of bosses that have said: “If you can’t explain a complex concept to a twelve year old then you don’t really understand it yourself.” (I’m sure this quote is attributable to someone famous).  Over time I’ve figured out that the maxim holds true.  If you have complex intellectual property but are pitching to VCs with business backgrounds, make sure you can explain the intellectual property to them in a way that makes sense.  Another sub-point here: some technical entrepreneurs can double as great frontmen CEO-types who can give smooth presentations and interact with anyone in the business community.  Some technical entrepreneurs can’t do it, and there’s nothing wrong with that, but realize that fact and maybe bring on a frontman with polished presentation/sales skills.
  7. Objectively Layout Your Competition.  How far along are your competitors?  How will you catch up? How are you different? If you have areas you need to work on this is a good place to state it and why the company needs the money to bone up in these areas.  And how doing so will lead to crushing your competition.
  8. Avoid Clichéd Comparisons.  I personally don’t like to hear companies compare themselves to an existing company.  I realize it can sometimes make it easier to explain what your company does (see point 6 above though), but to hear that your company is the next Facebook for zoologists, or the Foursquare of frat parties, the Twitter of tech nerds, doesn’t do it for me.  If you have a comparison that makes sense or helps explain I think its ok to do (such as “We are like [insert company name] in this aspect because ….”). But I’d suggest avoiding this altogether.
  9. Tout The Company’s Benefits and Uniqueness.  If you have a huge leg up on competition, an unbelievable advisor, or existing investors, then let people know.  Obviously if you are raising a round of financing and already have a lead investor, or even any investors, let people know this.  Companies that already are already associated with prominent VCs, or have well known VCs after them, become more attractive to other VCs.  Its like the average looking guy that has a best friend who just happens to be female, and is a drop dead gorgeous blonde.  If he rolls into the bar with her, the other gorgeous girls (who otherwise wouldn’t give the average guy the time of day) will see he’s friendly with the blond friend and then get interested in the average looking guy themselves.  There’s some psychological explanation that eludes me, but its human nature.
  10. Sell With Swagger.  You need to have everything down pat for your pitch, you need to know it backwards and forwards.  You also need to anticipate the likely questions that VCs will ask you (I’ll do another post on this).  Once you have everything down cold, you need to place a sheen on it.  You need to turn up your salesman skills to get the people you pitch to interested in what you are cooking.  People will invest in people that can make them believe.  If you can’t sell yourself, your team and your company to the investor, the investor is pretty sure you can’t sell anything to a customer.  You need to project the type of confidence that will instill trust in the people who are cutting you a check.  Remember not to go overboard though.  Some people don’t like arrogance but everyone likes justified confidence.