10 Mistakes to Avoid When Seeking Investment
The art to the perfect pitch is to know what you are selling and to sell it well. Looking for investment can be stressful and time consuming; but the more prepared you are, the quicker and more easily a deal can be done.
Here are 10 mistakes every small business owner should avoid when pitching to investors:
1. Don't Contact Every Investor you Know
When looking for an investor, do your research. Not all investors are interested in every type of business, and not all investors are willing to invest the same amount of money. Talk to your friends, your connections, industry association, local Chamber of Commerce, accountant and lawyer. Ask them for recommendations of investors and then find out everything you can about them. Find out what types of companies they have invested in previously and at what stage of business. Generally this type of information can be found by the investor’s website, but you can also make use of social media platforms like LinkedIn and Twitter to see who they are talking about and who they are talking to.
Once you have completed this research, target the one or two investors who you think best fit your business. This research will save you time from pitching to investors who are not interested, and will help to demonstrate that you have done your due diligence.
2. Don't Cause Death by PowerPoint
Find the right balance between providing enough information to interest investors, but not so much so that the investors get bored and have little time for questions. If you’vebeen given an hour to present to an investor, create enough slides to take you up to the 30 minute point and then 30 minutes for questions and answers. This should be approximately 12 to 15 slides.
And it’s not just about the number of slides. Make the slides visual as well as factual. Include results from surveys, product tests and provide any client quotes or insights you have gained. If you have a product or prototype, make sure it’s fully charged and ready to demonstrate to the investor. If you can hand out samples, do it, everyone likes free stuff.
3. Don't Get Thrown Off by Questions
Before attending the meeting, put yourself in the investors place. Think about the questions you would want ask: how large is your target market, who are your competitors, why is your product better than your competitors, how much money have you made, what are you growth plans? Also be prepared to supply alternate strategies. If an investor doesn’t agree, for example, with your marketing strategy, have another answer on the back burner.
When an investor has questions, make sure you answer them in a calm and collected manner. If they ask a question during the presentation, make sure you answer it as completely as possible. It can be tempting to brush through the answer to keep on track with your pitch, but it is important to remember that your relationship with this person is likely to be long-term; therefore your communication will be important.
4. Don't Paint an Unrealistic Picture
Just because you think the investor is looking for the next HootSuite, Lulu Lemon or Jim Pattison doesn’t mean that you should paint an unrealistic picture of where your business will be in 5 years. Be realistic and tell the investor how they are going to earn their money back and more, and in what timeframe.
Add credibility to these facts by identifying your rivals and explaining your competitive strategy.
5. Don't Think Short Term
Don’t think about getting just enough cash to get you through the next 12 to 24 months, think about your long term plans. Want to reach 500,000 downloads of your mobile app? Want to sign a big new distribution deal? Want to hire a new marketing director to raise your awareness? Plan achievable milestones and aim for them. It’s better to raise more money than you need than too little. And it will make the investment feel more attractive.
6. Don’t Get Carried Away Talking About the Product
Both you and the investor are there for one thing. Money. By agreeing to meet with you the investor is assuming that your business is viable. Of course you should spend the first few minutes explaining the product or service that you supply, but your meeting should be focussed on the financial opportunity. Spend time talking about how much money you are seeking, the percentage of the business that will represent, the number of investors you would allow and specifically what you intend to spend it on. An interested investor will ask more about the product if they need to.
7. Don’t Forget your Appearance
When attending pitch, make sure you look the part. This doesn’t have to mean a suit; but it does mean a clean professional outfit and groomed hair. It also means you have to be aware of your body language. Make sure you maintain eye contact. Don’t wring your hands or put them in your pockets. Don’t fidget from one foot to the other. The investor will make allowances for nerves, but fidget too much and you look like you’re hiding something.
8. Don’t Talk in Acronyms and Don’t Read a Script
Your presentation should be clear and concise. Don’t use acronyms the investor may not have heard of. Don’t use bad language. And don’t read off cue cards or the presentation. Instead present yourself as passionate and enthusiastic. Communicate what your idea is, why you think it’s great, and why it will be a financial success. Remember though, there’s a fine line to being opening enthusiastic and coming across as a slick salesman. Find the right balance.
9. Don’t Forget to Provide an Out
Show the investor how they’re going to make money. Provide one to three year projections. Investors don’t want to be your partner for life; they want to make their money and get out. Whether that’s selling to another company, going public or letting you stand on your own two feet.
10. Don’t Forget to Seal the Deal
So the pitch went well, you felt like you connected well with the investor, now you need to close the deal. Follow up with a phone call after the pitch. Ask the investor if they have any further questions or concerns you can help with. Ask outright if they are looking to invest. If they are, schedule a second meeting.
Be prepared to hammer out the details quickly and efficiently. The longer you take to respond to questions or requests for information, the less likely the deal will be completed. Remember, investors are not only looking at your business, but many others, and if one of those is quicker or smarter in supplying details, your deal will be replaced by someone else.
Before you Seek Investment, Get your Business Plan Reviewed
Looking to approach an investor but feel like your business plan may need tuning up? Make an appointment with one of our business advisors who can objectively review your plan, providing feedback and resources to help you for your presentation to potential lenders or investors.
Speak to our Client Services Team today at 604 775 5525 or toll free at 1 800 667 2272 to find out more information.
This article was authored by a member of the Small Business BC team. When you find yourself asking "How do I...?" Give us a call. We'd be happy to help.