Pitching to Investors: What to Cover and How to Succeed
Turning to investors to raise capital is one way to obtain money to get a startup off the ground or take it to the next level. And as it goes with any presentation, you must be persuasive and engaging to catch the audience's attention. But how do you make the presentation memorable and leave a good first impression? What should you do to convince the investors that you're worth it? After all, you might not get a second chance.
On this page, we go over how to pitch to investors and succeed. We share the best practices that startups should make a note of if they want to stand out and get funding.
How to Prepare for Pitching to Investors
Think of your pitch to investors as a first date. You'd want to look good and make a great impression, so you should spend some time on preparation. Let's first go over the things you must take care of before "showtime". Here's what you should do to help your audience remember you and appreciate the solution's value.
Craft a Flawless Pitch Deck and Presentation Script
Supporting materials are always an integral part of any presentation. And if you plan to pitch investors, ensure you've given your slides much thought beforehand. The same applies to planning what you're going to say.
Let's start with the pitch deck. It'll serve you multiple times, i.e., you'll use it during the presentations and send the slides to the investors as a follow-up afterward. Therefore, the content of the deck has to be polished either way.
According to recent statistics, venture capital investors (short for VCs) tend to spend much less time looking through pitch decks than previously. On average, they spend 2 minutes and 42 seconds reviewing pitch decks, which is down by almost a quarter in just a year. It's no surprise, really, as investors receive thousands of applications with pitches. And this means that you're fighting against the clock to stand out and convince them.
Take the time to put together a deck that'll cover all the main points and make it easier to follow what you're presenting. Include the vitals in a concise and easy to comprehend way. Apart from an introduction to the problem, solution, and product, make sure to have information about your financials, startup equity distribution, business plan, competitor analysis, gained traction, core startup analytics, metrics, and well-researched facts. Mind that investors care about their return on investment, so your pitch has to be solid regarding your business plan and revenue streams. Not to mention that the pitch deck must make sense on its own without your comments.
There are many more tips and tricks on how to craft a standout deck, but here are several fundamentals. Follow a logical structure, have a clean layout with readable text and elements, and keep it short (say, 10 to 12 slides that are not crowded with text or packed with complicated visuals). This is not the right place for fluff, period.
Modify Your Pitch for Every Audience
It's very likely that you'll present your pitch to investors more than once. And the worst thing you can do is not have an individual approach to various investors. For example, are you turning to angel investors or VCs? Which ones in particular?
These aren't just startup terms, and you have to keep in mind that investors often have their own thesis. That is, they might be interested in funding products that fit particular niches. For instance, if they solely care about the healthcare sector, then most of the presented SaaS ideas from other categories won't make the cut. And in this case, it doesn't really matter how great or revolutionary the solution is.
Bottom line: by researching what the VCs are interested in, their priorities, portfolios, and areas of expertise, you can save yourself and the investors time. What do they prefer? Who did they already fund? Are they more inclined toward AI based startup ideas? Who are these people as individuals? Try to find answers to these questions to understand what they're searching for.
Mind that you will likely be restricted to a specific time limit (usually under 30 minutes in total, including the question-answer part). Therefore, not adjusting your pitch presentation and refining the slides based on the audience is among the common startup mistakes not to repeat during pitches.
Practice Your Pitch
Have you ever seen poorly rehearsed shows or plays? Make certain that your investor pitch is nothing like that.
A well-honed program is much easier to perceive than if the presenter forgets his lines, stumbles, goes back and forth from one idea to another, and presents some improvised mess. However, there is a balance to strive for, as a perfectly memorized speech may sound fake and emotionless, which isn't good. Take the time to practice your speech and presentation out loud for a more consistent performance and to get the feeling that you really own it.
Try Testing the Pitch on a Demo Audience
Holding several test pitch presentation rounds to non-investors can also be good practice. You'll polish up your speech, gain confidence, get feedback, and allocate areas for improvement.
Did you notice that people get distracted by a slide with a complicated graph? Did they stop listening to you because they were trying to figure out the slide content? Were some parts of your story too confusing? Use this information and your observations to improve the presentation, eliminating any weak points for when you actually pitch investors.
Think Through the Q&A Part
Which questions can come up during your pitch for investment? Most likely, you'll be asked about the potential risks and how you'll approach them. Or what your go-to-market strategy includes (for instance, whether you plan to spread the word about the product by going through a Product Hunt launch). If you're at the later stages of startup development, then you might be asked about your exit strategy plans.
