Joe Johnson, Ph.D.
Entrepreneur. Investor. Startup Expert.
When you’re standing before an investor, you must be able to seize the moment quickly and decisively. Investors will be able to sense if you’re at all unsure of your product or company. They may discern a slight hesitation or note your inability to answer questions with clarity and ease. You must be sure that you can deliver. Here’s what you need to know so that your pitch will be successful:
Remember that the individuals you’re pitching have almost certainly heard a great number of pitches. Moreover, they are, themselves, likely to be veteran business pitchers. In such company, there’s simply no room for improvisation – also known as “winging it.” While it may seem as though doing so will add needed spontaneity (perhaps you feel as though your business knowledge permits you to skip the work that goes into preparing a pitch), it truly does a lasting disservice to your business, your team, and your concept. Investors know where to check for hidden junk and dirt. Preparing a well-conceived pitch that is engaging, clear, and honest is the only means of attracting their interest. Knowing how to answer their questions (being able to provide knowledgeable answers should go without saying) can help you to secure the backing necessary for taking your business to the next level.
Problem You’re Solving
One engaging method of introducing your company is to tell a customer story which clearly identifies a problem and relates how your company solved it. This shouldn’t be a fictional tale. If you don’t have customers yet, don’t invent them. Share the problem that your company intends to address and exactly how your solution will fulfill your future customers’ needs. The idea that you’re proposing shouldn’t be “pie-in-the-sky,” but based on your solution’s real-world benefits. While you may want to solve world hunger or bring peace to war-torn areas, no single product or company can possibly achieve those ends, so don’t make that sort of ludicrous claim. Doing so will likely result in your audience either tuning out or tearing you apart, neither of which makes for a positive outcome.
I’ve already mentioned that you should discuss the benefits of your product or company. This is an important point. Not everyone likes to get bogged down in a feature list, no matter how innovative. They don’t want to hear that your gizmo has a large storage capacity, they want to hear that they can save twice as many photos with it than on any other device currently being marketed. That benefit is clear and it helps to relate the product to your audience. It helps them to conceptualize it in use, rather than trying to wade through a possibly dry or technical feature list.
How It Works
If the reason for your product’s or company’s existence hasn’t been clearly defined by addressing a customer problem and proposed solution, then it’s time to flesh out your company’s goals with an eye on its results to date. For companies which haven’t begun selling or which aren’t yet engaging with customers, you should highlight the projected market interest in your solution and provide quality information on your industry and target audience. This is a great time to identify competitors and differentiate your company. You should be extremely open about existing solutions and discuss how your company addresses issues that they don’t. It’s very rare that a company has no market competition and investors will view any claims along those lines with suspicion. Espousing a belief that your concept has no competition is nearly always a red flag indicating that haven’t done your homework. Competitors are almost certainly out there, so do the necessary research and find them!
Additionally, you should also provide information on your marketing and sales strategy. How will you be reaching potential customers?
Having the right team around you is essential for success. Investors want to see a well-rounded and fully-committed team in place; they strongly value experience. Highlight each individual’s role, their expected contributions, and past successes. Essentially, investors want to know why your team is the right team to bring your idea to fruition. They also want to hear your plans, if any, for adding future team members.
Making accurate projections can be tricky. Being able to provide honest, realistic projections requires research and practice. In this part of your pitch, you should highlight your historical sales and any early traction achieved. It’s a good idea to provide multiple paths to illustrate a range of possibilities, such as best-case vs. worst-case scenarios, as well as a mid-range version. Never present a “hockey stick” projection showing sales magically skyrocketing. No one will buy it and you’ll lose credibility.
You should also share any foreseeable risks and your detailed plans for addressing them.
If you’re pitching, you’re asking for something. Be clear about what you need and how you’ll use it. Many investors will want to hear just how you arrived at that number and whether you could achieve your goals with less. Make your reply as specific as possible. No one enjoys writing a blank check. Explain how you intend to use the money and detail your expected results. Some investors will also be interested to learn the amount which you and your team have personally invested. They appreciate founders who believe in and back their own companies.
Expect that potential investors will also be interested to learn when they can anticipate repayment. What’s your exit strategy? Are you aiming to take your company public? Will you be seeking a merger with or an acquisition by an established company?
Depending on where you’re pitching and the organization’s rules, you may expect questions to be posed either throughout the pitch or at the end. You may be certain that curveballs will be encountered. Dealing with them adroitly is an excellent opportunity to demonstrate your knowledge of both the industry and your company. As always, aim to be both realistic and honest. No investor will write a check if they don’t believe that you can be trusted. Your ability to provide clear and knowledgeable answers is critical.
While no rule requires that you follow this particular order for a pitch, it does comprise a well-used formula for covering all of the bases. That said, it’s important to share a bit of your company’s unique flavor so that investors can more readily understand the individuals involved.
You don’t want to sound wooden or at all unsure as you deliver your pitch. You should sound entirely natural, your passion should shine through (though not overwhelmingly), and you should be able to thoughtfully answer questions without equivocating. You absolutely must practice until this is the case. Failing to do so may make you appear to be unprepared or leave you struggling to answer questions.
The Elevator Pitch
In addition to rehearsing your longer pitch and practicing answering questions, you should create an elevator pitch by boiling down the most important, captivating elements to a sentence or two. Essentially, you want to quickly create interest so that you can secure another meeting or make an important connection. Your elevator pitch should be engaging while clearly and concisely imparting the essence of what you do. Be ready to deliver it at all times: dinner parties, networking events, and possibly even in the occasional elevator.
As you’re working through everything, remember to question your assumptions. If you don’t, an investor will. You should be able to clearly explain where you’ve learned information about your market, the industry, projections, etc. Expect to be asked about your target audience, any person or company already invested in your business, and your potential for scaling. Let investors know both the mark that you intend to make in your industry and how you intend to accomplish the feat.
About the Author
Dr. Joe Johnson is an entrepreneur, investor, and startup expert. He is the founder and principal of GoodField Investments and the GoodField Foundation (www.GoodField.com).
Joe has a Ph.D. in Entrepreneurial Leadership and an MBA. He is the author of the upcoming book on The Science of Why Most Entrepreneurs Fail and Some Succeed.
Most importantly, he is the incredibly blessed husband of one amazing wife and father of six wonderful children. He resides in Bradenton, Florida. For more information on Dr. Johnson and his work, go to www.JoeJohnson.com.