- Investors hear countless pitches a day, so it's important to frame your pitch in an engaging way with practical data to back up your claims.
- Do your homework and be prepared to answer hard questions about your business. Investors don't want a show; they want financial details that highlight the advantages and risks associated with your business.
- Investors are investing not only in your business, but also in you. Showcase your passion for the project by demonstrating your industry expertise.
Unless you plan to fund your new business from your own bankroll, you most likely will need an investor at some point along the way.
Regardless of how great your business is, if you can't get someone to invest some money to launch it or help it grow, your venture doesn't have much chance of success.
As a fund manager, investor and entrepreneur, Shereen Shermak, CEO of Launch Angels, has listened to and been part of dozens of pitches. She said the key to making a strong impression on potential investors is the ability to thoughtfully answer all of their questions.
Shermak provided these explanations of six questions that every entrepreneur should be prepared to answer in an investor pitch meeting.
1. What does your complete competitive landscape look like, beyond just where you're playing?
As an entrepreneur, you need to demonstrate that you understand and respect the competitive environment you are operating in. What sets them apart from the competition? Investors want to see that companies understand the growth and contraction trends of their competition, especially as it relates to their product or service.
As part of understanding the competitive landscape, it's also very important for the investor to understand what areas you choose not to compete in and why you opted not to pursue those areas. Knowing where not to compete (because it is outside the current capabilities of your organization) demonstrates a high level of self-awareness. A lot of times, an investor is searching for a unique idea. How are you different from your competitors? This doesn't necessarily mean you need a brand-new product or service, but you want to show your own unique spin on it.
2. What's your competitive advantage?
You must be prepared to explain how your solution is better, faster or cheaper than existing solutions. You should be able to quantify the customer value proposition, validate that the solution is better, or provide data to indicate that such items are meaningful to the customer. Investors like to consider market share before signing over a check. The larger the market share, the more appealing it becomes to an investor.
Your business plan must demonstrate your projected market share and how you plan to stand out within that market. One way to stand out is to show your expertise in the industry. Investors like to choose companies with leaders who have a track record of success. If you have a proven passion for the industry, the investor will feel like you're more driven for the business to succeed.
3. What are your achievements and milestones?
Is your company meeting its goals or tracking well to meet them? Have there been setbacks that forced a change in plans? If so, what di you learn from those situations?
Investors are also very interested in your upcoming milestones and challenges. How will an investment help you reach those milestones? What are your biggest challenges, weaknesses, and roadblocks, and how are they being addressed and overcome? Examples include key hires, change of revenue model or sales strategy.
Your financials will dictate what types of investors are drawn to your business idea. For instance, venture capitalists will look for companies that have the potential for a high ROI with a clear-cut exit strategy.
4. What are the risks?
It's always better to let potential investors know about the risks to your venture. It builds trust and again shows self-awareness, as well as a pragmatic view of the overall forces that may impact the company. Your business plan should include both the advantages and risks of investing in your business. Investor-business relationships should be founded on trust and transparency.
5. What's your exit strategy?
Every investor wants to talk about exit strategies, and they want to know that your company has a sophisticated understanding of the exit strategies that would likely be available to your business. They want to invest in companies that will have a positive return in a short or moderate timeframe, such as three to seven years. Startups need capital, and investors need a positive return on their investment. They want to know that your company is thinking about this balance of needs and actively developing the product, partnerships, and network, and that you understand the motivations behind M&As in your industry that will facilitate that exit opportunity in the future.
6. Why me?
Investors want to know how an investment from them can add value to your organization and help you meet milestones. They want to see you've done your homework on potential investors and strategically targeted them for a specific reason.
An investor wants to be part of your business narrative. You should explain not only why the business is important to you, but also how their involvement adds value to your venture.