Why Pitch? Pitching is a crucial part of the investment journey. Fail to pitch well and fail to learn may set you back. So be prepared!
Before we explore the pitching process, let’s consider what stage of your business life cycle you are in and therefore what the investment requirement might be. Business start ups often involve personal cash and time, as well as borrowing money from friends and family (love money). This is often referred to as bootstrapping. You might also be relying on loans and overdrafts and more than likely tapping into non-refundable grants. The pitch often comes when you are looking to start-up or more commonly looking to scale up – that is, getting your business idea off the ground, or growing quicker than your baseline and projections suggest.
So you now want to consider investment in your business? This means you are giving away part of your company and you will share ownership and therefore many of your company’s future decisions. So you need the right investment partner. Accepting investment is not like a loan when you can walk away after fulfilling payment. Investors are typically involved for a number of years until a successful buy-out or if unsuccessful, liquidation. Is your investment partner a crowdfund campaign, a sole angel investor, an angel syndicate, a family office, with or without co-investment funds, or perhaps a corporate venturing company or a venture capital fund?
Confusing, yes? Think carefully about how these types of organisations differ as your approach to them will need to differ also.
Individual angel investors and/ or angel groups are less institutionalised. They may come from a finance background, but likely to be successful entrepreneurs and will be very commercially minded. They will insist on meeting you face-to-face and you will be expected to peak their interest in your investment proposition almost immediately.
Family offices behave in a similar way to angel groups but will often require a trusted introduction and your investment proposition will most likely to be a very good fit with their investment principles.
If there are co-investment funds in the mix, these organisations may be public funded or form part of a University Fund and will again have a different approach based on alignment with their permitted sectors and criteria for investment.
Corporate venture funds is popular particularly in the technology sector, and often a good solution for early stage technology companies to bolster their balance sheet and begin growing sales and/ or advancing new technology, but it is not always right for start-up companies for a number of reasons, often due to conflicts of interests.
Venture capital funds are perhaps the toughest route for a start-up company to pursue given that they are usually focused on investing in more mature investment propositions and their process will almost certainly be more drawn out than the options previously outlined.
Crowdfunding has been popular, and has been successfully applied when a brand is strong and can attract interest from a LOT of small investors. You will normally be expected to have a minimum level of investment secured before the crowdfunding campaign, and require a good handle on PR and online marketing. In terms of pitching, you may have one chance at a first impression as your ‘pitch’ will be recorded and uploaded, and may not even meet your investors face-to-face. Innis and Gunn had a successful crowdfund campaign in 2016 and have recently launched another campaign to help build a new brewery.
There has never been a better time to consider investing. Ten years ago the choices were far more limited, and who knows what the investment landscape will look like in ten years time. For example, the UK Government’s SEIS and EIS investment schemes continue to give early stage investors plenty of down-side protection.
It is a good time for a female founder to approach potential investors. BUT the proposition still needs to be sound!
The Pitch Deck
So, onto the pitch. Critically, some investors will provide a template to use, so you will need to revise your pitch to use a format they are comfortable with. But let’s assume you are invited to pitch without any documentation provided.
Pitch decks can range from short and succinct to long and detailed, and one very important point is not to use the pitch deck you would normally make to customers as investors want to see different things!
The most common pitch deck headings include:
- The problem your business is solving
- Roadmap (showing time to achieve milestones)
- Your solution or product
- Market size and potential
- Route to market
- Competitors and points of difference
- The management team
- Historical finances and projections
- The ask – investment proposition
Additional areas that may also be covered include:
- Purpose of company – why you set up the company
- Investment and funding history
- Testimonials and PR coverage
- Board of directors and advisors
Ten Ways to Get Your Pitch Right
Let us consider your investment journey like a recipe for a chocolate cake. Each cake might look and feel different depending on the quality of ingredients, the amount of chocolate you use, how you mix it and the oven itself. And finding that magic extra ingredient to make it unique, whether a splash of whisky or spice. So the following themes are your ingredients for each pitch, use as much or as little as you need depending on who your audience is. Apparently, investors spend on average 3 mins 44 seconds on reading a pitch deck! So it’s a challenge.
