Startup Funding Masterclass: Part Eight
When pitching to an investor a good pitch deck is very important, but so is the way you deliver the investor pitch.
If you are anything like me, then you probably have had a similar experience.
“Following a short but stressful struggle with the local video system, you stand in front of the audience and start to paraphrase the information on your slides. A bit like a newsreader, but certainly not with the same clarity or tone. 3 minutes in and the first investor is flicking through your slides. 5 minutes in and the first iPhone pops up.”
People are simply not good at giving attention nor remembering. Therefore you have to nail your investor pitch in order for your message to be received.
Luckily we have got you covered with some key tips. Let’s dive in and figure out how to nail your pitch.
This post is Part Eight in a new Masterclass series on Startup Funding. Funding is the fuel that every business runs on. Knowing the ins and outs of funding is therefore essential if you want your startup to be successful. We searched for a compact-yet-comprehensive guide on startup funding and found it nowhere, so we decided to build one ourselves. This is that essential guide.
We bring it to you in partnership with Belgium’s largest startup and scale-up accelerator Start it @KBC, supporting and promoting more than 1.000 entrepreneurs with innovative ideas and scalable business models.
– Jeroen Corthout, Co-Founder Salesflare, an easy-to-use sales CRM for small B2B companies
If you’re looking for advice on how to build up your slides, check our previous post on how to make the perfect pitch deck. 👈
If you’re ready to nail the delivery of your investor pitch, read on!
Pitch to the right person
Are you about to pitch to the right partner of your favorite VC and only looking for tips on how to nail the investor pitch?
Then go ahead and skip this section! (🤞🤞)
Are you not sure if you are pitching to the right person or did you not book any meetings yet?
Then this section is for you. 👊
Before we dive into how to nail the investor pitch, we want to give you some tips on how to pitch to the right person at the right moment.
Find the right person
The goal of pitching is to secure an investment in your startup. So there are two types of useful pitches.
Either you pitch in front of a decision maker with a potential direct impact.
Or you pitch in order to get a step closer to the above decision maker.
All the rest is either marketing, practice, or a waste of time.
In order to find the right person, we need to take another look at how venture funds and investors function.
Typically investors have a partnership structure in which investment decisions are made by a group of senior partners.
This can be a structured process with a so-called “investment committee” and teams pitching internally for permission to invest, or this can be informal with partners only requiring signoff by the managing partner. Or anything in between.
Whatever the exact process, you will have a partner who proposes his newest exciting investment opportunity to the rest of the team.
Getting the investment is thus a matter of convincing the right partner(s) to endorse your startup in the internal decision-making process.
To recognize the right partner, consider the following key considerations:
- Expertise: Partners tend to specialize in domains and sectors.
- Reputation/Seniority within the firm
Now go back to your list of possible investors and identify the most relevant partner to speak to for each of them.
Tip: Don’t be afraid to ask investors about their internal decision-making process.
Get to the right person
Now that you have identified the right partners to speak to, the question arises “how to get their attention?”.
The golden ticket is a personal introduction by a person that is respected by the partner.
In case you do not have access to someone who is willing to make this introduction, it is time to go out and pitch your way towards one.
Possible routes to take are the following:
- Investors’ network: Leverage your already existing investors for an introduction
- Advisors’ network: Use your advisors for an introduction
- Fellow founders’ network: Ask other founders to introduce you
- The same firm: Pitch your way into the introduction by speaking to other Partners, Managers or even Associates
If you get a good personal introduction, make sure to respond the right way and you will have a good chance of being invited to a pitch.
Fans of our Masterclass will know that investors are not always open for business. They might be fully invested, undergoing team changes, or closing their latest fund.
While you should certainly not spend all your days pitching to investors for which the timing is not right, you should consider doing a few (2 or 3).
They might not be able to invest, but they could have precious feedback and might be the link to that coveted introduction.
