Five tips to consider in advance of your pitch to increase your chances of securing funding
To some people this word evokes fear and anxiety at the prospect of having to lay bare their business, their dreams and ultimately themselves in the hopes of securing funding from investors. To others, however, a pitch is a relished opportunity to shine and share their passion. Irrespective of how one views the pitching process, it is a crucial part of every start-up’s journey and an essential skill that founders must develop. Yes, not every founder will need to pitch formally to investors in a Dragon’s Den-esque set up but for those who seek external investment, it is easy to get lost in the myriad of articles and videos online detailing ‘top tips’ and ‘exclusive insights.’ Without further ado, here are our top five tips to consider in advance of your pitch to increase your chances of successfully securing funding.
1. Know your business
This goes without saying but yet cannot be stressed enough. To know your business is to know your products and/or services inside and out and to know your supply chains and the risks to which they are exposed. However, founders often fail to accurately describe their businesses and their target market. Firstly, you must identify your business’ unique selling point (USP) which attracts customers and distinguishes you from actual and potential competitors. Knowing your USP will not only enable you to develop strategically and scale your business efficiently but will also allow you to better determine the nature of assistance you require and the types of investors which will suit your needs best. Secondly, you must be able to identify your target customers and serviceable addressable market–the portion of the total addressable market that your business can actually achieve. After all, your customers are your business and the more precisely you define their characteristics, the more effective your marketing, branding and product design can be, all of which will ultimately increase your chances of success. Communicating this information during your pitch will convince investors that you are knowledgeable about your business and your industry. Knowing your business is not just about knowing what you sell and at what price point. It is about understanding how the different elements of your business fit together and the landscape in which you operate in order to strengthen your ability to contemplate new areas for growth.
2. Be clear on your ask
Know exactly what you require from investors in terms of both financial and non-financial assistance. Outline the use to which their money will be put as precisely as you can by forecasting your company’s future expenses. It is also important that you clearly outline any non-financial assistance you may need. This can include tapping into the investor’s network, referrals for regulatory agencies or advice from investors on particular aspects of your business. Being clear on your ask in both these respects benefits prospective investors as it enables them to see if and where they can add value to your business or if alternatively, they can recommend you to better more suited investor. Additionally, it benefits you as a founder as it strengthens your understanding of your needs. The clearer your needs are, the more accurate your approach is and the greater your chances of success are.
3. Be bold and show why you are worthy of investment
Be bold and courageous. Pitching is all about persuasion and if you cannot convey confidence in your idea it will be nigh on impossible to convince others of its merits. A pitch is an opportunity for you to tell your story so draw upon every persuasive tactic you have in your arsenal and have your listeners hooked on every word. You do not have to be the best storyteller to be successful in this regard. You just have to own your story and tell it as it is. Let your personality come through and play to your strengths. People invest in founders just as much as they do in the business proposition and at times are driven more so by the individual. Although you are the protagonist of your story, do not forget to outline the role prospective investors will play in the development of your business. Make them a key character and leave them inspired by your prospects. To be even more engaging, demonstrate your product or service if you can as it is always better to show than to tell.
4. Listen to questions and feedback
Actively listen to questions and comments and try not to answer them whilst they are being asked. Do not be afraid to say that you do not know the answer to a particular question upfront and that you will respond in due time. To best prepare for the inevitable difficult questions, try to anticipate what could be asked before the pitch and if possible, incorporate the respective answers into your presentation in the first place. It is also important to note that the manner in which you respond to negative feedback in particular can set the tone for any future relationships you may have with the investors present in the room and others within the wider network. You need to be able to take on constructive feedback and not be dismissive of comments made by others. Not every investor you pitch to will love your idea, and offer you funding there and then. It is important to acknowledge the information communicated to you.
5. Raise capital at the right time
Regardless of how detailed and aesthetic your pitch deck is, how knowledgeable you are or how scalable your business is, the perfect pitch at the wrong time is likely to fail. There are two things to note in this respect. Firstly, the importance of being resourceful. Bootstrapping is a severely underrated skill. Try to invest your own money into your business and gain traction on the back of your own resources before seeking external investment. Although certain businesses are particularly capex (capital expenditure) intensive and thus may require external funding early on, being self-sufficient demonstrates an ability to operate efficiently and putting your own money into your business demonstrates your belief in its prospects. This appeals greatly to investors as it indicates that your business will likely produce considerable returns on their investment. Secondly, understanding what you as an individual need from investors. The trajectory of a founder’s personal development is closely linked to that of their business. Given that certain investments are not just financial but involve a degree of involvement from investors into the running of the business, you must understand whether you are ready for such external involvement in what has since been a personal endeavour. Though seemingly trivial, the success (or failure) of your partnership with investors can define how you as an individual and correspondingly your business as an entity are regarded by others in the wider ecosystem.
Please refer to the recorded Cornerstone Partners webinar on when to raise capital for a more detailed discussion on this topic.
Written by Jennifer Kanu (intern)