The 7 things private investors wants to see in your pitch

 

As soon as you’re eager to secure investment for your start-up it’s of the utmost importance that you show probable investors you know your business inside out and can demonstrate why they should have faith in it will become a success.

With that in mind, we’ve created a list of the 8 details any investor will want to know about your business before they will think about supporting it. Most of them should find their way into your pitch, but if they don’t this is a useful checklist to use when you’re putting your pitch and supporting notes together.

1) What problem does your idea solve

Most new products or services become popular because they make life easier for people and solve an everyday problem that is encountered by lots of consumers. Clearly outline and then detail the problem you’re solving with your new idea. Use language that explains everything succinctly, interestingly, and in an engaging way.

If your potential investors understand exactly what you’re trying to achieve with your start-up, how you’re going to make like easier for consumers – possibly even themselves – then they will be eager to hear more about it.

2) Numbers

It’s sure to come as no surprise that all investors have numbers on their minds and that’s no less true when it comes to start-ups.

Make sure you have all the financial information you need either in your head or at your fingertips.

You’ll need:

• investment to-date
• sales to-date
• projections
• profit margins
• staff costing
• income

It’s a lot of numbers, but if you’re asking someone for money then you have to be completely open with them about how much has been spent so far and what on.

3) Potential investment return

While this also falls under numbers, it’s so important that we felt it needed its own section to drive home that importance. Even so-called ‘angel’ investors aren’t really angels; they want to invest in something that will provide them with a return, or profit.

With that in mind, make sure you can illustrate with all the other numbers and details, what you think the return on investment would be. Calculate the numbers for more than one scenario:

slow growth in a challenging environment

median forecast

‘perfect backdrop’ forecast.

Most investors would plump for the lower one but it’s good to show your optimism and knowledge of what ‘could’ happen if everything works out well.

4) Market knowledge

Investors need to understand why your idea is working and/or why it will continue to work. What problem are you solving with your product or service, why is your solution better than existing ones already available, what makes it different and why will consumers spend money on it again and again?

They are all important questions you need to demonstrate that you know the answers to.

5) Marketing strategy

Include details on your marketing strategy:

• Target demographic
• How you will reach them
• Which social media platforms best suit your target audience
• Inbound, outbound or a mixture
• Show you understand marketing, how you will use it and why it will work.

6) Exactly how their investment would be spent

Be as exact as you can. If you plan to spend £45 on a new chair you can include it along with the rent you’ll pay on-premises or the wages you’re planning to pay an employee. Investors are impressed with entrepreneurs who can prove they know where every penny goes as well as being able to create a new, successful concept.

But don’t be frivolous; do your homework and ensure you’re planning to pay the right money for each piece of your start-up. If your salary estimate is too high or low then that questions your knowledge of the market you’re working in. It also raises questions over whether or not you’ll be able to afford to keep your business staffed if your estimate is too high, or be able to keep hold of staff if your estimate is too low.

7) How your market will look in 5 years and what it means for you and your business

No one can predict the future but clear projections of your business, consumer usage, and economic backdrop can combine to give a good idea of how things ‘could’ look. Show potential investors that you’re not only thinking about how your product/service and business will work now but how it could evolve and remain relevant or how it will remain relevant in its existing form.

Then, in that future scenario, how will your business work, will you still be the right person to lead your business or will it be time to find a buyer and move on to your next plan. Understanding your own abilities and how they are best used is another impressive attribute to show potential investors.

 F A Q

Q: What can I expect in my first meeting with a venture capitalist?

Venture capitalists often prefer to make investments in small companies where there is little competition from larger firms. These smaller competitors tend to be easier to manage and grow. Also, these ventures are generally cheaper to start and operate. Finally, venture capitalists like to invest in industries that are growing rapidly, so that they can reap large profits when the industry matures.

Q: Where do I find a venture capitalist?

Finding a venture capitalist is relatively easy if you live near one of the major cities.

Q: How can a venture capitalist benefit my business?

A: There are two ways that a venture capitalist benefits a company he invests in. First, by investing in the company, the venture capitalist provides additional resources to help grow the business. Second, if the company succeeds, then the venture capitalist receives a share of any profits earned from the sale of products made using those resources. 

Q: How Venture Capitalists Work.

A: The venture capital business model has been around since the early days of capitalism, but it was not until recently that we saw a major shift in how VCs operate and what they look to invest in. The traditional approach to investing had two main components: identifying promising companies with potential, and providing seed funding to help these startups get off the ground. This process worked well when there were few competitors or barriers to entry into new markets.

The typical process begins when an entrepreneur approaches a venture capitalist with his idea. The investor will ask questions such as "Why do you think this company has value?" and "Is there any way we could help?". Once the two parties agree upon terms, the investor provides seed financing through loans or equity stakes. This initial round of funding allows entrepreneurs time to develop their products while also allowing them to hire employees and build out infrastructure.

 What is pitching in business?

Pitching in business refers to presenting business ideas to another party. For example, you may pitch your startup business to potential investors or your products to potential customers. A business pitch needs to give your audience a clear understanding of your plan or goals to gain buy-in. To do this, you must gather and share relevant research or provide a compelling vision. When you pitch effectively, you can motivate and persuade your audience to follow your idea and make it a reality.

How Are Startups Funded?

Startups generally raise money via several rounds of funding:

There's a preliminary round known as bootstrapping, when the founders, their friends, and family invest in the business.

After that comes seed funding from so-called “,Angel investors” high-net-worth individuals who invest in early-stage companies.

Next, there are Series A, B, C, and D funding rounds, primarily led by venture capital firms, which invest tens to hundreds of millions of dollars into companies.

Finally, a startup may decide to become a public company and open itself up to outside money via an IPO , an acquisition by a special purpose acquisition company ( SPAC ) or a direct listing on a stock exchange. Anyone can invest in a public company, and the startup founders and early backers can sell their stakes to realize a big return on investment It's worth noting that the initial stages of startup funding are limited to those with especially large pockets, people called accredited investors, because the Securities Exchange Commission (SEC) believes that their high incomes and net worths help shield them from potential loss.

While everyone wants the more than 200,000% return Peter Thiel saw on his investment into a little startup called Facebook, the vast majority about 90% of startups fail, according to a report authored by UC Berkeley and Stanford researchers. This means early-stage investors have a very real possibility of seeing 0% returns on their investment.

Source: forbes.com