Startups are not always capable of self-funding, and hence, most early-stage startups have to generate some funding from investors by pitching to them. These startups usually prepare a pitch deck and present it to their targeted investors.
The pitch deck has around 15-20 slides, and it gives a brief idea regarding the business idea you’re working on. This pitch deck aims to showcase the product/service, technology, and team to the investors.
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What is the importance of a perfect pitch deck?
When you present a business idea to the investors, you ask them to trust you with their money based on that idea. Raising funds from these investors requires a lot of effort, and presenting a flawed pitch deck is just not acceptable. While you focus on your pitch deck, you need to be equally careful about many other things. You need to be aware of investors’ common questions, the loopholes and shortcomings of your system, your team’s capability, and the technicalities of your project.
The inexperience and lack of expertise at delivering a precise, engaging, and attractive pitch might lead the investors to lose interest in your business. Remember, your business idea could be one in a million, but if your pitch is weak, the chances of receiving a fair amount of funding from investors are slim. Suppose your pitch does not have an attention-grabbing introduction, a clear idea about your vision and mission, a solid plan to achieve your vision, and a strategic exit strategy. In that case, you might have a hard time finding the investor of your dream business.
So what can you do to refine and polish your pitch? Simple, study the common mistakes made by other startups while pitching to an investor and avoid most of them. That will leave you with a little scope of making the same mistakes while delivering your pitch. Here’s a list of the ten most common mistakes made while pitching, with a bit of advice on how to avoid them. Read on!
1. Sending your business summary and executive plan unsolicited
Some investors are starting to embrace the idea of cold pitching via emails, but not most of them entertain the idea of receiving unsolicited business plans. These investors receive thousands of emails in a day, and the chances of them reading your business summary are meager, let alone the idea of them liking it and calling you back.
So, who do they listen to? How do you get the investors to read your plan? The answer is “referrals.” Investors always listen to recommendations, referrals, and direct introductions. Contact their fellow investors, the entrepreneurs from their profile, or anyone who can connect you with your targeted investor. Let them put in the right word for you. Always prefer going in this traditional way instead of sending business plans randomly over emails.
2. Being unclear about your pitch
Investors are busy people, and even if they’re not, they like to make things quick to understand a business plan. They do not wait for detailed explanations or take the time to go through hundreds of pages explaining how your business plans work. Your pitch needs to be clear and precise.
It should include the following points:
- The problems your business is aiming to solve
- An exit strategy
- Your target market and market size
- Expenses and revenues
- Customer acquisition cost
Do not go on and on about what your product is. Be very clear and convey the message about why your work is needed? Why is it beneficial for investors to invest in your startup? Be assertive and confident, but be receptive to suggestions and ready to answer the critical questions.
3. Not explaining the product or service well enough
By well enough, we do not mean “long explanations about unnecessary details” of your product. Talk about the technicalities, how the product is better than the existing competitors, how you have reduced the cost of production, resource allocation, etc.
Give the necessary details without any fluff. Bragging or being overconfident is not welcomed much while pitching to investors. No product is perfect. Be clear even about your product/service shortcomings and explain how you plan to overcome them.
You need to highlight the problems that your product is capable of solving. Share an anecdote related to the inception of your idea to make it relatable to the audience. If you cannot delineate how your business also helps solve a problem, you will definitely walk out empty-handed.
4. Going to pitch your ideal investor first
“Practice makes perfect.” Do not rush ahead to pitch your desired investor without any prior experience of pitching. Start with the “warm” investors. Listen to their questions, prepare for those questions when they come from your ideal investor.
Learning about the process of generating funding takes time and practice. Very rarely, you will find that the investor of your dreams happily accepts your clumsy newbie pitch. Be very consistent in pitching your business ideas to new and better investors to receive timely feedback and develop your pitch accordingly. One more benefit of practicing your pitch this way is that you might find an investor willing to invest more in your business while you are just looking to practice more.
5. Having a long elevator pitch
The name itself suggests an elevator pitch should be as long as an elevator ride. 20 to 30 seconds is the time duration of an ideal elevator speech. You can take the liberty of 10-15 more seconds but not more than that.