Hook your audience
Everyone has a short attention span, so you need to work for attention.
Lose your audience in the first five minutes of the investor pitch and they are probably lost forever. Kill it in the first five and you will be rewarded with attention for the next period as well.
This concept is all too clear for any form of entertainment. Ever noticed how any Bond movie starts out with a great scene?
Create a similar effect and come out guns blazing in your first five minutes. Ideal items to open up your investor pitch with are the following:
- A one-sentence explanation of what you do
- A short but powerful introduction to the opportunity
- The key facts introducing your business and the funding round (Stage of development/ traction, what you are looking to raise)
Once you have grabbed their attention, it is time to continue your pitch.
This is also a great moment to check in with your audience.
Take this moment to ask for prior experiences related to your company or figure out biases existing in your audience. This will allow you to tackle these issues head-on later in the presentation.
Don’t lose focus however and do not engage in any discussions at this point.
Tell a story in your investor pitch
People remember stories, not data.
When you do your investor pitch you should try to go beyond presenting the facts. Instead, you should try to present a clear narrative. Pitch and convince your investors of your vision by taking them through a story.
Any good story has the following three parts:
Use your story to explain your business and the data in a way that resonates emotionally.
Create the setting
First, you need to create the setting in which the struggle can occur. This is normally the shortest piece of your story.
In order to create a powerful setting, use the following tips.
Ask your audience questions
Do you know about …?
Have you ever met …?
Hands up for those that know …?
Try to trigger curiosity by asking a good question.
Put your audience in the setting
You want your audience to relive the pain of your customer that makes your solution so valuable. Include them in your story.
Excluded: I was with a group of people …
Included: Imagine being with this group of people …
Make the characters relatable
Ideally, you want your audience to relate to the main character in your story. Do this by using someone who the audience is likely to know, or by using the audience themselves.
We all know Greg, a great salesman who can talk anyone into buying what he’s selling, but terrible at following up at the right time and therefore losing out on a lot of deals ...
Convey the struggle
Now that the setting has been established, it is time for the most important part of your investor pitch’s story: the struggle.
It is now all about making the audience feel the struggle.
If you do it right, they will just want to make it stop and invest in your solution.
Make the problem familiar
This is where some homework on your audience can come in handy. Try to use something from the world of your audience.
It’s just like when you …
Place your audience in the problem
Refrain from using “I” and “we” as it distances the audience from the group living the problem. Instead, make the audience the group that suffers the issue by using words like “you”.
Use specific details
Instill confidence in your investor pitch by using details. Also, use specific examples instead of statistics as they will make the story come alive.
Generic: Our average customer spends six hours per week filling in data prior to using Salesflare.
Specific: We took out a stopwatch to follow Greg and found that he spends 5 hours and 55 minutes filling in data.
Prompt your audience to feel
The goal of the story is to add emotion to the logic. So try to prompt feelings in your audience.
Imagine spending six hours each week filling in customer data ...
Present the solution
Now that our audience is feeling the struggle, it is time to present the solution.
Let the audience create the solution by asking a question
Trigger your audience during the investor pitch to come up with your solution by themselves. People like their own ideas. Let them own it.
What if there was a way to …?
Show clearly how it alleviates the pain
Building from the struggle earlier, it should be clear how your solution alleviates the pain. Be specific and refer to the main character of your story.
Greg can now spend 5 additional hours per week on sales, representing a gain of 16% for only 360 USD per year.
Highlight the scale of the problem and potential of the solution
By now you should have convinced your investor that there is a problem and that you have a great solution.
The key missing piece is the scale of the opportunity created by your solution. A bottom-up approach works well with storytelling.
Greg is certainly not alone, in fact, [x] companies with [x] people have the same problem, representing a market opportunity of $[x]m.
Tailor your story
Custom fit your story for the audience and format of the investor pitch.
Leave enough time for Q&A
A great investor pitch is a conversation, not a presentation.
