As a new entrepreneur, drawing up a meticulous business plan is often just the beginning – it’s the investment that brings an idea to life. Achieving investment bridges the gap between having a great idea and building a successful business.
However, when your chance to secure that funding comes down to a short pitch effectively persuading a stranger to part with thousands of pounds (if not more), it’s no wonder that nerves can get the better of some people. It’s a pressure-filled moment, but with the right planning and preparation, there are ways to make pitching easier – for yourself and for your potential investor.
Make it personal
Sending a generic email blast to hundreds of investors will not work. It’s that simple. There’s plenty of competition between entrepreneurs and if you send out the same email over and over again, you’re hardly going to stand out from the crowd.
The best way to make contact with a potential investor is through their own network, such as a co-worker or a business owner who has already received investment from them, although not everyone will have these contacts.
The next best option is to make a personal connection and build a relationship with an investor. Make sure you show that you have done your research and tailor your initial pitch to be relevant to them; familiarise yourself with their portfolio, background and interests.
Persistence pays off
The majority of investors and fund managers will receive hundreds of emails every week from entrepreneurs vying for their support. The ones that stand out from the crowd are the determined business owners who don’t give up at the first hurdle.
Running an investment fund doesn’t leave much time for admin but when it comes to answering emails, it’s positive to see that keen entrepreneurs have followed-up if they haven’t heard back from you straight away.
On the flip side, there is a fine line between persistence and harassment. You don’t want to get ahead of yourself and annoy an investor by emailing them every day. You can decide how many attempts is too many, but as a guide, three emails over two weeks will suffice.
Tell a story
There’s often a lack of human connection when it comes to pitches – charts and spreadsheets might include some key information, but they don’t tell an investor why you’ve started your business, how you got to where you are and the lessons you’ve learnt along the way.
Effective storytelling is one of the best ways to engage an audience. If you turn your pitch into a story, you will make your business memorable, which is a big bonus because investors can sit down with multiple entrepreneurs every day. Tell the investor about you, your history and what inspired you to start your own business. Remember, they’re not just investing in your company, they’re investing in you, so it’s important they believe in you as well.
Once you get in front of a potential investor, an essential part of your pitch should be about establishing credibility and trust, both in you and what you’re doing. The best pitches will take the investor through failures as well as successes, and the lessons learnt from the experience.
Investors are effectively taking a chance on you and your business, so if you have made mistakes, can’t answer every question or your figures aren’t quite what you’d like them to be, don’t hide the truth, shy away or exaggerate the numbers.
An investor will know if you’re trying to avoid a particular line of questioning and it will lead them to wonder what else you’re not telling them. Respect their intelligence and be up front.
Understand your sector
You need to have as much information about your sector as possible. Investors will want to hear that you know your industry inside and out – what’s the market size, what’s the market value, do you have competitors, what are your competitors doing in the space, what does your audience look like, etc. These are all important questions that you should know the answer to.
Investors will expect you to be the expert in the room when it comes to your industry, even if they have invested in similar sectors, so it’s your job to educate and inform, giving them as much information as they need to help them reach a decision.
One of the most important questions business owners need to ask themselves is “how much money should I ask for”? Some entrepreneurs will start with a huge sum and overestimate how much they will actually need, while others will underestimate their requirements in fear of putting off an investor by asking for a larger sum. Neither strategy is likely to result in success.
When sizing your request, you should consider your company stage, the type of investor you’re pitching to, investment terms, what you’ll be using the funds for and the projected return on investment. It’s no easy task – if you’re greedy or change your request under pressure, you will be at risk of losing your credibility – but it’s one of the most crucial factors when it comes to securing investment.
While you should always go into a pitch with a compelling presentation, it shouldn’t take up your entire meeting. Investors love to talk, so let them. Invite them to comment and ask questions, and don’t be afraid to talk less. Pitching can often be a very formal process, but it shouldn’t feel forced or be an uncomfortable encounter for either party. A pitch should be a conversation.
You don’t have to be a sales whiz or a great public speaker to wow an investor, you just need to know your market and be able to demonstrate your value. At Fuel Ventures we specifically look for ambitious entrepreneurs with businesses that have the potential to scale globally into multibillion-pound markets.
Getting in the room is one thing – when you can successfully capture an investor’s attention, give them an air-tight business plan, tell an inspiring story and back up your numbers, you will have a truly compelling pitch.
Mark Pearson is the founder of investment fund Fuel Ventures