Almost all successful businesses start as a spontaneous idea. However, it will remain an idea if you don’t take action. One of the main tasks when building a business is finding the right investors and selling the idea to them.
How do you effectively express your idea and communicate its viability and potential impact on the market?
Pitching a business idea can be one of the most challenging steps of an entrepreneur’s journey. It’s not always easy to share a great business idea because others may not be as enthusiastic about it or may see a major flaw that you didn’t. This is why startups find creative ways to pitch their business to potential investors. Technology has been prevalent in every aspect of our lives in recent years, and tech-driven strategies can be powerful tools if used properly. However, you should never forget the human element when pitching your business to potential investors and ensure that you don’t get caught up in the nuance of new digital tools and use technology for technology’s sake.
If you are thinking of launching your business, here are some tips you can follow to ensure higher chances of success.
- Know the Different Investor Types
“Investor” is a broad term that can apply to multiple benefactor types. Here is a look at the most common investor types:
- Venture Capitalists. These investors typically provide private equity financing. In exchange for an investment, venture capitalists obtain a percentage of the company’s ownership and revenue. Venture capital firms often focus on a particular sector or industry, such as biotech, fintech or retail
- Angel Investors. Typically, angel investors are high-net-worth individuals who invest individually in companies, usually in early stages of launch. They also usually seek an equity investment in the company and may operate individually or in small groups of like-minded investors
- Personal Investors. These may be friends of family members who are interested in supporting your work. They may also seek a portion of company ownership, or provide loans or grants to support your business
- Peer-to-Peer Investors. There are many online crowdfunding platforms that allow business owners to pitch their company and seek support from the public
By understanding the potential investor audience, you can position your company for the best returns.
Venture capitalists, for example, are highly detail-oriented and will want lots of numbers. They are often writing checks to provide returns for many different investors, so are often very cautious about what investments they pursue.
Angel investors are more likely to act quickly and will want the big picture, benefits and market demands your product or service will address.
- Create Your Elevator Pitch
You’ll need to develop, rehearse and master a 30-second pitch that can identify your business idea and what makes it unique. A concise pitch lets you articulate your business idea and what makes it compelling to investors.
You’ll want your elevator pitch to be front of mind when you run into people informally who may be interested in your company and when you’re presenting your formal pitch to investors.
Your elevator pitch should contain the answers to the following:
- What the problem is that your product or service will address
- What your specific solution to the problem is
- What your core value proposition is to potential customers
- Write Your Story
You need to create a compelling story behind your company. How and why was it formed? Was there an experience or issue that spurred you to start your own business?
Sometimes, the founder’s story is an a-ha moment, when the founder sees a problem and has a solution come to mind.
The narrative of discovery and business creation is one you want to hone in on and build. The story should include:
- The audience for which your product or service will solve a problem
- The common problem or problems you will solve
- The emotional reaction that your audience will have when your company addresses a pain point they have
The story will be a way to grab and hold the attention of your investors. You want them to be intrigued by the story and see the path from the company’s development to the articulated problem and the potential solutions.
- Know Your Audience
You may be building a pitch for many different audience types. The audiences will consist of different investors or groups of investors and other decision-makers.
It’s important to understand with whom you are meeting and research your audience extensively. Learn about who they are, their current and past roles, and their interests and investment histories.
These insights can help you fine-tune your pitch. For example, if your company is in an online B2C business, and you’re pitching to investors that regularly work in that space, you can likely use acronyms and phrasing related to the business. If you’re pitching to those who do not typically operate in the space, you likely will need to provide more detail and industry context.
You want to be sure your presentation is focused on what the audience knows and needs and connects them to your work and your desired outcomes.
You want to tailor your presentation to each audience. Using the same deck for each audience is not a good idea. Understand what your audience is looking for, what it expects from potential investment companies and the standard questions your investors usually ask.
Know your audience’s interests and investment motivations and hone your pitch for each one.
- Research Your Target Audience
Understanding your target audience is an important factor to crafting an effective pitch. Be sure to great target audience personas, which are detailed descriptions of the shared characteristics of your audience members.
A target audience persona will include the demographics of your typical audience members. It will also include psychographic insights and behaviors, including the websites, social media platforms and news sources.
Demographics may include the gender, location, ages and marital status, income, profession, along with what devices they are likely to use when accessing your website.
Understanding your target audience helps you explain to investors who you are targeting and how.
Customer acquisition is an important component of your plan. You need to show investors how you’ll market your products or services to audiences, what channels you’ll use and any existing marketing strategies and results.
You can use multiple sources to build your target audience profiles, including market research, analysis of your existing customer base, and third-party brand intelligence resources.
- Explain Your Business Model
Investors want to have a clear understanding of how the business is structured and how it runs.
Your business model illustrates to your investors how your business will operate. Will you have brick-and-mortar locations, a web presence or both?
The business model also illustrates how your company operates by explaining how day-to-day operations function and who is responsible for which core functions.
- Show Your Success
Investors want to be associated with winners, both in the short and long terms. To do so, they need to know what success you’ve had to date.
Develop proven industry-standard metrics and measure your success. Success can be defined in multiple ways – sales, customers, contracts.
By setting goals and measuring progress against those goals, you can demonstrate to investors the gains you’ve made to date even before the desired cash infusion.
- Build Your Pitch Deck
Once you’ve understood your audience and created your story, it’s time to build your pitch deck.
A pitch deck is a set of slides, often made in PowerPoint or Google Slides, that tells your company’s story. Many of the elements of your pitch deck will come from the previous steps you’ve completed. Also, check this complete collection of pitch deck PowerPoint templates.”
While the content may vary for each audience, there are common components in each pitch deck, including:
- The Problem: Here is where you tell that compelling story and personalizing the issue you’ve identified
- The Solution: A brief insight into the solution and how you will promise to solve the problem
- The Features: What are the main features that make your solution so compelling? This section should begin to build investor confidence in your proposed solution
- Market: Create a picture of your customers in your audience’s mind and set the scene for the situation (market) in which you will operate
- Competitive Landscape and Risks: What are the risks that your company will face and how will you address them? Be clear about what the opportunities are for your products or services
- Revenue and Operating Model: Show your audience what the cash flow projections will be and how you plan to operate
- Traction: Show the investors what your record of success is
- Projections: Where will your company be in five years?
- Team: Show the lineup of your senior leadership, their qualifications and expertise and their roles on your team
- Fundraising: Spell out what you need from your investors and what roles you expect them to play in your company
Some companies create two versions of their pitch deck. The shorter version is used in the presentation itself while an expanded version is provided to the investors who want more details or information.
In conclusion, the human touch is irreplaceable in business interactions, but done the right way, tech-driven strategies can further enhance the methods used in launching your business. Every business is unique and will have different strategies, but there are certain patterns that help increase the likelihood of success. The tips above will help you in finding a balance between technology and the humanization of business interactions.
Ultimately, having a deep understanding of your audience, knowing your business model inside out, and showing these through a pitch deck aimed at dazzling investors with a clear ROI are key in winning investors’ trust. Once you have that, the hard questions become easy and the future of your business becomes clearer—and brighter.
