The first pitch to investors is in many ways the company’s first date. It is the investors first experience with you and your company. The end goal is to receive a second date. Yet, with many top notch pitches coming through it takes more than just a solid proof of concept and innovative idea to gain interest. Read more
Your pitch is often the first impression your company will make with an investor. The company can be amazing and if your pitch is still rough, your company looks rough too.
When you are in front of VCs or angel investors you know it can make or break your fundraising efforts. Combining two of the most challenging things someone can take on (entrepreneurship and public speaking) your presentation can be anywhere between enlightening and embarrassing for both you and everyone in the audience. Here are some ways I see people screw up the pitch of otherwise good startups. This isn’t an exhaustive list, just the most exhausting things I see on a regular basis.
I’m only talking about the pitch itself here; assuming that you have a company with a real product, a solid team, and traction in the market. You know what you’re asking for, your valuation is reasonable and defensible, and you don’t look like an idiot. Perhaps you even have over a million dollars in revenue and strategic partnerships in place – even those companies can mess it up. Whatever the case, you’ll probably have a short 5 -15 minutes on stage, and only a few slides (at most) to make a first impression.
Don’t blow it! Be mindful of what the audience is here for, and you have a much better shot at closing your round.
Here are 5 ways to screw up your pitch:
- Too narrow of a talk. Frame the problem you’re solving and why it’s important, and go from there. Hold off on the technical aspects – while they may be easy for you to talk about, it’s not so easy for someone who hasn’t heard of your startup to understand. Most of the time, scientific or detailed answers are best left to the Q&A, or (even better) one on one with the prospective investor after the pitch. Get out of you own head, and make sure you put your idea in context of the problem you’re solving and the ecosystem in which it operates.
- Forgetting what investors do. Keep in mind that they are investors, so they want to hear about the investment. Unfortunately, that sense in that isn’t as common as it should be. Know what investors want to accomplish, and learn from CEO’s who have raised and exited successfully before. Understand your valuation and think about the exit, because that’s how investors get paid, and many entrepreneurs forget that. Talking about the cool idea you have without any numbers to back it up might work with an unexperienced angel or a rich uncle, but it won’t work with people who know what they’re doing.
- Acting like you’re in business class. Avoid industry-specific jargon and MBA-speak. Your audience is smart, but it’s your job to make sure they can understand you. They may have already heard 20 pitches that day, with the same acronym in 3 different contexts, and once you lose their attention it’s very tough to get it back. Also, trying to appear impressive with something other than actual accomplishments may give the audience a signal that you’re not coachable, which is a big red flag. Investors also won’t care about your 50-page business plan like a marketing professor would – be concise (in large font) in your deck and save the business plan for due diligence.
- Not practicing enough. It’s okay to feel nervous about the pitch. It is not okay to ignore what makes you nervous. The single best thing you can do to reduce fear is by practicing what you’re going to say, many times over. Practice on your own, in the mirror, and in front of real people. I joined Toastmasters when my career led me to frequent public speaking, and it’s the best thing I could’ve done to improve my presentations. Public speaking wasn’t brand new to me (I had probably spoken to over 1,000 people in public at that point) but the difference I saw was dramatic. I’m still not an expert, but it was a steep and useful learning curve. Not all CEOs will have the time to join a public speaking group, but you at least need to dedicate ample time to practice.
- No feedback. Learn all that you can from your practice. Record yourself on video and watch it – it’s probably humbling. Feedback from other people is extremely valuable as well. Toastmasters does a great job of this (on the technical speaking points) and it’s one of the most best parts of the program. Rarely in life are we given honest, realistic feedback (even if it stings) so soak it up when you can. Ask knowledgeable people in the industry like angels or other CEOs to watch and critique both your business and the presentation. If you’re able to get a pitch coach to work with you through the process, be thankful and take advantage of it.
Overall, make an effort to be more aware of what your investors are looking for, and how you communicate most effectively on stage. If you’ve gotten to the point where everything else in your business is solid enough that the only thing holding it back is the pitch, consider yourself lucky. This isn’t an easy process, so learn as much as you can. Then go out, get more feedback and practice, and keep polishing!