Leave enough time to engage in this conversation and limit your presentation to a third of the meeting.
The rest of the time can then be spent answering specific questions.
Decide which questions to answer in your presentation
Some questions might return in every investor pitch. Decide if they are best answered as part of the Q&A, or if you would benefit from answering them right in your presentation.
Be confident and believe in your story
From everyone in the room, you are probably the person who has spent the most time on the subject you are presenting.
This means that the investors, with their limited availability and lack of background, will have a hard time evaluating what you are saying in your investor pitch.
The first proof point of your expertise for the investor is your own confidence. You don’t convey confidence by saying that you are confident; instead, you do this by displaying it.
Definitely, do not seem nervous and apologetic. If you are building something great, you are doing the investors a favor by telling them about it and showing that you believe in it.
On the other hand, don’t be arrogant. Instead, try to come across as coachable. Recognize potential problems and be open to advice when you don’t have all the answers.
This shows investors that you are open to change where needed and that they can help you with their experience.
Ace the Q&A
Have you ever wondered how a famous CEO can stand in front of an audience and nail almost every question?
The answer is simple: a lot of preparation.
Create a Q&A file
It is hard to prepare for questions that you didn't see coming beforehand.
Therefore, the first step of preparation is creating a file that allows you to track any relevant questions that you or investors can come up with.
The format is not important; just make sure that you can maintain the file and that you don’t end up deleting questions that might be useful in the future.
In the world of finance, my former habitat, it is not uncommon that this file is a spreadsheet with Q&A grouped per topic.
Let’s take a look at some tips to become a Q&A master.
Keep track of good questions
Now that you have created a simple Q&A file, it is time to keep track of good questions. Start right from the beginning, your pitch preparation.
It is not uncommon that your brain wanders off and comes up with a great question when you are preparing your investor pitch. Do not let them go to waste, but note them down, forget about them, and continue with your preparation.
Once done, take another look at your Q&A file and see if the questions are now answered by the pitch. If not, consider fine-tuning your presentation or prepare for the questions.
Consistency goes a long way when trying to get confidence from your audience.
It is not always easy though in a free-floating format like a Q&A. This is where preparation can really provide you with an edge.
As you answer the questions beforehand, you have the opportunity to check them for consistency within the overall story.
A good answer should provide a detailed, to-the-point, and factual answer, but also reference the overall story.
Take your time
Even if you are super prepared, there might be a few questions that you didn't see coming.
It is important that you don’t feel obliged to answer immediately. There is nothing wrong with telling the investor that you need to think about it. You can also buy yourself some time, or even not answer and promise to come back later.
A great way to buy yourself some time is by asking clarifying questions.
If you don’t know, you don’t know
Sometimes buying some time is not enough and you just can’t come up with a good answer.
If that is the case, just admit it, but refrain from just saying something to get you out of the situation.
Definitely, do not lie or guess. Nothing kills your credibility like having to come back on your own words later.
As Y Combinator puts it; “there is only one preparation technique that truly matters: practice”
Not only will your delivery improve every time you pitch, but as you continue to practice you will figure out what works and what doesn’t.
Also, practice your pitch tailored to the occasion and the audience. Whether it is a demo day or a sit-down meeting, make sure that you have rehearsed your pitch in a similar setting before walking into the room.
Finally, try to pitch... a lot.
Go into every investor meeting with the goal of coming out better prepared for the next. See what sticks, which points are clearly missed, and which questions you should prepare for the next meeting.
Dare to be opportunistic and use meetings as warmups or as a sparring round before you go on to your target investor.
Ready to nail your investor pitch now? 😎
Pitching to the right audience, hooking them from the start, telling a great story ... you know how to do it now. 👊
Let us know if you have any questions left; we’ll be happy to elaborate! Also, don’t forget to tune in next week for Part Nine in our Startup Funding Masterclass: The Ultimate Term Sheet Guide!
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