Figure out a way to make the investors take some interest in your business through just your elevator speech. Cut out the unnecessary words, focus on the essential details, and, most importantly, state your idea’s core purpose and importance.
6. Not highlighting your team’s credentials
Investors give more importance to the team members than to the product/services in most cases. They need to know who they are working with—the idea of business matters but the people working on the idea matter more. Investors like to know if an experienced entrepreneur is in the team or has the right skillset and temperament to build the business.
They always want to know if the team possesses the ability and passion for carrying forward the idea they are presenting. The questions that you can expect from the investors are as follows:
- Who is the founder, co-founder, and core team of your startup?
- What is the collective and individual experience of the team about this domain?
- Why is the team uniquely capable of delivering the expected results?
- What motivates the team?
- How do you plan to scale up your team over a year?
- Tell us about the individuals on your team and the reasons why they should be on your team.
7. Avoiding tough questions
Always expect to get interrupted by the investors while presenting your business idea. They will stop you, and they will ask difficult questions. They will create hypothetical conditions and check if you can think on your feet.
Do not tank the entire presentation by avoiding tough questions. Do not say that you will “get back to them” when they ask you a difficult question. If you are thorough with your business idea, you must answer them then and there. If they create a hypothetical condition and you can’t answer how to deal with it, your business plan needs to be healthier.
8. Giving an incoherent marketing strategy
The business you are building must be great but are the customers going to like it? Will it get instant user adoption? Will it sell? If yes, then how?
You need to explain your marketing strategy to investors. Tell them how you will utilize the various marketing channels to gain visibility and leads in the market. Explain why your marketing strategy is logically sound and cost-effective. Tell them how you are going to utilize social media platforms like Facebook, Instagram, and Twitter. Explain to them if you are looking at search engine marketing or planning to put up sponsored posts on sites like Forbes.com.
It would help if you also had an idea about the expected outcomes of your marketing strategies. Make sure you find the loopholes in your plan before the investors do. Providing a proper, implementable, and cost-effective marketing strategy is the only way to go.
9. Not explaining your projections’ basic assumptions
Numbers are very, very important when it comes to pitching a business idea. You ask for their money, and they need to answer when they ask you about your financial projections.
One cannot precisely estimate the entire cost of starting or running a business before starting it. But one can always assume the costs logically and provide an estimate that is as near as possible to the real value. Investors will always push you for the numbers and ask you about the budgetary constraints you might face, about budget allocations, and you will have to be prepared with the numbers. Remember that a fancy pitch deck is not the only thing that will get you through the process. Be firm on numbers.
10. Not clearly explaining the use of funds
Being unclear about where and when you will utilize the investors’ funds can put them off. You need to give detailed information about your plan of using the funding along with your burn rate. This will allow them to predict the duration, after which you will need another round of funding.
Including all the costs like office space, marketing expenses, and engineering costs will give them a clear idea about your budgetary skills. It will also create an impression that you have done responsible business planning.
11. Not following up post the pitching
Remember that the investors don’t need you. You need them. You don’t have to leave the meeting without telling them about the upcoming steps in your plan. But you also have to give them the time to process your presentation. You might be hesitant to ask for feedback, but taking feedback is one of the essential parts of your pitching process. Something good always comes out of it.
Taking feedback will enable you to learn better and prepare for the next presentation. In some cases, taking feedback can also land you a deal that you were not confident about in the first place. So, whatever the decision turns out to be, whether or not you get the funding, feedback will always help you move things forward.
12. Not giving time for asking questions
Always keep a Q&A session at the end of your presentation. As mentioned earlier, do not say “I’ll get back to you” as an answer. Be prepared for the difficult questions, and give the best that you can.
In fact, having a Q&A session at the end of your presentation might highlight the topics that you missed out on while giving the presentation. Please take this as an opportunity and make the most of it.
A perfect pitch takes time to develop. Practice, hard work, and a proper understanding of everything about your business will only get you there. You might not be aware of some technicalities when you run a business, but you need to show them that their investment is going to the right place when you expect someone to invest in you.
Make sure that you avoid making any of these mistakes and deliver the best pitch you can. You will still make some mistakes, but take it as a learning experience and move on to the next pitch to make your dream business happen!