Many businesses get their start from friends and family or partnerships through angel investors. Meanwhile, already established companies turn to larger venture capital firms for funding to expand their businesses. No matter the stage of your business, you don’t have to give up on your dream or go at it alone.
If you’re ready to make your next move, let us provide you with some helpful tips. We have researched ways in which you can pitch your next idea to investors and come out on top.
Pitching to Investors
Use our guide below to learn the best tips for pitching your business idea to investors.
You can also read our comprehensive list of angel investors for women entrepreneurs once you're ready to pitch an idea.
How to Pitch an Idea to Friends and Family
The main point behind a pitch is that you have a well-thought-out idea. Although people will normally want to see that you have a sound business plan, remember that you are ultimately selling yourself when looking for people to fund your business, so you can execute said idea.
The good news is that once you pitch an idea, the investor can either say ‘yes’ or ‘no,’ and you’ll know what to do next. If the answer is ‘no,’ try refining your idea or coming back at a later time when you have generated some revenue. This might help your potential investor better understand your products’ or services’ income-generating potential.
What are Angel Investors?
Angel investors can be other business owners who can provide the necessary know-how and funding to help you get started with your business or help it grow. In general and according to the Small Business Administration (SBA), angel investors provide an average of $330,000 to startups or early-stage companies. This amount of money could really make a difference and get you closer to your company goals.
Who Is the Best Angel Investor for My Company?
If your plan is to secure funding for your business, there’s some information you should understand first. One of the most important strategies when looking for an angel investor should be to ask a lot of questions; the first relating to previous business experience with other companies. You should also find out how much knowledge the person has regarding your particular type of business.
If they have funded other similar companies, ask questions about success rate and what strategies worked that may be applied, if similar to your company’s situation. This will help you get some insight as to not only their experience, but how they might be able to help you. They can demonstrate their ability by assessing potential problems right off-the-cuff, pinpoint areas of growth, or highlight areas of improvement.
Experience is key when looking for angel investors. Generally, angel investors may have an already existing support system. This is crucial for addressing unknown areas of the business. A larger network can provide additional resources and valuable expertise.
What is a (Large) Venture Capital Firm?
A large venture capital firm is like an angel investor that is willing to provide more mature companies in their growing stages with a heftier sum of money. Their team may be composed of various investors or companies looking to make a higher profit from your business, and are ready to invest well into the millions of dollars.
What to Look for in a Venture Capital Firm
If you’re ready to pitch your company and create a partnership with a venture capital firm, there are some rules of thumb you might want to keep in mind. For starters, you'll want to do some research and prepare for the unexpected. This will include:
- Learning about the people you will meet
- Available fund size
- Type of companies they have worked with in the past
- The stage of the fund - to determine if there’s enough money left in the fund to go around for the year
You’ll first want to learn everything you can about the individual(s) you will be meeting with weeks or days prior to your presentation. Finding out their expertise and background can be valuable information, so you’ll know how to present your company in a relatable manner.
In addition, ask yourself if the person will be a good fit for your business, since the investor will become part of your team with the authority to change your company’s vision and direction.
Before you start your pitch, it is okay to ask what they would like your presentation to focus on the most. This will save everyone time and cover the main points, so you can honestly answer all their questions before they make a decision.
At first, get to know the people you will be presenting to and let them get a feel for who you are by relating to them in a genuine manner; keep this interaction brief and use your best judgement. After all, more than anything, you are selling yourself first and then your company.
When you’re ready for your pitch, make sure you start out with a concise (five seconds) company mission statement. Your objective here is to clearly define what it is that your company does so they can follow along and understand your business structure and needs. Perhaps, ask and answer a question regarding a need that your company, products, or services will meet in society.
You’ll want to show them how they will benefit from a partnership and what they can do for you to help you achieve your company’s envisioned goals. You should identify any roadblocks preventing you from growing your business and explain why your company, products, or services are different.
Make sure to do your best to prepare for all the questions you may be asked in relation to your business. You’ll want to clarify everything in simple language and be able to address:
- Why you are passionate about your business
- Specific numbers your company is producing
- How goals are achieved
- Why numbers are not being met (if applicable)
- Information about your employees
- Your business culture
- Your company’s weaknesses and strengths
- Performance against competitors (financial and operational)
These specific points will allow your future investors to see potential areas of improvement and envision helpful strategies from the start. You should avoid focusing on intricate details that will only lose your audience, since your pitch should be only fifteen minutes long.
Focus on the business during your pitch and avoid overselling your company. Investors are more interested in someone who has passion and enthusiasm to continue producing and growing the business; they want someone who is not only serious about what they do, but fully believe in it.
Focus On Numbers
At the end of the day, investors are interested in hearing numbers, so make sure you are familiar with expenses and pertinent business terminology: profit and loss statement (P&L), gross margin, etc.
On average, about “66 percent of angel investments fail” to provide any financial gains, so you want investors to know and care about your company as much as you do — to give your company the best fighting chance. Don’t forget to practice, practice, and practice your pitch some more, so that you can tailor it to different people and their core business values.
Remember, you’ve got this!