Investors listen to countless pitches from entrepreneurs, each of whom believe they have the best new business idea. A good idea isn’t enough, though. With so many competitors vying for funding, if you can’t communicate your pitch convincingly, you will never have the backing to get it off the ground. Your investor must have confidence, not only in your idea, but in your ability to execute it well, run a successful business, and turn a profit. It takes work and practice to put together a great pitch.
Here are four common mistakes that start-ups during their pitches:
1. Not Providing Clear Milestones:
Too many pitchers are vague about the details of what investor money will be used for and how it will help the start-up succeed. Explain to investors precisely what your plan is for their money. Articulate clearly what it looks like for your start-up to get from point A to point B. Tell them why it’s important and how you will use your funding to achieve that milestone. I recommend this article by James Currier at NfX to help provide you with a framework for this.
Be specific and be sure to provide real numbers. For example: “We are currently doing $5000 per month in sales. The money for this round is additional marketing capital that will take us to $20k a month in sales and position us to raise our next round.”
Investors want to know exactly where their money is going, how long it will last, and what tangible goals will be met because of it. Walk them through your business plan, showing them exactly how you plan on turning a profit. Prove that you are running a trustworthy start-up that can turn their funding into profit.
2. Not Articulating the Problem:
Another common pitch mistake is neglecting to convince investors why you think your product or service is truly needed. You can provide all the financials and explain your business plan until you’re blue in the face, but investors also want to be sure that there is a legitimate consumer base that will benefit from your idea.
They also want to see how you plan on appealing to that customer base. Explain how your product or service solves a real problem and will yield real results. If potential investors aren’t convinced by the need for your product, chances are, your target customers won’t be either.
3. Not Emphasizing Achievements:
Alternatively, some sales pitches swing the other direction and are so idea-heavy that they neglect to provide concrete numbers and results. While investors do need to be sold on your idea, they also need to be confident that you have what it takes to sell it to others. It takes more than a good idea to make a start-up succeed.
Prove to your investors that you have the business savvy to handle their money well. It’s a good rule of thumb to illustrate your market traction towards the beginning of your pitch. If you are still in the idea phase, show the data or research that suggests the needs for your plans. Once your investor knows you are serious about obtaining real results, the idea will be an easier sell.
4. Not Giving a Specific Goal:
A shocking amount of entrepreneurs cannot answer the simple questions “How much do you need and why?” after giving a pitch. Too often, they respond with a vague answer such as, “It extends our runway”, or “It will help us start building”. That type of response isn’t going to cut it with a savvy investor. Be prepared to ask for a specific amount that will go towards a specific goal and yield a specific result. Investors want to see their money achieve tangible results.
For example, if you are launching a large marketing campaign, provide your investors with the numbers about the planned cost, expected reach, and anticipated resulting sales. Be prepared for them to ask follow-up questions about your plan. Walk into your pitch with a clear goal set and ready to be presented.
A successful pitch is vital for getting your start-up running. Don’t walk into a pitch unprepared. Give investors real data and a reason to trust you. Show them that their capital will be in wise hands. With a thousand other entrepreneurs making pitches for their funding, you must walk into a pitch thoroughly prepared and able to speak in a way that makes investors listen.
But, my best advice is to look at your startup through an investor’s eyes before you go into the meeting, this will help you tremendously. I will talk more about how to do this in an upcoming article.
Need help preparing for a big pitch? Schedule a consultation with me.