How to pitch your entrepreneurial Idea to investors or angels

Businesswoman reporting to sales in a seminar

 

One of the most important skills any entrepreneur needs to have is the ability to pitch the product, project or idea you intend to sell. No matter if you find yourself presenting your business idea in front of a S&P 500 company board of directors or have 5 minutes with an angel investor, more often than not, their decision is going to be based on the quality of your presentation along with the people involved in the business. Here are some do’s and don’ts when presenting your ideas.

DO’s

Prepare the idea as all as yourself

Business or Angel investors will always invest in the entrepreneur not in the business plan, idea or product. The most important thing is that the investor and entrepreneur form a bond and get along. Investors will look to see if you are fast, thoughtful and efficient, and most of all sustain the project from conception to growth.

Highlight the main ideas and essentials of your business idea

Investors are more interested in the presentation of your business idea rather than the details of the business plan. If you can, in 5 minutes of less, explain your business idea, the return on investment and the growth strategy; then you are on the right track.

Have a plan from the get-go

Investors are not only interested in potential and idea of making money, but more interested in the exit strategy. You will find that many investors grow tired and bored of a project after several years and begin to seek out new opportunities after period of time. To satisfy this problem, make sure you have an exit strategy for your investors. Will you sell your shares to another entrepreneur? Sell to a venture capitalist? Franchise the business? Or take the company public?

Investigate, research and find out as much as you can about your investors

Be prepared to undertake extensive research about your potential investors in order to get a better idea of who you are dealing with. Find out who they have invested with in the past. Have their previous investments been successful or not. How much knowledge do they have about your industry? Do they have the time to give to the project and yourself?

Take care of all due diligence

Generally, it does not take more than a few months for investors to do their due diligence on your idea and make sure that it is worth their time, energy and money or it is a waste of time.

Prepare and negotiate a term sheet offer

Given your level of experience, this part of the presentation can be an extremely painful part of the whole proposal. A term sheet is a bullet-point document outlining the material terms and conditions of a business agreement. After a term sheet has been “executed”, it guides legal counsel in the preparation of a proposed “final agreement”. It then guides, but is not necessarily binding, as the signatories negotiate, usually with legal counsel, the final terms of their agreement. A term sheet implies the conditions of a business transaction, as proposed by a party. It may be either binding or non-binding.

DONT’S

Your Business idea does not solve a compelling problem

In general, individual pay for problem to be solved. It does not matter what your problem is, all you need to know is that problems sell. Investment pitches that try to sell a gadget or thing that is cool, complicated and that nobody has thought of creating; is probably, in all honesty, an idea that will not muster that much enthusiasm or interest other that curiosity from investors. If nobody has thought of or had the will to create the gadget, it is probably because no one actually needs it. You need to be able to, in a clear and concise way, articulate the problem, explain who has the problem, and why they are willing to pay have the problem solved. As mentioned above, if you cannot explain and articulate the problem, then your idea and pitch probably sucks.

Never use meaningless numbers and top-down estimates

Do not include in your pitch any verbiage or statements like “the current market has 20 gazillion people globally and if i can target a tenth of a percent of those potential customers, then we will all be multi-billionaires.” This will only make you sound and look like a complete idiot and indicate that you are lazy and have not done the leg work and undertaken the proper research and market analysis of your sales and economics. I agree you have to have big ideas and go after the big markets and be rewarded with big payoffs, however once you’ve established it’s a large, growing, profitable and attractive market, you need to shift gears to bottoms-up estimates. Do your market research and come up with conversion rates, sales cycles, etc. and provide investors with concrete and achievable estimates for growth.

Make sure you a good idea about how to make money

If you cannot clearly show exactly how your business idea will create cash flows as well why your product is worth buying, then i am sorry to tell you, but your presentation will fail and entice any potential investor to give up their cash for your idea or project. If you want to get any investment capital from any investor you need to be able to clearly show how you will be able to return the initial seed capital as well as how much profit, over and above the seed capital, you will make on that investment for the investor. All investors need to be certain that you are running a viable business. Make sure you can identify and show your cash flows, justify your margins, and understand the price of substitutes. You need to be able to build a solid financial plan in order to get the attention of any investor and to persuade them to invest in your business, idea or project.

Make sure your visual presentation looks good

If you are suing PowerPoint to present and pitch your idea to potential investors, make sure that all your slides are readable. Never land up in a situation where you have to say to your investors ‘you probably cannot read this, but this is what is written on the slide’. If you don’t have the sense to make sure that you slides and presentation are readable, then you more likely than not, do not have the sense or ability to make money for your investors from your project or business idea. Never include too many slides in your presentation. The rule of thumb is one slide for every three minutes of your presentation.

Make sure you know when to talk and when to keep quiet

Following your presentation there will a Q&A session. Make sure you answer the question and only the question. The Q&A session is not a time to pitch your idea. This is the time to be direct and concise in your answers. If your investors want to know more they will ask further questions. Investors get extremely frustrated when they have a question they want to ask you but you ramble on in your answers and they run out of time. Answer all questions directly and succinctly.

In summary, your pitch to business or angel investors should consist of the following:

  • A business plan of no more than 50 pages
  • A business plan condensed into a PowerPoint presentation of 20 slides of less
  • The PowerPoint presentation should be conduced into a 2-page document
  • A 5 minute elevator pitch

Remember if you cannot get through the pitch, you will never get the big payoff.  There is never a guarantee that you will succeed if you follow the tips and advise mentioned above, but one thing is certain, if you do any of the “dont’s”, you are destined to fail with your pitch.

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