INVESTOR PITCH

Accelerate your business with these expert tips on "Pitching for investors". Analyse and discover this TIP!

The investor pitch must go focused on getting the investment you need for the project. To do this, you have to take into account who the talk is aimed at, what they know about the subject and what they need to hear. The aim is that, at the end of the pitch, investors think "this is profitable and they are capable of doing it". Investors know about money.

It is common that they do not understand your product, but you should not mind, after all, if your project is profitable, they will be interested in getting to know you. We need to be able to focus on the pitch presenting them with an excellent investment opportunity rather than a product sale. We recommend drawing up a script containing clear points and unique messages in each of them. The content of your PITCH needs to focus on demonstrating that you have an investable startup, i.e. the 6 points you have practised in this TIP (see+).

MISTAKES TO AVOID IN AN ENTREPRENEUR'S PITCH TO INVESTORS

MISTAKES THAT WILL MAKE YOU LOOK LIKE A NOVICE TO AN INVESTOR

One of the most stressful situations for any entrepreneur is having to make a presentation to an investor, especially if it is the first time... We are assaulted by nerves, uncertainty and thousands of doubts... How should I approach it? What to say? What will he ask me? And, above all... What rookie mistakes should I avoid if I want to convince him?

Although we have already discussed how you should prepare your presentation for investors (+), the keys to preparing for your meeting, the most important questions you will be asked and even the most common mistakes when dealing with investors, we still had to talk about a key aspect: which phrases, attitudes or actions will automatically rule you out.

Even so, before addressing the issue, I would like to talk about the most important question to ask before going to talk to an investor: Do I need it? Why? Am I willing to bring in someone from outside my company to push me to grow? Is it my only option or can I opt for other options such as the bootstrapping (+)? And you should ask yourself these questions not because investors are bad, far from it: they will not only provide you with capital but also with contacts, they will help you to grow your business faster and better... etc. but because maybe that is not what you want, and you prefer to go "as you go". Think again!

THE MISTAKES YOU SHOULDN'T MAKE WHEN TALKING TO AN INVESTOR

There are several common mistakes that entrepreneurs should avoid when trying to attract an investor. It is important to bear in mind that, Each investor is unique and may have specific preferences about what they are looking for in a start-up. It is therefore crucial, research and understand potential investors before submitting a proposal and avoid making these common mistakes.

NOT KNOWING THE INVESTOR. LACK OF RESEARCH: 

Not taking the time to research potential investors and their investment preferences can result in a presentation that is irrelevant and a waste of time.

• LACK OF CLARITY IN THE PROPOSAL: 

A confusing or inarticulate proposal may make investors uncomfortable or uncertain about the viability of the project.

METRICS. LACK OF FINANCIAL PLANNING:

Not having a solid and realistic financial plan may cause investors to doubt the startup's ability to achieve its goals.

• NEGLIGENCE OF THE DUE DILIGENCE (+):

Failure to respond adequately to investors' questions or to provide complete and accurate information can lead to mistrust and loss of the investment opportunity.

COMMITMENT. LACK OF COMMITMENT TO SUCCESS:

Failure to demonstrate a strong and consistent commitment to the success of the project can make investors uncertain about the dedication and focus of the entrepreneurial team.

• ASK FOR A NDA BEFORE SPEAKING

If there is one thing that automatically rules you out in front of an investor, it is that you ask them to sign a non-disclosure agreement (NDA). (see+ TIP) before showing him your project... for a number of reasons: firstly, because you are the one who has an interest in him investing in your company, secondly because it shows a tremendous lack of trust and thirdly because if he agreed to sign all of them he would end up with 10,000 signed NDAs... impossible to manage.

That is not to say that, when the time comes and if he is really interested in knowing more of the detail of how you do things, he will be willing to sign it, which he will be. But if all it takes to copy your project is for someone to listen to what the idea is about, you'd better look for another project. Because ideas per se are worthless (see+)

• TRYING TO RAISE MONEY WITHOUT TRACTION

I am not going to argue that only investing in projects that have started to have 'movement' is the right strategy... but it is the most common strategy for investors. As we said before, investors do not invest in ideas but in projects... And, for these to materialise, you not only have to create the product but also confront it with the market... and get some validation, which is called traction (something you should understand).

