Rarely will investors give you deeps insights. Why would they give you their secrets? But, we'll share them with you...
“Tell me what you want, what you really, really want.”
Those lyrics from the Spice Girls’ song “Wannabe” were imprinted in our collective consciousness in 1996, but are just as relevant today when it comes to business leaders trying to figure out what investors really, really want. So how can you spice up your investor pitch to deliver the key elements they really want (and need) while avoiding the pitfalls?
First, you have to read the investor’s mind and it’s not as hard as you may think. There is a set of rules that are foundational for going from pitch through due diligence.
As an investor, running a successful angel investment network, and training over 1,000 CEO’s on the art of the pitch, I have a few insights to share. They will accelerate your fundraising efforts and help you close your rounds faster. So lets get the big issue out of the way first!
Blah, blah, blah – CUT THROUGH THE NOISE
Investors hear pitches all the time, but rarely good ones. In pitch sessions, during pitch contests, in elevators, at cocktail parties, over coffee, in an email, in the rain, on a train, in a house, in a box, with a mouse, not with a fox. Ok, ok, you get the idea. Everywhere! So how can you stand out, cut through the noise so to speak?
Boil down the essence of what your company does into one simple message that anyone can understand. That includes your Aunt and Uncle in Des Moines, not just you or someone in your field. Something memorable and repeatable; it’s all about the message.
Key 1 – don’t think investors know your industry, how you do-what-you-do, or even what you’re talking about in your pitch. They’ve made a lot of money, they must be smart, right? They certainly are, but don’t assume they know why you are asking them for cash.
The average investor hears a pitch per day on average. Couple that with the retention rate of information the average person retains, 5 percent. There’s no way they can be expected to comprehend everything you fired out in your pitch, especially if you drill down into an area that you feel confident in presenting; like your product.
Keep it high level sound bites and memorable descriptions of why you need capital. And please, don’t drill down on your company until they want that information. Even then, keep it simple and well organized. They are listening.
I HAVE GREAT ADVISORS!
So you’re keeping-up, pitching with the best of the best. You can see the attentive investors hanging on your every word. You describe your team, they are seasoned and focused. Then you dive into your key advisors. You describe them as intelligent successful people that bring you the knowledge and influence required to move an early stage company.
As many investors do, they ask you in the Q&A or privately during diligence, what your cap-table looks like? During your description, they realize your advisors have not invested – full stop. You stress they are investing time and generating relationships. “Hm-m-m,” they say to themselves, and then they politely end the conversation and offer to call you after they’ve done a little homework, the call never comes. What happened?
What does it mean?
Key 2 - It’s time you begin thinking like an investor. In simple terms, reverse your view of the deal. That means becoming a critic of your own organization. Your job as a CEO is not to defend your key points, but to pick them apart like an investor who doesn’t want to lose their money or ROI. Investors are looking for the key elements of a successful business, regardless of startup or mature companies. Proof is a great way to mitigate risk. For example, do a small, but precise customer survey that speaks to the risks inherent in a new product launch. There are always nuggets in the data. Find them and include them in your pitch – facts and data speak loudly.
Getting back to that advisory board of non-investors, it is an easy fix. Just leave the advisory section empty in your pitch deck or discussion. You may call them mentors, you may say there are a few key people that help you out, but you don’t have to put them in your deck. Don’t set yourself up.
SPEAK INVESTOR-ESE
That’s sound simple doesn’t it? In most cases they use English, you use English. Well, it’s almost that simple, once you know their language.
Key 3 - As a CEO you need to know the high-level information on each area of the company, but it’s not enough to just know it, you need to package the information the way an investor wants it. Ok, I know, there are many types of investors and they all have their own version of information delivery. However, there are key elements they all want to hear. Speaking investor means you talking with percentages and dollars throughout your pitch deck.
Think of it this way, when you read your 401K you key on percentages and dollars. If you are bored, or you’re losing money in your 401K, you might take the time to read all of the information. However, you primarily want to see what you made and what percentage of an increase it equates to in that term.
To make investor comfortable, speak their language. For example, if you are defining the opportunity in the market or problem you are solving, speak to the percentage of the market that needs your solution as well as the total dollar amount, they make up in the overall market, don’t forget to practice the investment details. That’s why the investor is there, they want to know you can quickly define the elements; equity or debt, basic terms, and valuations.
Here is bonus gem, since you have read the whole post.
Don’t think and talk, investors can hear it. Maybe they don’t realize what you’re doing, but you are speaking in long descriptive narratives. This causes pitches to slow down, Q&A session to stall and business leaders to fail at raising funds. Know your content, it should be reflexive. As a friend once told me, “Perfect practice makes perfect.” e.g., if you practice the wrong pitch model, you are preparing to fail miserably. Give investors what they really, really want, a great pitch and a company to invest in today!
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