Dig Deeper: Finding the Perfect Pitch
How to Choose Potential Investors
Research Potential Partners. Potential investors can range from family members and friends to venture capitalists or angel investors. "You should choose an investor as carefully as you choose a spouse," Berry says. "Look for investors who will be good long-term partners. They have to be comfortable with you and you with them." That's because you are going to be spending a lot of time with your investors if they become financial partners in your business. There are meetings, reports, and reviews. They may also seek new management if you don't do a good job meeting your goals.
"If you want partners who will just give you money and leave you alone, search for investors who do that -- and good luck with that," Berry says. "Very few people write checks to businesses and then forget about them."
In today's economy, you have to explore many different avenues before you secure financing. On one hand, venture capitalists frown upon businesses that blanket potential investors with their business plans. "Do not under any circumstances shower potential investors with mass print or electronic mailings," Berry says. "They'll know you did, and it won't work. Instead, focus on a few, well-researched targets." On the other hand, if you only approach one or two potential investors, you may have to wait a long time before hearing back. "You're probably pretty quickly going to see that most of them are going to say, 'No, this won't work today. Our funding is not there for this now," Pinson says.
Here are some tips on finding the right investors to approach:
• Who you target is very important. Pinson advises that you research which investors tend to know your industry well and invest in companies in your industry. She says you may want to start by approaching those investors with your plan.
• It's not always good to go it alone. "It's good to find intermediaries," Pinson says. Sometimes intermediaries can help you connect with the right investors. Join the chamber of commerce, talk to business professors, and search the Web. The U.S. Small Business Administration (SBA) sponsors about 1,000 Small Business Development Centers (SBDCs) around the country, most often hosted by universities, colleges, or state economic development agencies. SBDCs are designed to help entrepreneurs start, finance and run their businesses. Their counselors may know potential investors and may be able to introduce you.
• Seek compatibility. You should want investors who will become partners in building the business as well as funding it. Do your research and ask the right questions. "Do they know people who can help you? Are they familiar with your business area? Do they share your long-term goals for growth and eventual exit?" says Berry. "Are they good partners? Do the people in companies they've invested in regret it?"
Dig Deeper: Five Tips for Selecting an Investment Partner
Pitch and Presentation Tips
It's important to be versatile and to be able to deliver your pitch in a variety of different media. These days, a growing number of businesses take to YouTube to deliver their business pitch. Some angel investors like Berry have taken to reviewing some of the YouTube pitches before scheduling a face-to-face meeting with an entrepreneur. "It's a new world," Berry says. "That lets me see the people as they talk about their business and how they manage communication. It gives you more access to information faster."
Berry's new pitch website suggests entrepreneurs adhere to the following five steps to deliver the perfect pitch:
• Be specific and concise. Know what you want to say. Know your business plan. Pick out what matters most.
• Sell yourself. This is the "why me" section. Talk about your skills, background, vision and why you can make it work.
• Sell your offering. Berry calls this the "heart" of the pitch. What need does your business fill? Why is anyone going to buy your product or service?
• Close the deal. This is where you put your salesman's cap on. Make sure to make a strong finish.
• Nail your delivery. Practice makes perfect. So practice your pitch and presentation in front of family, friends, business associates, etc. and get feedback on how to improve it.
You also need to avoid some key pitfalls.
• Don't memorize the presentation. "Know it like the back of your hand and be able to give it fluidly, using different words each time," Berry says.
• Avoid PowerPoint faux pas. The formal pitch is usually accompanied by a presentation, most often a slideshow, which you should also hand out to attendees at the pitch presentation. "Avoid bad PowerPoint like the plague," Berry advises.
• Keep in mind what's in it for investors. "Describe what benefits you offer to specific investors and how that will make your investors money," Berry advises.
Stay Flexible. In the text books, the standard process is that you make an elevator speech that produces a request to see your business plan, followed by an opportunity to pitch, which ends with investors offering you funding. However, Berry says, "The real world is not nearly as orderly as this would imply." Follow up with the investor but remember that the relationship is only going to work if it is mutually advantageous. If they want to invest, make sure you work with an attorney you really trust.
In the end, you should think of the pitch and present process as a filter. "If nobody wants to invest in your business, yes, you might be the true visionary in a world of lesser beings, but -- no disrespect intended -- it's much more likely that the world is delivering you an important message," Berry says. "Maybe you need to revise your plan, go back to the drawing board and improve it. On the other hand, maybe this idea has fatal flaws and isn't going to work, and your failure to raise money has saved you a lot of heartache."
Dig Deeper: How to Improve Your Presentation Skills
Presenting Your Business Plan: Additional Resources
The Funded
Research on histories and lists of different high-end investors.
Small Business Development Centers (SBCC)
Provides management assistance to current and prospective small business owners.
Bplans Business Pitch
Author Tim Berry's website dedicated to pitching your business plan.
How to Change the World: The 10-20-30 Rule of PowerPoint
Blog entry on pitching by venture capitalist Guy Kawasaki