As Marek Fodor says, the right sequence of success is: USERS -> CUSTOMERS -> INVESTORS

Practice with these tips to get traction (see+).

• SAY THERE IS NO COMPETITION

If there is one phrase that terrifies an investor, this is it. If there is no competition, it is usually for several reasons: either there is no market, and therefore no competition.... or you don't know it. It is very rare that you have discovered a new market, and even if this is the case, it is still dangerous: opening a new market is very risky, it requires a lot of funds and above all, it takes a lot of time to do... because you have to "educate your clients" (another forbidden phrase). So be careful. Identify all your competition (see+).

• NOT LETTING THE INVESTOR SPEAK  

If you have secured a meeting with the investor, you should set aside at least half of the available time to answer their questions and discuss a possible deal. If you need an hour to explain your project, it is probably better to go back to your office and give it a spin... because, normally, you will need a lot of time to explain your project to the investor, You will only have 30 minutes to explain it perfectly (and another 30 minutes for questions). If you spend all your time explaining your wonderful product that is going to change the world, it is quite likely that you will never hear from him again. Practice the active listening (ver+).

• DEFENDING/JUSTIFYING ONESELF IN THE FACE OF CRITICISM

One aspect that makes a very bad impression on anyone in general, and on an investor in particular, is that you are unable to accept criticism or a view that differs from your own. Whether you agree with her or not, don't spend what little time you have proving that you know better than him and that your way is the right way. Remember that the investor, a person who sees dozens or hundreds of projects a year and who has a very broad vision of the sector, when he gives you feedback is giving you a gift... so thank him for it and tell him that you will analyse what he has told you.

• LYING TO YOU OR NOT ACKNOWLEDGING THAT YOU DON'T KNOW SOMETHING

The investor will probably ask you questions that you don't expect and that can put you out of the game... never, under any circumstances, make up the answer and above all, don't lie. First, because starting a relationship that will bind you together for a long time with a lie is a lousy idea... and second, because you are likely to get caught sooner or later, and that is forever discarded not only in the eyes of that investor but perhaps even in the eyes of others. It's better to say that it's something you don't know, but that you'll probably do x and z... and that when you get the answer you'll get in touch (a perfect excuse to follow up). A concrete case of this is lying on data such as traction figures, turnover, etc., which is a very bad idea.

• NOT BEING ABLE TO EXPLAIN WHAT YOU DO (OR SPEAK IN "KLINGON")

If you are not able to explain perfectly what you do to an investor, they will never believe that you can sell it to a client. So make an effort to define your value proposition and, above all, your business model (i.e. how you are going to make money) in a clear and perfectly understandable way. And please don't speak in Klingon (or technical). Although investors tend to have a fairly broad view of the field in which they invest, they are rarely experts in everything. It eliminates acronyms and other esoteric terms that not everyone understands.

• OVER-INFLATING THE VALUE OF YOUR COMPANY

Nowadays a startup is worth 1,000,000,000 euros the day after it opens its doors. It is not very clear why, but companies with hardly any traction and only a few customers feel confident to say that their market value is in the six figures. But sf the investor asks you why you have chosen that valuation and you are not able to explain it in a convincing and reasoned way, you will look like a novice. And, possibly, I don't dispute your valuation, but I don't come into your company. Because a high valuation means that between the round in which this investor invests and the next round, the investor must investment round (+) there is a very significant increase in the value of the company. (which will increase the value of its shares), i.e, forces the valuation of the next round to be much higher (still). So if you start with a rating that is too high, what you are doing is making the next round much more complicated and putting yourself in a bind. Don't underestimate yourself either, and put a sensible figure on it.

VALUATION. DISREGARD FOR VALUATION:

A valuation that is too high can drive investors away, while a valuation that is too low can result in the startup not receiving adequate funding. (see+ TIP).

