Most entrepreneurs and companies seeking capital fail to secure funding because of their pitch. Here's how to create a compelling pitch for investors.
Approximately 95 percent of entrepreneurs and companies never receive any funds because of their pitch. How do you become part of the 5 percent that makes it to the next round?
It's not nearly as difficult as you might think. As the founder of an angel investment group, I have heard a lot of pitches – just over 1,000 now by my estimate.
And 99 percent of them are terrible and aren't going anywhere from the first word.
The big question for me is why do 5 percent actually attract investors?
The good news is that standing out and being in the top 1 percent is not difficult. You just have to tell investors a compelling story. Most companies spend 80 percent of their time talking about themselves, where they came from and their product.
Investors don't care. Investors are only interested in your product to the extent that it solves a problem. It is the problem that they are interested in and the size of the return that solving the problem can generate.
Remember, they aren't buying a product, they are buying an investment opportunity. You need to explain how your business will generate a return and how you will do it. Before drafting your pitch, know the problem you will solve and the process to make money.
Also, know that you can't fit everything into a six to 12-minute pitch. Many entrepreneurs stress out because they can't cram all of the information they would like into a six-minute pitch. If you are cramming material into your pitch, you're doing it the wrong way.
The goal of any pitch – whether it's 30 seconds or 30 minutes long – is to get to the next conversation. Tell potential investors enough of the story to get them interested in asking questions. Once they start asking questions, you have achieved your goal: You are in the next conversation preparing for the one after that.
There are some things investors look for in a pitch that you should address. The general outline looks something like this:
- A solid, attention-grabbing introduction
- The "pain" or market need
- The solution
- The addressable market size
- The business model
- Experience in the market/market validation
- Channels to market or your market strategy
- The team
- Forecast or plans
- Exit strategy
- The ask
You won't always use all of these elements in your pitch. Some pitches, depending on the investor, may require a different focus. But for most investment pitches, this is a good place to start.