Asking people to part with their money can sometimes be as difficult as bringing down the Great Wall of China and building it back with bare hands. Many great ideas have died without seeing the light of day due to lack of funds. But thanks to the startup culture, and the daring and dynamic nature of the new world, more investors are enthusiastic about backing ideas with their money than ever before. A profitable idea with a dynamic and convincing pitch will surely find investors. However, putting together a dynamic and convincing investor pitch can turn out to be more difficult than coming up with a profitable idea. So, what makes a good investor pitch? Is it all about wit and confident body language, or is there more to it? Here are five key factors that make the core of a perfect investor pitch.
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It's common folly to think investors are in it for the money. In an age where money dictates almost everything, you'll be surprised to see that most investors are looking beyond the pay-back, and into the soul of your idea – is your idea relevant, is it solving real-life problems, does it have the ingredients to build a great company? If they see these qualities in your idea, then they sure will know that the profits will follow. As an entrepreneur, you should first focus on your vision of building a great company. Ken Howery, Co-founder of PayPal and Founder Fund says, “Having a great start-up pitch has more to do with setting up and running a great company than optimising some type of sales process to investors. Great investors can see through most tactics that you will use in the pitch process. The best fundraising strategy is to build a great company.”
Investors can detect fear, lack of confidence, lack of homework, and lies more accurately than any man-made machine put together to do so. If you're not prepared, it will show through in your lack of confidence, fear, or fake confidence. You may inadvertently lie or overcommit. The major reason entrepreneurs overcommit during the pitch is the fear of rejection. Deepak Gopalakrishna, CEO of RxAnalytics, advises entrepreneurs to narrowly identify their core strength. “You're never cheaper, faster, better, and of higher quality. Pick one,” he says.
The road to success is not without bumps. Investors know that; they expect you to know that and be prepared for it. Nat Wasserstein, Chief Restructuring Officer at Lindenwood Associates, a crisis management firm, and also an investor, expects entrepreneurs making a pitch to understand and have an action plan for the downside case. According to him, “A downside case is not just a must-have scenario. It must translate into how the investment would likely be recovered if the venture failed at various stages of development.”
A good idea does not take time to make itself clear. It can stand on its own without the need for forced humour or extra props. Also, investors have a trained ear to detect a hollow sounding idea that tries too hard to look good. If your idea is good, you should be able to get the point across easily without beating around the bush. Ted Jenkins, Founder of Oxigen Financial says, “You must realize that you have less than two minutes in general to be able to get the core message across to your future lenders. Make sure your pitch is succinct and thorough at the same time.”
Investors want to see your idea through your eyes. If you have not envisioned the future steps, and your schedule, they will not either, and your pitch is likely to fail. You should make a realistic roadmap a key part of your pitch. Define the immediate milestone you are aiming for. Defining your strategy in short, clear steps will make it more believable than keeping it wide, long-shot and vague.
A good investor pitch shares the same passion that created the business idea. Make sure your passion and honesty, coupled with research and insight, comes through during the pitch.