• TRY TO AVOID AT ALL COSTS THE DILUTION (+)

The shareholder composition of your company says a lot about you, and about the way you understand your business. The gollum entrepreneurs (see+) who under no circumstances release equity and who do not share even a small percentage with other founders or key positions are not well regarded. And this also applies to anti-dilution measures and fights for shareholder crumbs. While it is of course important not to give away equity, your goal is not to get the biggest piece of your startup's pie, but to make the pie as big as possible... so spend less time talking about dilution and more on how you are going to take your startup to the next level.

• ASK FOR FUNDS TO PAY SALARIES / BUY FURNITURE / RAISE SALARIES

You should bear in mind that when an investor puts his trust in you, he does not do so in order to make you live better or to become a boss who pays your salary... It does so because it is committed to the future of your company, to helping it evolve and become what it aspires to be. To make the cake bigger. This means that you must assume and reflect that the funds an investor decides to invest in your startup will go towards improving the product and making your company bigger and more valuable. (i.e. marketing, expansion, new services...etc.) and never to working capital (paying salaries, debts to suppliers .... etc.).

• USING A CANNED PITCH OR NOT KNOWING THE INVESTOR

It says very little about you as an entrepreneur if you don't know who you are talking to, what kind of companies they invest in and how they usually work. Each presentation to investors must be personalised as much as possible to the person you are going to talk to, to their particularities, emphasising the most relevant aspects for them... etc. Because if you haven't taken the time to research the profile of the person from whom you intend to raise tens or thousands of euros.... How do you expect the investor to believe that you are going to make an effort to make your customers fall in love with you? Follow these tips to improve your PITCH (see+).

• USE SOMEONE ELSE TO DO THE PITCH

This is my view, but I know it is shared by many other investors. The CEO must be able to sell: when he talks to clients, when he talks to investors, to potential partners, to employees. And if an entrepreneur is not able to sell his project to a business angel or venture capital and needs someone to make the presentation and he remains in the background, he is not a CEO I would like to invest in. That doesn't mean that you have to give a professional speech and handle yourself with a golden pickaxe - far from it. Everyone has a hard time in front of an investor, and at the beginning there are many who shake their voice, sweat or fidget. But they have had the courage to face such an ordeal, and that is something to be appreciated. (although if you can rehearse your presentation at home until it comes out smoothly, all the better).

• NOT BEING COMMITTED

One of those points that always generate controversy... but which is important if you really want to get investment. When we say that you must be committed before talking to an investor, it is not just that you have to be 100% dedicated to the project. (although, as we said a few days ago, it is not necessary to jump into the pool head first, but once you have seen that there is water, you have to make a decision). We're talking about you or people in your environment (the famous 3F's (see+): family, friends and fools) risk some of its assets. It doesn't matter if it's €3,000... but it means that you are gambling something, just as the investor is gambling his wealth or funds. Because when things get tough (which they will) and you wonder if this madness is worth it (which it is), you won't give up at the first attempt and you will keep fighting until everything works out.

• NOT TO TALK TO HIM ABOUT HIS ROLE

I leave for last one of the most obvious, but no less common, rookie mistakes: spend all your time talking to the investor about your project and forget to answer the basic question: What's in it for me? You should never forget to explain clearly why you want him and, above all, how much money you are going to make him. That is to say, you should talk about the strategy of exit of your startup (+): how long you think he will be with you before he can leave, how you expect to make the company worth a lot more and of course, a scenario of how much he can earn (please forget about ROI and so on... he doesn't want to recover -only- the investment, but to earn a lot of money with you).

BUSINESS PLAN

ME + MONEY

An admirable plan. Mr Gibbs, but short on details.

But above all, the most important thing is that you don't worry and believe in your project. No one is born taught, and most investors are not going to take kindly to you being nervous or forgetting something. Be honest and tell them how you are going to change the world, tell them how excited you are and what a great opportunity they have to join you on an exciting and profitable journey... and the rest will happen by itself.