Article by Tim Harvey, regular contributor for Rockies Venture Club blog.
This is the sixth of many blogposts in a series that I’m calling the Investor Pitch Deck Series. I am creating a post about each investor pitch slide, why it is important, the common errors, and how to communicate that you have what it takes to achieve your goals for this company.
Posts in this series
(note, this is NOT a suggested order for sides in your deck)
- #1 – The Market Slide
- #2 – Exit Strategy Slide
- #3 – The Team Slide
- #4 – The Summary Slide
- #5 – The Problem Slide
- #6 – The Customer ROI Slide
The Customer ROI Slide
The customer ROI slide is a new take on the old business model slide. By the end of this slide, your audience will feel confident that your user will use your product, and your payer will pay for it.
User: The person or business who uses your product.
Payer: The person or business who pays for your product.
With traditional consumer goods, the user and the payer are the same person. However, with many business models, the user and the payer are totally different entities and you have to acknowledge both for your investor to really GET your business.
Think about your toothpaste at home on your bathroom sinktop. It’s a simple product. It’s pretty basic. Do you buy the same kind every time you run out. Do you switch between brands? Why? Your investors will need to know why potential users will switch from whatever they are currently using (or not using) and start using your product. This value to the new user is called the User’s ROI or Return On Investment. Users are not investing capital; they are investing the energy required to make a change in their habits. Identify the User’s ROI and your venture capital or angel investors will feel much more comfortable with your product.
Now about the Payer’s ROI. It’s graduation season so I’ll use a college analogy about parents who send their kids to college. Parents are paying for the education, but not directly using it. Of course there is a benefit for Mom and Dad. By paying for college, their kid is more likely to get a degree thereby lowering the odds that they will move back into Mom and Dad’s basement bedroom. How do the parents choose which school to send their child to? The Payer’s ROI often a complicated answer when they are not also the User. The Payer wants a good deal financially, but they also want a perceived value for their dollar that has nothing to do with direct use of the product.
Other examples of payers who are not users:
- Insurance Companies
- Companies that pay for advertisements
- Companies that purchase the data collected from free software
- Governments who provide free public services
Cringe Factor #1 – You have a few paying customers and they aren’t increasing in number over time.
Why this makes us cringe: Status quo, apathy, and disuse are the reasons that products die.
How to do it right: Your investors want to be reassured that you are a realist. A realist knows that a new product, no matter how sexy, inexpensive, functional, or perfect, will not become instantly adopted by the world. There are plenty of products out there that consumers are happy to use for free, but will abandon when a financial transaction is required. If you are in revenue, you must show your potential investors a trend of increasing paying customers over time. If you cannot show this positive trend then you must have a good reason for a lack of increasing adoption. Alternatively, you can devise a way that you can monetize your product without the user having to pay.
Cringe Factor #2 – You aren’t clear about WHY people will pay for your product.
Why this makes us cringe: Investors are afraid that no one will be willing to pay for your product.
How to do it right: Make the Payer ROI very clear in your pitch. If your product is faster to install and cheaper to run than the current solution, then you have a great argument. Visually show your audience that a payer can currently expect to pay $2000 a pop for the current solution and would only have to pay $800 for yours. Further, you can install yours in minutes instead of days. We want specifics with the Payer ROI description. Beat us over the head with your Payer ROI. Don’t leave it to the imagination.
Cringe Factor #3 – You aren’t clear about WHO pays for your product.
Why this makes us cringe: Many products are free to users these days. (Thanks, Google!) So, who are you planning to get your revenue from. It’s not always obvious.
How to do it right: Even if you are selling a product directly to users, be explicit about who pays for your product. You can go one step farther and discuss your price point. It’s a lot easier for investors to picture a successful transaction when they understand whether the cost of the product is reasonable.
Example Customer ROI Slide
One of the simplest ways to show customer ROI is to create a graph of potential savings that a customer might experience if they were to switch to your product.
If your user is not going to pay for your product, you will need to describe a non-financial ROI. It’s not enough to have a better product. People need a very compelling reason to change their habits.
Article by Nicole Gravagna, PhD, Director of Operations for the Rockies Venture Club as part of a series on the elements of an investor pitch deck. The next in the series is ….
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