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The Perfect Pitch - the Secret to Securing Investment

This blog written by Ben Goldsmith on behalf of Club Workspace - a network of creative co-working hubs based within their business centres - is reproduced in its entirety with kind permission.  I was delivering my workshop entitled "The Perfect Pitch - the Secret to Securing Investment" in conjunction with Dreamstake - an online network to help you build great startups and get funded!

 

Ben blogs...

 

Winning Investment can be the defining moment in an entrepreneur’s life. If you secure that huge deal that enables you to spread your wings, it can really ramp your business up a level. On the other hand, if you don’t get the investment you need, you go back to square one. Therefore, you want to get your pitch for investment right, right?

 

That’s exactly why Gary Weinstein came into our Leathermarket Club Workspace venue. Gary has previously hosted a workshop about writing business plans. This week he was back, laying down the law about investment pitching. Gary came to Club as part of the Dreamstake Academy.

 

Are You Ready to Pitch?

 

Before Gary gave shared the secrets of Investment Pitching, he threw this question out to the audience: are you ready to pitch for investment? The answer to this question depends, of course, on what level of investment you’re hoping to raise. If you’re doing the ‘friends and family’ rounds, then as long as you’ve got an idea and passion, you should be prepared enough. 

 

If you’re looking to secure Angel or VC money, you need to ask yourself some questions:

 

Where is my product? If you’re a product-based business, your product needs to be at a late prototyping stage, in beta, or launched. If it’s 'just' an idea, it will be very difficult to secure big funding.

 

Am I a Ltd. Co? Limited companies will find it a lot easier to secure funding. Ltd. Companies are easier to portion off in shares, easier to value, and easier to exit than other models. Also, using a different model will make you ineligible for SEIS and EIS funding. 

 

Part One: What Problem Are You Solving

 

Gary then began to break down the perfect investment pitch into manageable sections. The first section deals with conceptualising your business idea as the solution to a problem. 

 

The first thing you have to do is describe the problem. Don’t go into huge technical detail, just use simple language such as, ‘too many people lose mobile signal in London.’ Next, explain why that problem is a problem. Even though the ‘problem’ is obvious to you, remember that it may not be so crystal clear to an angel. 

 

After you’ve made your problem as clear as can be, quote a figure. Tell your prospective investors how many people are affected by this problem. The higher number the better! Though, of course, don't massage the stats. 

 

Part Two: Your Solution to the Problem

 

Explain your business idea - your solution! - and relate it back to the problem posed. When you’re explaining your idea, use broad terminology. You want the investors to understand your offering, not to be bamboozled by it.

 

Explain why your product is a ‘unique proposition’. That does not mean that you should say that your idea is unique - far from it! If you claim to have a trailblazing, never-before-seen concept, investors are likely to run a mile. They would rather hear how you combine non-unique factors into a great, new, original package.

 

Part Three: Business Model 

 

After you’ve discussed the nuts and bolts of your idea, you can move on to the business model. Discuss how your business is monetised, run through all of the different revenue streams. Quote some figures, however keep them realistic. Although investors are, of course, looking for a big investment, they’d rather see a ‘genuine’ projection. A hockey-stick on a graph will look suspicious if you can’t back it up. 

 

If your business model is free - like Facebook or Twitter! - then you’ll need to be able to prove huge volume. Investors like to hear big numbers, and if you can’t give them big numbers with a pound sign, give them volume! Volume is genuinely impressive. 

 

Part Four: Your Competitors

 

Your competitors are hugely important to the success of your pitch. Your prospective investors know that everyone has competitors, even investors have them! If you don’t mention your competition, VCs and Angels will start to question why you have avoided the issue.

 

When you mention your competition, mention their core-offering, and explain how you do it better. If a ‘competitor’ has gone bust whilst providing a service similar to yours, be sure to mention them! If you analyse why they have failed, and explain how you will avoid their mistakes, your bravery and confidence in your idea will charm the investors. 

 

Part Five: Why are You Credible? 

 

Time to look straight into the mirror. Why are you running this business? Do you have years of experience in the industry? If not, why are you the best person for the task at hand?

 

Mention your team members, too. Why are they the best in the business? Why does each person have their job? Extraneous members of staff won’t go down well!

 

Also, if you’re involved with any mentors, coaches or accelerators, now is the time to mention them. 

 

Part Six: Funding!

 

It’s why you’re there! Mention all of the obvious things: How much money do you need? What is that money going to be spent on? Do you want all of the money in one lump sum, or is it better for the cash to come in tranches? When are you likely to turn a profit? When are your investors going to be able to exit? Always bear in mind: A lucrative exit is what they’re looking for, of course. 

 

In this section, throw in a realistic P/E (Price to Earnings) Ratio. They’re the kind of numbers that your investor will want to see.

 

Part Seven: Pitching Advice

 

Gary wound the night up by running through some pitching advice. One simple thing to remember is: less is more. This goes for what you say, and your slides. Don’t use several words when two will do. Or, to put it briefly: avoid pleonasm.

 

Be mindful of your tone of voice. Don’t be monotone, don’t be too quiet. If you’ve lost their interest, it’s very difficult to get them back. Another vocalisation-must: Don’t speak too quickly! It’s amazing how hard it is to unravel a garbled sentence.

 

Part Eight: Have Some Graphs to Hand

 

Gary recommended that you don’t include a burn rate prediction or financial projections in your presentation, as it’s difficult to give adequate time to these documents in an investment pitch. However, have all of these documents to hand. If your potential investors want to see them, it would be most impressive to be able to whip them out after several clicks of your mouse. 

 

Of course, if you are asked for a burn rate prediction, include several methods by which you would arrest burn. They downward trajectory isn’t nice to look at!

 

Thank You

 

A massive thank you to Gary Weinstein for providing another night of first class advice, and thanks, of course, to Dreamstake for inviting Gary back for his second event! We hope that all of the attendees found the event most useful, and best of luck to them with their pitches!