You may have sheer minutes to impress private investors, with success or failure hinging on how clearly and confidently you can deliver your presentation.
Mission accomplished. You have found what seems like an ideal match. You are ready for that first meeting with an angel investor where you get to present your business concept. How do you ensure your pitch is a turn on and not a turn off so that you get a second date or opportunity to close the deal with a written check in hand?
"You won't get past first base if you can't address four areas," says Mike Levinson, managing partner and co-founder of DreamIt Ventures, a Philadelphia-based accelerator program for start-ups. An angel investor or early stage venture capitalist will look at 1) is the business idea simple enough for me to understand and buy into, 2) does it solve a problem or meet a need, 3) is it a big enough market and customer base for the idea, and 4) does the entrepreneur have the right people on the team to pull it off, Levinson explains.
In essence you're selling your vision and your team. Angles tend to listen more to an exciting story about the business, while venture capitalists may pay attention mostly to the numbers, performance and traction. But given business owners generally have a window of about 15 minutes to make that initial pitch, every minute counts—and may cost money especially if you've paid to play.
"A lot of entrepreneurs object to paying fees to present to private investors. If you make a bad presentation and walk away without any deal, the cost seems high," says Mike Williams, CEO of Seattle-based Reality Gap, an online game developer. "Truth be told, if I had worked with an investment bank and paid the normal 10 percent finders fee, it would have cost $450,000 to raise $4.5 million. I paid in total $45,000 in presentation fees in the first 17 months of business, which is more like 1 percent. So, if you know what you are doing, you can raise the money you need, and it turns out to be cheaper," he explains.
Which pitching tools do you need? You should be armed with a business plan that includes a well defined marketing strategy and solid financial statements. That's a given. But what do most investors hone in on when trying to decide if your business is worth them parting with their cash, anywhere from $25,000 up to $2.5 million. How you look, the way you speak, and what information you leave out during a pitch can sink the deal.
"My whole focus is on trying to size up the entrepreneur," says private investor and real estate mogul Barbara Corcoran. "I am looking at how much wild enthusiasm do they genuinely have for their product. You can't fake passion," adds Corcoran, who is part of a panel of experts assessing potential business investments on ABC's reality program Shark Tank. Often on the TV show it is research and marketing facts and figures that attract the sharks and determine whether they bite. Here are some presentation pointers:
How to Pitch to Angel Investors: Focus on the Money
What's the No. 1 mistake entrepreneurs make during the pitch? "Rambling on about their technology or business rather than the financial opportunity—how you and the investor will make money together," says Tarby Bryant, founder of Gathering of Angels, a group of private investors and venture capitalists. For the first meeting, investors assume that the technology works. You should spend a few minutes talking about the business mechanics; an interested investor will ask for more details, says Bryant. Spell out the amounts and number of investors you are willing to sell equity.
Dig Deeper: How to Evaluate Your Company's Financial Position
How to Pitch to Angel Investors: Gauge Your Body Language
People physically judge your acumen based on how you look. "The reality is that people do judge a book by its cover," says Corcoran. Don't get written off by an investor before you even open your mouth. Beyond the obvious, which is you should be well groomed, professionally dressed, and make direct eye contact. Be careful not to wring your hands or place them in your pockets. "A certain level of nervousness is expected but if you constantly shift on your feet this sends a signal that you aren't trustworthy, maybe you are hiding something," Corcoran adds.
Dig Deeper: What Is YOUR Personal Brand?
How to Pitch to Angel Investors: Watch Your Tongue
Fancy talk doesn't work; it could backfire and create distrust. Clarity is the name of the game. The language you use to convey your concept ought to be concise. You don't want to come across as a slick talking salesman. Instead you want to display passion and enthusiasm. "I hear that a lot from investors, no passion from the entrepreneur," says Bryant. If you are just standing there and reading your presentation with no juice, no mojo, nobody gets excited and nobody writes a check." Communicate clearly here's my idea, this is my market, here's what distinguishes me from my competition, this is why it will be a financial success, and here's why you should invest in it, adds Levinson.
Dig Deeper: Close the Deal with a Flexible Communication Style
