How To Be Perfectly Prepared For Your Fundraising Pitch
If you’re an entrepreneur pitching to investors to fund your start-up, the one thing that you can be certain of is that you’re going to be asked questions about everything. The horror stories of those who’ve stumbled at the first hurdle are myriad, proof that you’ve got to ensure your presentation is – quite literally – pitch perfect. We have seen hundreds of investment presentations at Envestors; here are eight of the questions we hear most often and some tips to get them right:
1. What makes you the right person to run this business?
First off, investors want to know who you and your team are. You’ll be asked about your experience, any successful exits, your motivation, your capability to execute the business plan, whether you’re planning to scale the team in the next year, your commitment… experienced business angels know that it’s all about the people and they’re going to want to know that your people are ‘right’. In other words, be prepared for all questions and ensure your answer is defensible to anybody thinking about giving you money.
2. What’s the investment opportunity?
Financials are absolutely vital. Investors are looking for one thing: the opportunity to make money. You’ll be asked about projections, the business’ current financial situation – such as how much equity or debt you have – or whether you’ll need more funding in the future. Your presentation, with shiny graphics and futuristic pie charts will be worthless if you try to fudge the financials – investors will catch you out. The lesson is that your plans have to be realistic: one angel – with nearly 40 years’ worth of investing experience – tells us that he hears so many ridiculous forecasts, he’d be more likely to see a flock of pigs flying past than for those forecasts to be met.
3. What’s so special about your product?
You’ll need to hone your sales pitch here. You’ll be required to prove that your product or service is unique, scalable – new key features or later versions for example – and you may have to provide a demonstration of how it works. It is vital that you can answer these questions in full, as your responses will be a measure of your commitment and passion.
4. Is your intellectual property watertight?
This is a crucial factor in the success of any start-up. You’ll need to be able to provide information on your copyrights, patents/patents pending and any violations of rights. They’ll also want to know how your IP was developed or whether any previous team member could have a claim to it: quite simply, your legals must be rock solid.
5. What’s the addressable market?
You’ll need to be able to paint a clear picture of the market, the percentage you realistically think you can capture and crucially the competition. Your growth potential is a key factor in attracting investment and if you can’t prove that you’re unique or offering a competitive advantage, you’re going to struggle with these questions. Likewise, a common mistake is trying to create a problem that doesn’t exist, so if you’re asked about the market, you’ll need to prove that it exists.
6. What are your sales and marketing plans?
Your investors are going to want assurances that you’ve got your route to market covered. In order to acquire and retain customers, you’ll have to demonstrate how you’re going to advertise your services, whether you’ve conducted any market research and how this publicity will help you to scale.
7. What do you see as the biggest risks to your start-up?
Risks are unavoidable in any business plan and a savvy investor will be diligent enough to ask about them: it’s essential that if you have any regulatory or product liability risks, you’re able to give a precise answer as to how you will tackle these issues.
8. What exactly is this funding round for?
Again, this proves how crucial it is to be on top of your financials. They’ll ask about your start-up’s valuation and whether you can justify it, so be prepared – unless you’ve been exceptionally conservative – for some questions here that might leave a bit of scar tissue. All it takes is a quick watch of the BBC show Dragons’ Den: it’s made very clear that if there’s one thing the dragons can’t stand, it’s a high valuation business with zero sales. They will want to know how much you’re hoping to raise, what you’re going to spend it on and how this will benefit the business, all of which must be answered in a credible – and not sugary – way.