Preparing for an investor pitch: Improving your investment presentation

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Gaining the support of investors is critical for startups that need resources beyond what the founders have available. This can be a challenging prospect – convincing others that your firm is well-positioned to be able to capitalize on an often uncertain market opportunity, and yield returns beyond their initial investment. It will require multiple attempts before you are able to convince others to invest in your company. This article explores ways of increasing your success rate – important factors that you need to take into account before pitching your business.

Key things to convey when pitching to investors

Business Idea: The opportunity is worth investing in

Naturally, the business opportunity is inherently important when pitching your firm. Conveying that there is sufficient potential for profit to justify the investment by the investors is critical to secure funding. If the opportunity seems too small, or high risk, then no matter how well your presentation goes, you will have a hard time gaining investment.

Your business’s capabilities: That your firm is well positioned to succeed

The next thing it is important to convey is that your firm is well position to be able to execute on the strategy. While you may have identified an attractive market opportunity, there may well be other firms out there that have also identified it (some potentially further advanced than you are with launching their product and gaining customers).

Thus, beyond illustrating the potential market, is important to convey that you have the resources and capabilities to be able to execute your strategy, and that others would have a hard time acquiring or developing those resources and capabilities.

Your capabilities: You are worth investing in

The final key dimension that it is important to convey when pitching is that you (and your broader management team) are worth investing in. If you are unable to justify decisions, or unable to remember on the top of your head key numbers, then you convey that you are not prepared to make the necessary decisions to manage the firm.

This is perhaps where preparation pays the most to prepare. There may of course still be certain questions that you were not expecting, but if you trip on the basics of ‘what was your revenue last year’, then you will face a much harder time convincing investors to trust their money to you.

Things that you should be confident about

Know your numbers

The first, and most basic thing to make sure that you know inside out is your numbers – the financials, both historically (if you are not currently in business) and projected going forward, as well as support numbers such as the number of customers that you expect to have and potential market size.

Of course, you should have your prepared numbers – the ones that you specifically intend to highlight to them, but it is equally important that you are able to answer their questions on the fly. If they for example ask for sales next year, 3 years out, 5 years our – that you have these on the top of your head. That you know your margins, the breakdown in costs, the impact that certain strategic changes are likely to have on your cost structure.

Getting familiar with the numbers is not an exercise in remembering key figures, but rather internalizing your financials. The more that you have worked through projections, understand the cost structure of the company, and the impact of decisions that the firm may take, the better placed you are going to be to give convincing answers when you are probed for details.  

Be able to support your decisions

Another area that you should be confident about before pitching to investors is the justification for key decisions that you have made as a firm. It is important that you are able to explain the rationale for key activities undertaken by the organization, features provided to customers, and the price structure for the product or service. Not only can this help convince investors of the choices that you have made, but also it illustrates your thought process – that you have given due consideration to the various options and settled on one that makes sense.

Know what is unique about your firm

You should know both your firm and the competitive landscape. This can help illustrate the differences between your organization and other firms. A key thing that investors are interested in is some level of distinction between your offerings and other firms. Illustrating this requires an understanding not only of the underlying resource and capability of your firm but also those of your competitors. Being able to confidently talk through differences, and why competitors would have a hard time matching your capabilities, helps illustrate your awareness of the broader competitive environment, and also gives confidence that your offerings will not quickly be imitated.

Know your weaknesses

All firms have some elements of weakness – the potential pitfalls that you may face, or areas that you need to develop. As a startup, you will almost certainly have a lot of areas that you are weaker than established firms on.

It is important to be aware of these. You don’t want anything to catch you off guard in a presentation – the worst thing that can happen is for a potential problem to be raised, and you to convey that you have never considered this before.

The more that you have thought about it in advance, the better positioned that you will be to be able to respond to it – to be able to explain how you are either looking to mitigate or why you do not consider it is likely to be a problem.

Know about the person you are meeting with

The final thing you should know is details about the person that you are meeting with – what are other investments that they have made and how do they tend to work with firms that they invest in.

Finding a match between investors and your business is important. Not only will they be putting their money into firms, but they will also likely become involved in at least key decision making (if not the more day-to-day running of the firm). As such it important that you are aware of their style – not only for the pitch but also in determining if the opportunity makes sense for you or not.

Approaches for preparing for a pitch

Know your strategy

The most fundamental component leading to success in a meeting occurs well before the actual meeting itself – actually knowing, at a deep level, your strategy for how you will compete, as well as more implementation decisions contained in your business plan.

If you have given the necessary consideration for why you will be pursuing a particular course of action, then you should have an easy time answering those questions. If you have really delved into your financial projections, you should know those numbers off the top of your head – and be able to easily explain what they are based upon.

This is of course part of the reason why investors are interested in how confidently you are able to answer their questions. Partly they may want to know the answers, but they also want to make sure that you know the answers. There are thousands of things that entrepreneurs need to consider – an investor may be able to probe only a small percentage of those – if you can confidently answer those questions there is a much better chance that you will have considered the many other questions that they don’t have a chance to ask. If on the other hand, you fall apart answering the limited subset of questions that they do ask, it is much more likely that there are major parts of your strategy that have not received due consideration.

This is of course why it is so important that you have actually developed your strategy yourself – unless you have actually gone through the process of considering key decisions, you likely will not be able to explain to others the justification.

Practice, practice, practice

Practice is crucial – it is important that you can deliver your presentation confidently. This almost goes without saying, although with the many pressures that a startup is facing, it is easy to overlook the need for multiple rehearsals ahead of time. Practicing several days in advance can also be useful to ensure that you are able to reflect on the pitch, and make improvements over time. 

Another way of improving your presentation is to video record your pitch. This allows you to review the content, seeing how you come across to others.

Brainstorm questions that you may be asked

A final approach that is important in preparing for pitches is to systematically consider the questions that you may receive, and how you will answer those questions.

You will never be able to think of all possible questions that can be asked, but you will likely be able to think of the most common – and thinking through these can help address the more difficult unexpected questions that you may be asked.

One approach is to go through your presentation, and for each point that you make, ask a set of question :

  • Why did you make that decision? For every point in your plan you should be able to justify why you have made that decision. For each of these responses to further probe why you wouldn’t of done the alternative.
  • Support that point: Beyond justifying why it may make sense, it is also important to be able to support points that you have. What facts justify your assumptions.
  • What you do if this happened?: Think through possible changes to the environment that would impact each part of your presentation and broader strategy – consider how you would deal with such contingencies

Further thoughts: Learning from the experiences

Most likely it will take multiple pitches before you are able to secure financing. It is not easy to convince investors to part with their money – for every business that they invest in, they may see tens, hundreds, or potentially thousands of pitches or other solicitations.

Rather than being discouraged by the setbacks, see them as an opportunity to learn the sorts of things that investors are interested in. You will likely start to hear the same sorts of questions – which can help prepare for subsequent presentations (while also helping you to further develop strategic weaknesses that are identified in the presentations).

After each pitch that you make, it is useful to record all of the questions that you were asked. It is difficult to come up with responses to areas that you have not considered before on the spot – by having a list of questions that are asked, you will be better prepared to respond to a growing list of areas.