Module 5 - Funding & investment
4. Learn how to pitch
Practice makes perfect. If you have the opportunity to pitch to investors, take it seriously by making sure you’re always prepared. You should practice your pitch and know it inside out. You should also be prepared for potential questions they may ask you. It might be intimidating but remember you know your business better than anyone else so have confidence to defend your proposition. Investors aren’t there to catch you out. If they’re interested in your business, they’ll want to make sure you’ve done your homework and have a great team and plan to execute your idea.
Here are some other useful tips:
- Keep it brief. The more concise and to the point you can be, the better. Make sure you stick to any time guidelines you’re given if these are decided by someone else.
- Be enthusiastic and share your passion. Investors want to invest in people who give everything to grow their business. If you don’t bring good vibes to the room, they won’t either.
- Know your audience: if you’re able to research your investors before you pitch to them (it’s not always the case if you’re attending pitching events), do so and tailor your pitch to them and their interests.
- Tell a story: share your big vision and sell the dream. Find a way to be relatable and tap into your audience’s emotions. They can focus on the detail once they’ve bought into the idea.
- Once you’ve found investors: create a term sheet. You can find templates for term sheets online though it may be best to work with lawyers for this (and other investment documents) as the direct financial impact of doing this wrong could be very significant for you.
- Prepare legal documents with lawyers.
- Get money rolling in! And then the real fun begins.
Creating a pitch deck & an investment teaser
A pitch deck is a brief presentation which showcases key aspects of your business plan and is used to pitch to investors (or other parties you may want something from like accelerators or certain customers for example). Broadly speaking, your pitch should not have over 15 slides and should be concise and clear. Less is more! You won’t have much time to make an impression on whoever you’re pitching to so put a lot of thought and consideration into your pitch deck and how you present it. Make it visually engaging, not a list of bullet points and text you read off the screen! Make it exciting and tell a story to engage with your audience emotionally
A good outline for your deck could be:
- What problem are you trying to solve?
- What’s your solution?
- What market are you targeting and how big is it?
- How does your product or service work, or what does it deliver?
- Who’s your competition and how are they solving the problem?
- What’s your USP?
- How do you set yourself apart from your competition?
- What traction have you gotten so far? What are your sales, existing or potential customers?
- Who’s on your team and why are they the right people for this?
- What are your financial projections for the next 3-5 years?
- What investment do you require? (or another ask if it’s not used for investment)
An investment teaser, much like a pitch deck, is often the first thing potential investors see. Usually one or two pages in length and encompassing the same sections as a pitch deck though with more detail as you won’t get a chance to present.
It’s also important to remember that you should be careful on how you approach potential investors as there are laws protecting people from scams around fraudulent investment opportunities. It’s best to check these regulations for your specific country and/or ask for legal advice.
Types of funding summary table:
| Funding type | Pros | Cons |
|---|---|---|
| Grants | Don’t have to pay it back or give away equity | Applications can be complicated and time consuming Can take a long time to be processed Usually have strict criteria to fit into |
| Crowdfunding (rewards based) | • Allows you to test people’s
appetite for your idea and get
feedback • Gives the opportunity to build a community of loyal supporters and brand ambassadors • Helps spread your brand story and create a buzz around your brand and product/service • Don’t have to pay it back or give away equity | • Requires a lot of work before, during and after the campaign • Need to have supporters lined up before the crowdfunding starts, otherwise there’s a small chance of succeeding • Crowdfunding websites charge a fee of 3-7% • Raised funds on the smaller side (average on Kickstarter 18000€) • Less suited for B2B companies |
| Crowdfunding (equity) | • Potential to raise large
amount of funds compared to
rewards-based crowdfunding • Helps spread your brand’s story and create a buzz around your brand or product/ service • Gives opportunity to build a community of loyal supporters and brand ambassadors | • Require even more work than rewards-based
crowdfunding (need to have a
business plan, financial forecast and
valuation) • Need to give away a share of the business • Need to be approved by relevant financial bodies |
| Debt | • Raise capital whilst maintaining control of your business | • Has to be paid back with interest • Hard to obtain for startups with no traction • Might require a personal guarantee |
| Equity | • Opportunity to raise larger
amounts of capital • Possibility to accelerate growth through collaborative relationships with investors | • You need to give away a share of your
business • You then have investors to manage and be accountable to (this can be good and bad) |
Investor relations
Once you have investors on board, you’ll need to figure out how you will manage them. Some investors will be more demanding than others. You might schedule regular meetings or calls with enthusiastic investors if you feel they can help you in some capacity. Overall, you’ll need to develop a regular reporting method – this might be weekly, monthly or quarterly (longer than every quarter is likely to be too long).
Top tip from entrepreneurs on managing investors
“Over-communicate rather than under-communicate until you have balance so you can properly build trust.”
-David, CEO & Co-Founder Aerofarms
“Investors aren’t your bosses and if you treat them as such, you won’t get the most out of them and you won’t be a good leader. Before choosing your investors, we screened them for mission. We had a litmus test – if an investor didn’t share a story or anecdote on how they felt about throwing food away, it was very unlikely that they would get the mission. Come up with a way to screen investors. Also understand that when an investor passes on your business, it’s not personal, they just don’t get it.”
-Saasha Celestial-One, Co-Founder at Olio