The pitch seemed to start out great. One of your mentors got you a meeting with a potential investor. You prepared for weeks. You practiced for the last few days straight. You got 10 minutes to explain why you are poised to hit it big. But halfway through the investor seemed bored. He asked a couple of questions near the end. Said "Thanks, but this isn't what we are looking for." What do you do now?
Get Feedback First
I have had the fortune to sit on some investor and advisor panels (I’m a volunteer advisor at the RIC Center in Mississauga and judge a few startup competitions (Startup Weekend Etobicoke, Global Student Entrepreneur Awards) as subject matter expert and it's taught me a few things about what investors are looking for and some of the key mistakes that entrepreneurs make when pitching their startup.
The first thing you should do is ask for feedback. Most investors are willing to let you know where your pitch stumbled, or why your idea fell flat. Don't argue with them. They have an opinion based on what you presented and their past experience. This is one of the first mistakes that entrepreneurs make: not listening to feedback, or in investor terms "not being coachable". If you are deemed “not coachable”, take a look at this Forbes article to learn how to be. If you cannot get feedback directly, then we are going to have to break-down your pitch to see where it went wrong.
Gear Your Pitch To The Investor
Sometimes people launch into a sales pitch for their product and forget that they are actually selling their business to an investor - not a customer. When making any presentation it is important to keep in mind that the audience (in this case, an investor) and the specific pain points you need to address. Investors have a few key pain points that need to be covered and the format of your pitch should answer them. Specifically, investors are looking for opportunities to make their money grow while also preventing any unnecessary downside risks. Did your pitch address that or did you just talk about how awesome your product was? Mark Suster of Upfront VC suggests there are specific slides that investors want to see in your pitch - do not forget them!
Start Your Pitch Off With An Interesting Hook
Investors hear lots of pitches and that can get boring after a while. Did you make your pitch unique? Did you have an interesting hook to start off your pitch with? If you watch Shark Tank you will see that the most interesting pitches have some kind of spectacle involved. You do not have to go to that extreme, unless you are in fact pitching on a TV show. But you do need to have something novel to get the investor engaged in your pitch right at the start. The most boring pitches I have heard have the team rattle off their names, the name of the company, and then start off with a technical description of what the product is.
Solve A Real Problem
There are lots of ideas for products that do not solve real problems. Some of them may work out (ie - the Selfie Stick.) That said, investors can pick up very quickly whether there is a real need for a product or if it is a solution in search of a problem. You may be so in love with your product that you have imagined customer use cases that do not really exist. What if you think there is a real problem but the investor does not? This is where getting real customers first to buy a real minimum viable product comes in handy. Traction trumps skepticism every time.
Solve It In a Unique Way
The investor might be on board that there is a real problem, but maybe you lost them when you described your solution. Maybe the way customers solve the problem today works good enough that the investor thinks they will not buy your product. Perhaps you have pitched the 37th ride-sharing app they have heard this month and you really do not have a better way of doing this than UBER is doing right now. Take a hard look at your product, and ask if this really is a game changer worth taking a high risk on. For a good review of why this is key watch Mark Suster’s interview with Bill Gross.
Show You Are The Right Team
Investors are not investing in ideas so much as they are in a business venture to execute on the idea. If the market conditions are ripe there will actually be lots of ideas on how to solve customer problems. Investors are on the lookout for teams who have experience with bringing solutions to market and making things happen. When you pitched, did you explain why you are that leader and that team? Did you explain what expertise and experience you and your co-founders have? Do you know where your weaknesses are? Did you pitch an idea without convincing the investor that you have someone on board to build the product, someone to figure out the supply chain issues, someone to figure out the marketing, and sales? Do you have advisors or mentors who are helping guide you? Try this Inc Article that has 50 ways of finding co-founders to give you some ideas of who to bring on.
Build A Strong Business Case
There are a number of key questions that investors will need to see if there is a business case worth investing in. It is possible that the investor may not have heard enough compelling evidence that this is an opportunity that they need to jump on, or may have perceived too much risk to take a chance. If you cannot answer these questions then you have not given the investor enough data to take a chance on you.
- What is the market size? Is there a large enough market of customers who have had the problem to create a profit pool? Where did you get your data from? Are your numbers believable?
- What is your go to market strategy? How will you find customers? How will you attract them? What is your cost of customer acquisition? What is the lifetime value of a customer?
- What is your business model? How do you plan to make money from potential customers? How long will it take for the business to start bringing in revenue?
- Who else is doing this? Who are your competitors? How are they going to market? What will they do when they start losing customers to you? What are the barriers to entry in the market? How will you protect your market after you have started selling? Do you have any patents?
- What are your financial projections? Do you have a good grasp of your revenue, cost, growth, and profit projects? Can you predict where you will spend money? Do you know what investments you will have to make to execute?
- Do you have any proof? What kind of traction do you have? Do you have a demo model? A minimum viable product? Have you had any sales so far? Has anyone else invested in your product? Have you won any awards or competitions? Are you meeting the milestones that you have set for yourselves?
Make The Right Ask
I have seen entrepreneurs pitch perfectly, then blow it right at the end by getting too greedy with their ask. Or not being greedy enough. Or not making an ask at all! The ask is an early indicator of how business savvy you are. Ask for too much money for too little equity and you will turn an investor off. Asking for too much at the wrong stage or to the wrong investor is also bad. An angel investor will expect something very different from a Venture Capital investor. You can ask for too little. I watched a pitch recently where the entrepreneur got investors excited with his grand vision only to show them a business plan making $10M over the next five years. The investors were underwhelmed, and the feedback the entrepreneur got was to go back and look at how to increase their potential performance.
Fill The Holes Then Try Again
Once you have figured out where your pitch came up short, your next step is to figure out how to fill that hole. It may be as simple as providing some additional market data, or you might have to come up with some new product features. Maybe you need to go find a few more co-founders and advisors before you pitch again. But once you have done this, pitch again you must.
If you have a mentor who you trust to give you good feedback, do a trial run on them with your updated pitch and ask them to look for holes. Once you can pitch to them without them finding any it is time to go back out to investors.
After six months reach out to the investor that you blew the pitch with the first time. If you can get another meeting show them the steps you have taken to make a better business case. Show them that you have got the ability to be coachable, take critical feedback, and then go back and get things done. The ability to execute and persevere are qualities that will go far with potential investors.
For some inspiration on what makes a great pitch for investors you can take a look at some of the best at PitchEnvy.