And remember that extra special ingredient of patience will be needed! Extra chocolate anyone??
#1. Do your due diligence on them!
What’s the investor’s criteria, geographic and sector limitations, and track record? Who is in the room and do they have particular interests? Some investors focus on sector, some on stage of business life cycle, and others on differentiators such as social purpose and/ or gender. Weave this information into your pitch so they know you are talking to them not a generic investor. The Rose Review in 2019 highlighted only 13% of senior people on UK investment teams are woman, and almost half (48%) of investment teams have no women at all. Less than 1% of UK venture funding goes to all-female teams and just 4% of deals. So currently, you are more likely to be pitching to a male dominated investing organisation. So make sure you know who you are pitching to and that they are the right fit with your business and it is the right time to invest.
“At ESM Investments we receive 20 pitch decks per month and we estimate circa 10% had researched our organisation thoroughly for alignment with their own organisation. Alignment saves a great deal of time for both concerned. Investors often don’t have enough time to read through volumes of information in order to find that all important reason why they should contact the entrepreneur to make the next step. Being concise makes life easier for everyone. Oh and a warm introduction to the investor can be very helpful as a third party endorsement can be valuable. In summary, be aligned, be concise and try to be introduced if possible.” – Steven Morris, founder and Chair of ESM Investments Ltd
#2. Ensure your leadership team is aligned
They are investors not mediators. Most companies are led by more than one founder, so they will want to see that your personal motivations and growth plans fit the company’s vision. Is there a clear consensus on growth, diversification and exit? Get a trusted advisor to test all founders so you are able to confidently respond to any question.
“The challenge is keeping everyone on the same page. Investors ask questions and it can be a tortuous journey so being focused and aligned is important.” – Brian Williamson, award-winning entrepreneur
#3. Have a resilience coping strategy
No one said investment pitching would be easy. Remember all pitches give you exposure to experience. You might be lucky first time, but it’s unusual. It’s not about you! And even if the investors liked your pitch, they may not invest for other reasons such as timing, conflict with another investment they have or a feeling they won’t add any value as an investor. Make sure you don’t go into your second pitch deflated. Research by Harvard Professor Tom Eisenmann suggests companies need on average 40 investor meetings and over 12 weeks to close a round. A 2015 study of UK angel networks noted that only 30% of funding proposals went beyond the initial screening process, and overall, fewer than 3% attracted funding.
“My biggest challenge is the rejection and getting conflicting advice – go for investment now, no, wait two years etc. And if you have a social purpose its complicated. It’s ok and normal to be tired by it all, it can be very lonely.” – Avril Chester, Founder, Cancer Central
#4. Tell your story well
This is a story about you as well as your company. What are you passionate about? Why did you get involved in the company? Can you bring your product or service to life? Investors remember people and remember stories. Think also about props – your phone, a pen, a book, and weave it into the pitch. And how you tell it is as important as the ‘what’. And aim to be as authentic as possible otherwise it may come across as false even if it is polished.
“Be a compelling speaker. Practice. Know your story and how to tell it. Get the emotional connection.” – Russell Wardrop, The Pitchmaker
#5. What is the problem you are trying to solve?
How ambitious is it? And can you explain it succinctly? The pitch aims to complement your business plan that (hopefully) most investors will have read. But don’t assume they have! Use your time wisely. Too much detail might switch your audience off, too little looks lightweight.
“People fail to explain 1. What does the business do 2. What is the business model 3. Future strategy 4. What do you want.” – Atholl Duncan, investor
#6. Defensibility strategy
Who are tomorrows competitors? These are usually companies that do similar activity or an aspect of what you do, or new entrants that take advantage of your leg work. How can you protect what you do? What is stopping an established company creating the same thing to compete with you? It can be easy to be arrogant and state what you do can’t be replicated or done as well as you, but can you prove it?