Try to anticipate what people might be thinking and give answers before they even ask. Plus, brush up the answers and prepare them in advance to raise the odds of obtaining sought-after startup funding. Some startups even ask a Chief Technology Officer to tag along to answer tech questions, but if you don't have your own CTO yet, you can turn to an outsourced CTO for such assistance.
What to Include in Your Investor Pitch
Properly approaching VCs or investors to get funding is a delicate matter, as the majority of applicants get turned down. Do we have to remind you that lacking the required funds is among the fundamental causes affecting the startup failure rate?
And regardless of whether it's an on-stage investor deck presentation on demo day, a one-on-one meeting, or a video call, your presentation must be clear, meaningful, and concise. Here are the "musts" to include and the "dont's" to avoid.
Start the Pitch Explicitly
Your aim is to hook the audience early on as you pitch investors. So, make the statement with the purpose of your product brief. Preferably, limit it to a solid tagline or just one short sentence so it's clear who you are and what you're doing in one glance.
This half-minute speech should reflect the essence of your product. It's often referred to as the "elevator pitch", or what you'd say to an investor if you bumped into one in the elevator or in the hall. It isn't an easy task, but the tagline should be memorable, straightforward, and catchy, defining your vision and product core. Avoid terms that are too complicated and keep the message short.
To make an impression that lasts, the story you pitch to investors has to be memorable. Ideally, your narrative should sound like an engaging story with real and relatable examples and facts that can prove that what you're saying is true.
- Share your journey, how you came up with the tech startup idea, and the reasons why you're devoting so much time and effort to creating this product and launching a startup.
- Describe who the target audience is, which problem it's facing, and why your solution is necessary.
- Briefly explain what you're doing, how your product brings value, how it will make a difference, why the time is now, as well as what it may turn out to be in the long run.
- Bring up examples that people can picture and nod along to.
- Introduce the committed team behind the product and your background.
Being declarative with a story is an approach that can help you stand out and not sound robotic or monotonous. Be careful with jokes, though, as sometimes they end up being inappropriate and lead to the reverse effect.
Indicate Your Competitors
Claiming that your product has no competition during an investor pitch will cause suspicion. Thus, make sure you've done your homework and have thoroughly studied which competing solutions are already present on the market.
Mark how your offering is different and how its competitive advantage will lead to startup growth. Explain what makes it better at solving the problem than any of the closest competitors based on your in-depth analysis of the main players and the industry.
Emphasize and Explain the Figures
While who you are, what, and why you're building really matters, the specific numbers behind it matter more during an investor pitch. Whether you're just getting traction or aiming at startup scaling, your chances of getting rejected can snowball faster than you think if you don't have:
- realistic projections and forecasts;
- grounded estimates;
- a doable financial plan;
- meaningful user, competitor, and market research;
- facts to verify you're the real deal.
What are the impactful statistics and findings that matter? What's the bottom-up total addressable market (TAM)? Which of your metrics and numbers can demonstrate the solution's potential? Transparency and truthfulness are essential in this respect.
To be taken seriously, you need to have a track record and show proof of traction. As such, give a sneak peek at the revenue you've made, how many active users are already enjoying the product, your realistic startup valuation, or any other vitals worth sharing. You can dwell on your monetization model and profitability too.
In any event, ensure that any figures you're mentioning or the used data visualization you're showing is simple to understand. All charts, graphs, tables, etc., should have context, be quick on the uptake, and shouldn't contradict each other. Be prepared to give backup and evidence to every number or to explain how you've reached a certain calculation or estimate.
Show Your Solution
What's the likelihood that investors will strike a deal on a pitch with just an idea with no functioning product? Very low. Tangible products with proof of traction are the ones that'll be considered. So, if you've passed the POC to prototype to MVP path, briefly demonstrate what you've got.
An MVP demo can go a long way if people get to see the product in action. Or, at least, make it clear that you have something to show upon request (e.g., that you've completed the MVP development process and have a released and working product).
The benefits and product value should be your focus at this point. Try to outline why customers will care about the product and how it'll help them at solving a pain point instead of talking about the variety of future features you have on your product development roadmap.
Don't Go Into Too Much Detail
At the same time, you will most likely be tempted to explain every tiny detail and show your product from every possible angle. Being too detail-oriented is uncalled for when pitching to investors, really, for several reasons.
