If you are a startup founder, you will be pitching to investors if you are raising investments. A successful pitch can go a long way. A typical VC probably listens to 500 pitches in a year and invests in only 3-5 companies. That’s just 1%.
Fundraising is brutal. Even the best founders have been rejected hundreds of times before they got funded. Even a company like Starbucks was rejected 200 times. In this post, we will cover 10 important tips you need to keep in mind while delivering the perfect pitch to your audience. If you are a founder running an early-stage startup, do take some of our assessments here.
Let’s look at the 10 startup pitching tips to improve your investor pitch.
A good flow for your startup pitch begins with the problem or the opportunity you are addressing. Then you talk about your solution to the problem i.e. the product or service that fulfills that need. Then talk about the market. Who are your target customers? Lastly, business is about how you are going to capture some of the value you are offering to your customers. So you need to demonstrate how you are going to make money from the venture. And finally, traction if you have it.
Good pitches are almost ordered problem-solution-market-business-traction.
“Not enough traction”
VCs listen to many pitches from startups. They are often looking for reasons to NOT invest in your startup. So, for no fault of yours, you will hear the sentence ‘not enough traction’. What this really means is that you haven’t convinced me that this is a good investment, at least not for the time being.
Your pitch is to persuade investors to invest in your business. So try to tell a compelling story focussing on your strengths which outweigh your weaknesses by at least 10 times. And always remember that a “no” means “not now”.
Live demo vs offline video
There is always a risk of presenting a live demo to an investor. Your product might have a technical glitch or plain not work in that crucial moment where anxious investors want to see how it works. A way to overcome this challenge is to play a recorded video of your demo instead. This way you have something to show to your audience just in case things go bad.
I’ve seen this in live demo days. When for some reason a startup founder goes offline during the pitch, the host will play a demo pitch or a demo video of the product in use.
“Why now” is an important question investors often ask and want to know. You need to highlight the current trends and how you are riding on those trends. If you demonstrate your product as a result of these trends, you take advantage of the power of scarcity because trends last only for a while, you’re highlighting an opportunity that won’t last forever. And this creates time pressure.
Trends open up markets, and investors recognize that first-movers who follow trends capture and capitalize on such markets. A good way to think of trends is to do a PESTLE analysis. Look at the different economic, social & technology trends and demonstrate how your startup is taking advantage of those trends.
Many entrepreneurs try to show different revenue streams in order to show bigger potential in the business. But it’s a wrong strategy because if you show too many ways to make money and you are currently not making any money, it might come across that you’re not exactly sure how your startup will make money.
Show one key revenue stream and stick to it. To actually make your company look more lucrative, focus on one revenue stream, and then mention how you can offer premium services that can further increase your revenue. This will make your revenue model look more lucrative. Show a base revenue model and other revenue models that can stem from that.
Show skin in the game
When you ask for money, it also helps to show what investments have already been committed and use the power of social proof. According to research, people usually do or follow what other people do. If you share that you have received funding or keen interest from other investors, particularly reputed ones, then your current audience is more likely to follow suit and invest in you as well.
If you don’t have outside money but have invested your own personal finances into the startup, share your personal investment. Personal investment in your business demonstrates your passion and commitment to making the company a success.
Tailor your pitch
How you pitch your startup will depend a lot on the audience you are pitching to. Not all pitches are created alike. We mentioned earlier that a good pitch follows the order of problem-solution-market-business-traction. But the best pitches focus on two or three of these aspects.
So, for example, if your startup is solving a complex problem, which the audience is not very familiar with, you have to spend more time explaining the problem and why it’s a big one.
Similarly, if the problem is well known, then you should focus on the solution and the unique value proposition. Show what makes you unique and why you can be more successful than the other 10 companies who might be pitching an idea similar to yours. If the problem and solution are both known, spend more time discussing the market and the business.
Focus on your strengths
A startup is a temporary organization and as the founder, you will not have answers to many of the questions investors might ask you. When pitching, focus on your strengths. If you believe that you know the problem more than others, talk about how you will win with your solution. For example, in many demo days, founders present with problems that are huge and as a part of the audience, we didn’t even know they existed.
If your strength lies in the solution and you are bringing in a groundbreaking product or technology, talk about it. Focus on the elements you know very well.
Demonstrate founder-market fit
When you pitch to your audience, you must be able to explain why you and your team are the best options to solve the problem or follow the opportunity. VCs tend to get the market right but often fail in choosing the right team to invest in.
You must be able to demonstrate credibility to your audience.
The most effective way to establish credibility is to explain your problem in a very clear and concise way. A second way to show credibility is to connect yourself to the problem either directly or indirectly. If you or someone you know suffers from the problem, share that fact. Likewise, if you’ve had exposure to the problem space through your previous work, share that exposure. A final way to establish credibility is to borrow the credibility of experts by sharing expert opinions of the problem.
Use elements of persuasion
In 2001, Harvard Business Review published a paper on persuasion that resulted from years of research amongst business leaders.
Author Jay Conger concluded that persuasive proposals have four main elements: credibility, audience value, data, and emotional connection.
Based on research and verified by successful pitches, the key ingredients of persuasion are credibility, audience value, data, and story.
Credibility is your perceived knowledge and expertise in the topic of discussion. For example, doctors have significant credibility when discussing all things related to health. Audience value means tailoring your pitch to match the requirements of the listeners. Investors as an audience, want to hear how your startup provides a high return for their investment. Data are the facts, the research, the statistics, the evidence that your solution or business plan works. The story is the emotional component, the customer anecdotes, your own experience. Data is neither meaningful nor memorable without touching the emotions.
If you like our post, do read our other articles in our Tactyqal blog.