“Understanding our competition is vital. We’ve spent a significant amount of time researching who’s there, how they’ve grown and pivoted, and why. Learning from this, we can confidently demonstrate our ability to compete in the marketplace with a product that’s both robust and ahead of the curve.” – Catherine Ann Reid, founder Life’s Back Up
#7. Show off but don’t be a show off!
Investors want credibility – how do you show you know your market and product? Using statistics and testimonials can demonstrate your expertise and knowledge. But humility goes a long way. If you are pitching to angel investors, do you want an active investor that can support or fill a gap in your skillset? So the pitch may also become a reverse interview. For this reason, some pitch decks will place the team near the beginning to confirm its importance, and show active investors an opportunity for their skillset. Having an active investor as a partner can be invaluable as they can mentor you, provide much needed contacts or simply offer advice. But equally if it is the wrong fit, it can create more difficulties for you in your business journey.
“We’ve been approached and offered investment, but its not right for us at the moment. It’s important to leverage investment at the right time and with the right partner.” Anne MacColl, founder, Saint Amans Gin
#8. Investor chemistry
The F factor. Females generally have higher Emotional Intelligence (EQ) than men, so use it! Engage, converse, make eye contact, smile. Recent research from Stanford suggested women had 8% greater expressions of interest when approaching venture capitalists than men. However, we also know that this does not translate into actual investment funding so the pitch is a real opportunity to secure investment. Research undertaken in 2016 into UK angel investing confirms that people factors are the dominant ‘deal killer’ so a focus on engaging with your potential investors is vital.
“People buy people not products. You can have the best concept or business in the world but if investors can’t engage with you they will shy away.” – Victoria Russell, coach and advisor
Brevity, clarity, impact. What is your style for pitching to an audience? Is it to focus on your slides, or is it a theatrical performance? How you pitch is as important as what you are pitching. Ensure your slides don’t have typos and has a suitable font size and colour for the presentation room. Are you able to let investors experience your product or service? Why rely on slides when you can let them see it.
“Investors only skim slide decks. Start bold ‘solving world famine’. End bold ‘save a billion lives by 2025’.” – Gary McAuslan, pharma advisor
#10. Communicate the future but don’t lose sight of reality.
It is easy to show graphs and numbers projecting growth, and investors want ambition, but can you justify it? Who are you benchmarking against, and what proof of demand is there. Make sure you are knowledgeable about market demand not just your capability to deliver. While financial information is often captured in later slides, research suggests it is the slide investors spend longest reading.
“Calculate the market potential carefully. Numbers can often be unrealistic and don’t stack up.” – Simone Barnett, sales advisor
The Pitch – Other Considerations
- Duration – how long do you have? 3 mins, 15 mins? Are you the first presenter? Do you have a separate Q&A? Is there a visible clock or do you have someone to advise when you have a minute to go?
- Projection – does your attire reflect your business? Can you position yourself so you are able to view all audience members? Are your vocals clear? Can you engage with your audience easily enough?
- Slides – are you talking and clicking? Can you talk without having to stop and revert back to your slides? Are you saying verbatim what your slides say? Are you using the right visuals? Brand? Quality photographs?
- Media – do you want to use a video clip? If so, this eats into your presentation time. Can you forward beforehand to those attending?
- The End – how you end the pitch is as important as you begin. Don’t be afraid of The Ask.
- The Questions – be prepared. Questions can vary from asking about your differentiator, your cash burn rate, your personal motivation, margins, stress test sales, bottom up projections to industry track record and exit plans.
Victoria Russell is a global consultant and coach. She has supported companies with pitch decks, pitching skills and business plans, has helped with crowdfunding preparation, and is an active member of an angel syndicate supporting members and companies, as well as investing herself. She is particularly passionate about supporting fellow female entrepreneurs. This article aims to offer an insight based on experience from herself and other investors, and does not represent the views of any investment group or intermediary.
This article was produced for participants at RBS Venturing Forward Conference, November 2019 attended by around 300 participants. Victoria facilitated the Investment Pitching session.