First of all, you have to note the tradeoff regarding the investors' attention. There's a limited capacity of things people can remember, and because VCs and investors see too many presentations, it's silly to assume that all of these peculiarities will stick.
Secondly, think of this as your chance to make a first impression. Just as it goes with first dates, some questions should be left unanswered to fuel interest in further communication in the future. You'll want them to "call you", right? Hence, cover only the key points, highlights, most important major takeaways, and add enough hooks to "land your second date" and continue the discussion to find out more. If things go well, the investors will most probably initiate a technical due diligence process later on to audit the state of the product.
Make Your Call to Action Clear
What is your funding ask? What do you ultimately want from the investors? One too often, startup founders end their presentations with cliffhangers and don't state how much investment they're seeking. Instead, formulate your ask by noting the approximate required sum, how you plan to use the obtained resources, and the estimated runway.
More Tips on How to Pitch Investors Successfully
What else should you know about if you'd like to raise the odds of securing the deal? Here are more recommendations on how to pitch to investors effectively.
Try to Connect with the Audience
How do you choose a tone that'll set a more personal and casual direction for the investment pitch discussion? Well, you may begin your presentation by actually asking what the audience would prefer you to focus on. For example, if they're interested in the total addressable market, you can devote more time to cover this area of your presentation.
Mind that investors care about the people they'll potentially deal with or work with no less than the product itself. If you want to connect with the audience, you have to be natural, sound confident, and behave authentically. Do your best to maintain a professional yet easy-going tone, as if you're talking to people you know for a very long time.
If you're not sure how to pitch for investment the right way, always remember that the clock is ticking. Therefore, getting to the point quickly is another must-do.
Being minimalistic is definitely the right direction to move in. Try not to bore your audience with too much information, so don't use too many words and simplify every explanation or concept you're trying to convey.
Boost Your Speaking Skills
Having strong oral presentation skills can make all the difference while you'll be presenting the key aspects of your product that are displayed in the deck. If you're not sure how to pitch to investors and get them to really listen to what you're saying, you have to know how to use your voice, articulate, and get the right message across. Here are some best practices:
- Don't rush, speak slowly.
- Don't mumble.
- Use your natural, calm voice.
- "Umms" and other interjections don't inspire credibility, omit these pause-fillers to sound more confident.
Mentioning other points worth noting:
- Use simple vocabulary (don't overcomplicate things by using very difficult words or unneeded jargon; don't force your listeners to make an extra effort to understand what you're trying to say, this isn't the time or place to show off your knowledge of fancy terms).
- Use shorter sentences.
- Try to avoid cliches and predictability (if people can guess what you're about to say, that isn't always good).
- Get rid of buzzwords that don't convey true meaning.
Mind Your Body Language
Natural gesticulation is important to support what you're saying while you pitch investors. Yet too many hand signals can be distracting to the audience. If you know that this is your soft spot, try to control yourself and avoid sudden excessive movements and unnecessary twitches.
Eye contact is crucial as well, even if you're communicating via a screen. Look at the people you are talking to and avoid reading off a paper or other reference material at all times.
Finishing on a Strong Note
How do you end your conversation? Summarize everything you've talked about, overviewing the highlights in a nutshell. Perhaps you can rephrase the tagline you've begun the presentation with so that the main message sticks as you pitch your idea to investors one more time.
Then move on to answering questions the investors may ask you or would like to clarify. Give confident replies going back to the value of your product. Try not to waffle on, giving useless information. And if you can't answer a hard question you weren't prepared for, give the best reply you can, noting that you'll get back with a more precise and detailed answer later on.
Wrap the conversation up by stating your call to action. Also, inquire about the next steps you should expect and the approximate timeline.
Concluding Thoughts on a Convincing Investors Pitch
Raising money is challenging, the competition is rough, and the overall low success rate of such fund-seeking presentations might not be encouraging. As a startup owner, you should be ready to go through several pitch rounds before getting a check signed. However, reaching out to truly selective investors can be an experience to learn from, so you must fine-tune your investment pitch.
Surely, there are many components forming a successful pitch. This is a strategic approach to such a time-constrained process which makes sense if you'd like to get the desired financing and results. Nonetheless, there's still a pinch of luck and a deal of preparation that can turn the tide.
As a product studio, Upsilon knows how tough fund-raising could be. However, many startups that have used our MVP development services or turned to us for IT staff augmentation services to build their products have managed to raise funds and make successful exits. So if you're in search of a trustworthy and experienced tech partner, feel free to contact us to discuss your plans!