There are seven deadly sins you need to learn and avoid before pitching to investors. These will enable you to present yourself and your company accurately, articulately, and properly.
If you are an entrepreneur and looking for a way to finance your business venture, you will know how tough it can be. We hope the following tips will help remind you of the things you already know.
1 – Taking things personally when pitching to investors
The majority of UK and US early-stage funds invest into around 0.5-2% of all the business plans they receive. This means that if you have trouble with rejection then regrettably, you are setting yourself up for disappointment.
You need to be ready and expecting that people with limited knowledge of your product will confidently try to convince you that there is no market for it. Take it personally and you will not get far.
2 – Poor presentation
There is no easy way to make a good quality presentation, as good is subjective and will differ from investor to investor.
However, by doing your homework and ensuring that you get the distinct items and salient points in there, in particular the competitive advantage, go to market strategy, the executive team, market problems, your solutions, business model and the financial projections. This will all be something almost every serious investor will want to know.
It is vital that you remember the absence of essential market research makes it difficult to demonstrate that you are onto something huge. Make sure you have done all you can to gather information supporting your supposition of market need and readiness.
3 – Be humble
Being arrogant or rude to early-stage investors will not get you anywhere. Even if you are smarter than them, have a better idea and know you have something world-changing on your hands. You are schmoosing, do not ever forget that.
Most early-stage investors have spectacular CVs themselves and they are not likely to be influenced by a “what would you know about it” approach. What they tend to know is good business.
It all sounds fairly obvious, but you would be amazed at how many aggrieved emails that are sent once an opportunity has been rejected. Apart from that, the early-stage investment group can be awfully close knit, so you should be ready for the different organisations you are pitching to know each other.
Additionally, do not lie about who else is looking at your pitch as you will almost definitely be discovered.
4 – Stretching or missing out the details
The two principal areas that entrepreneurs can be guilty of fudging is the estimated market size and the downplaying of competitors.
When you discuss the market size, remember the distinction between the “addressable market size“ and the “total market size.”
In addition, when stating “we have no real competitors” can be dicey, this is often tempting when there is a lack of an operationally exact company operating in the market. However, that does not mean that there are not similar organisations or alternative solutions competing for your client’s money.
Consequently, you need to know who and what your competitor is and how they do it, and how you will look to address their market share.
5 – Chasing investor money
Entrepreneurs can often fail to seize the significance of securing the finest and best-fit investors.
On numerous occasions follow-on investments have saved start-ups from impending doom. The significance of a high-quality investor cannot be understated. They have to be someone who is a good fit for your company and how you want to operate. Ideally, they need some background in the industry you are in, contacts they can put your way and so on.
Do not be tempted to accept the first offer of funding simply because it puts the money you need at your fingertips. Unscrupulous investors do exist, and they can be very hard to dislodge once they are involved.
6 – Asking for an NDA
Most, if not all early-stage investors will not sign an NDA.
At any given time they are usually looking at 3 or 4 similar deals, and they are not ready to generate legal issues, in the instance that they may fund a similar proposal a week later.
Business ideas seldom, if ever, get stolen by early-stage investors. Investors are seeking imposing and capable entrepreneurs who can develop, setup and run a successful business for them. They do not want to do it themselves. That is not the game they are in.
Any entrepreneur who seriously believes that their idea might get taken by an unprincipled investor are greatly underestimating what is required to create and setup an innovative business.
7 – Thinking that a good product will sell itself
Regardless of what you may think, early-stage investors make investment judgements first and foremost based on their first impressions.
These are both looking at your team and the possible upside of the deal for them. In other words, what they could realistically expect to see as a return from a successful business.
This in turn means they will ask themselves questions like, what is the background? Do they have a strong team? Have they got a good marketing strategy? What will they do when and if the business does not go to plan?
They ask these questions because they know business building is no straightforward process and they want to be sure that their investment will pay off.
Summary
Your relationship with an investor usually goes beyond simple ROI, and it is crucial to target selling yourself, as well as your skills and know how.
Relationships play a vital role in the early-stage investment process. Early-stage investors, alongside venture capital investors, are often involved much more in the team as opposed to the product.
Convincing an investor to put their money into your business has never been simple, so you need to give yourself every opportunity to achieve success.
Having a good understanding of these seven deadly sins will greatly increase your prospects of receiving funding. Finally, ensure you get advanced assurance for SEIS, it will make you a noticeably more appealing investment.
If your business is looking for investors or is interested in preparing for investment, please get in touch today so we can help you make your dreams into a reality.
