UNDERSTANDING FINANCING
MASTERING THE PITCH
When it comes to pitching your business, the more prepared you can be the better. Just think about some of the entrepreneurs you’ve seen on Shark Tank . In almost every instance, it’s the most prepared, knowledgeable business owner who gets a deal. The good news is that if you’ve been following along with this book, you’ve already done a lot of the work. But before you can approach an investor, you must identify what you should present and how you should present it.
It may sound obvious, but the first step is to understand your business inside and out and know how to communicate it in a straightforward way. You must also be able to explain your business model in an equally concise manner. In under two minutes, the investor should understand what exactly you’re selling and how you plan to make money. In theory this may sound simple, but many entrepreneurs find it difficult to summarize their business. Test yourself by attempting to explain your business to a stranger in less than 120 seconds. You may be surprised at how challenging this exercise can be.
But remember, a successful pitch is about more than just communicating the business model. The investor must believe in more than just your product or service; she must believe in your ability to sell it. So you’ll want to demonstrate a clear understanding of your industry and target market from the start. Being able to identify competitors and trends within your market will only help gain the investor’s trust.
In the previous chapter you learned how crucial it is to know your numbers, and that’s especially true when it comes to pitching. Even if you don’t consider yourself a “numbers person,” a potential investor will want to know that you have a sound grip on your company’s financials. Don’t forget, if you do score a deal, you’ll be playing ball with the investor’s money. He’ll want to make sure you know the game.
And finally, you should have a reasonable idea of where your business is headed. Investors don’t expect you to walk in the door with a wildly
successful, hugely profitable company. If that was the case why would you be there in the first place? What they want to see is that you have a sound and realistic plan to grow the business. Anyone can start a company; what they’re looking for is vision and your ability to execute. Only once you feel like you have these necessary pieces of information in place should you think about pitching.
When it comes time to pitch your business, your information and presentation should be seamless and polished. Here are a few ways to create a better pitch:
Know your audience: Who exactly are you pitching to? Are you speaking
with a large investment firm or with a single angel investor? Maybe you’re pitching to a good family friend. While every pitch can have the same basic information, the presentation should be tailored to the audience receiving it.
Start off strong: Investors hear pitches all the time, and you don’t want to
lose them before you’ve even begun. Craft an opener that’s compelling enough to grab their attention from the start.
Keep it simple: Just because the investor may understand business
doesn’t mean she will necessarily understand your business. Avoid using a lot of industry jargon or making the business appear too complicated. A simple and concise pitch will serve you better than one that’s confusing or convoluted.
Tell a story: While it’s important to stay focused, you don’t want your
pitch to be dry. Tell a compelling story about the problem you’re trying to solve and the market opportunity you wish to seize. Data is vital and you should be able to back up your idea. But don’t underestimate the benefit of storytelling.
Humanize the experience: You started this business for a reason, right? If
you believe in what you’re doing—and you should—let that passion come through in your pitch. If you’re funny, be funny. If you’re excited, be excited (to a degree). Yes, you should be professional, but don’t be
afraid to also be human. Remember, this is a partnership, and the investor is interested in getting to know you as much as he is interested in getting to know your business.
Avoid exaggeration: If your company grossed $150,000 last year and
you’re projecting $20 million next year, you better be able to back up that forecast with data. It’s easy to rely on exaggeration and hyperbole when trying to impress an investor, but be wary of going down that path. Nobody wants to work with someone who’s out of touch. Optimism is encouraged, but only if it’s grounded in reality.
Stay on your game: There are a hundred different things that can go wrong
during a pitch: your slides don’t work, you forget an important piece of data, the investor loses interest. If something happens and you need to take a second to regroup, take it, but don’t let a hiccup ruin the entire pitch.
Be ready for questions: After your pitch is over, the investor will most
likely have a handful of follow-up questions. This is where all that knowledge about your target market, competition, and financials really comes in handy. Prepare yourself for as many different types of questions as you can. Rest assured that if there’s something about your business you’re trying to hide, the investor will eventually uncover it. It’s better to be uncertain than dishonest.
Practice, practice, practice: While the greatest pitches may appear smooth
and effortless, you can bet that plenty of work goes into their preparation. In fact, the most seamless pitches are usually the ones that require the most practice. Devote as much time as you need to fine-tuning your pitch. Practice in front of a mirror; practice in front of friends; practice in front of strangers if they’ll let you. The more work you put into the preparation, the more likely you’ll be to secure an investment.
“The best pitch isn’t a pitch. It’s an honest pre sen tation of what you are going to do, how you are going to get there, and why it matters.”