How To Pitch To Investors in 4 EASY Steps
For the TLWR(Too Long Won’t Read) crowd…
WHAT AM I GOING TO GET OUT OF READING THIS ARTICLE:
- What should I know before approaching investors to pitch?
- What do investors want to see?
- How do I make the best first impression possible?
- How do I get a deal?
You’ve done it! You’ve come up with a great idea that no one has thought of before, or at least no one has taken action on before. Now you’re ready to actually take action on it and do what you need to do to bring your idea to market.
What now? Well you need to get a patent, a prototype, test out the product, so on and so forth…but that costs money.
So you ask yourself; “What are my options?” Because as you’ve heard a million times: “it takes money to make money.”
OPTION 1: BOOTSTRAP (pay for your invention and what it takes to turn it into a successful product and company yourself.)
Well, you may reach into your pocket and pull out lint. So, you’re a little cash strapped at the moment, what about option number 2?
OPTION 2: BANKS
You go to the bank and everything you’ve heard is true! There are a ton of hoops to jump through, interest rates are astronomical, and they want their money back darn near immediately.
OPTION 3: FRIENDS AND FAMILY
Maybe you haven’t been to holiday dinner in awhile, or perhaps you’re not in the best situation to ask relatives or friends for money, or perhaps pride precludes you from doing so. No worries friends and family involved in capital situations can get very complicated very quickly. Relationships can sour, permanently.
So you land on…
OPTION 4: TIME TO PITCH TO INVESTORS
Investment money can often times be your best bet because if you are lucky to be aligned with the right investors, you not only get the capital you need, but you also get partners that can support you and get you to where you want to know with invaluable expertise.
But you think to yourself; “Well, I’ve never pitched investors before, how do I pitch to investors?”
Honestly, you’re starting off in a good place, because as you can guess, I’ve seen my fair share of those that rush into the process, go about it all wrong, leave a bad first impression, and never get a second chance.
So because you’re putting thought behind this and reading this, I am happy to discuss with you:
How To Pitch To Investors in 4 EASY Steps:
STEP 1) HAVE A GREAT IDEA YOU CAN ACTUALLY MONETIZE
You’d be surprised, or maybe you wouldn’t, how many people I talk to that share their great idea with me… and it really is great, and then I ask them; “Yeah but, how will it make money?” — “Well, everyone will love it!” — “I agree, but how will you get people to pay for it? Naturally, if you are taking investor money, you expect to pay them back, plus ensure they have a return on their investment, and of course you intend to make money too. How will this idea do that?” — “I don’t know, don’t you figure that out?” — “No.”
Picture this, you’ve come up with this amazing service everyone could benefit from. Perhaps an app, or a website, that people can go to solve a problem. You intend to offer it for free. How will this actually make money? Yes, everyone may love it, but how can you charge for it?
Or, maybe you come up with an idea to sell something for dirt cheap where as your competitor is selling for significantly more and you intend to under cut. Do you intend to pay back your investor $500 a year for 30 years? What cut of that will you get?
You will want to know going in, exactly how you intend to make money from the idea:
- How much will it cost you to produce?
- How much will you sell it for?
- Who will you sell it to?
- How will you charge them?
- How will you reach them?
- How much will it cost to reach them?
- How will this forecast out over 1, 3, 5 years?
You get the idea. You want to have a crystal clear fool proof system in place before you even consider approaching an investor for money.
STEP 2) DO YOUR HOMEWORK
You need to paint the picture for them. Sure, you can tell them about your idea and they may think “that’s a good idea” — but then the questions are going to come in to validate your idea and to mitigate their potential risk by partnering with you on the investment opportunity.
So here are some things you are going to most certainly have in order before you pitch an investor:
- How much will your invention cost to make?
- Where will you manufacture it?
- What benefits does that offer by manufacturing it there?
- Do you have a prototype?
- How much do you intend to sell the product for?
- Who do you intend to sell it to?
- What is the market size? (How many of your target customers exist?)
- Where do you intend to sell it to them? (Geographically)
- How do you intend to reach them? (marketing and advertising plan)
- How much will it cost to do that?
- How much money will you make per sale?
- How many sales do you project to have year 1, year 3, year 5?
- When do you intend to pay the investors back?
- How long will that take?
- How much of a return on their investment are you able to give?
- Are you looking to sell or license the idea to someone else?
- Are you looking to grow your invention into a company?
- What is your exit strategy?
- Or are you looking to turn this into your career?
Those are just SOME of the questions, it gets a little different if you’ve already bootstrapped it yourself and have sold some.
The idea here is that you need to answer all of these questions ahead of time so:
a. The investor knows you believe in the idea enough to do this research.
b. You are intelligent enough to know you have to do this research or hire a professional to help you.
c. You eliminate as much risk from the idea as possible, giving hard facts and data showing your great idea is a sure thing.
It is not their job to do this for you and you are up against others who have already done this.
Entrepreneur published a great article diving into the “need to know’s” about raising venture capital. You can check it out here:
STEP 3) GET A PITCH DECK
I cannot stress this enough… get a pitch deck to pitch to investors.
In the last step, we talked about the types of information you will need to have in order to pitch to investors, but now we talk about the HOW TO PITCH INVESTORS part… in other words, the mechanism in which you do it.
You could jot all of this down in an old school lined notebook, you could rifle it off in an informal email, you could give it to them piecemeal as you get it in, or you could just “explain it to them” as I’ve heard so many times…and honestly that is all bad form and bush league.
You need to make your pitch in the way that the investors are used to seeing it… and WANT the information. Remember, this is not about you, it is about earning the opportunity. You capitulate to them.
What is a pitch deck?
It is a slide show, you can use Powerpoint if you want, or any other method of creating slides that in about 10 – 14 slides you answer all of those questions above.
In a nutshell, you explain the problem, how you intend to solve it, why you, and how you intend to monetize it, in a short, succinct, and effective way. You want hard data, hard numbers, and cold hard facts… with passion, belief, and a relatable story.
STEP 4) BE REALISTIC
Ideas are worthless, execution is everything. Everyone and their mother has good ideas. How many times have you known someone, or maybe even you said; “I thought of that years ago. I should be rich!”
Yeah? Millions of people have great ideas, but only a fraction of 1% of those people actually take action, put in the research, put in the effort, and follow through.
If you’re reading this, you’re probably one of those people who are willing to do the work, take action, and execute.
So be realistic, investors do not need to chase people down for good ideas, they do not need to come to you; they get tons of ideas thrown at them daily. They’re also not going to “steal” your ideas. They are looking for a partnership, someone who can help execute and make the idea into an invention, into a product, into a profitable and successful company.
So why you?
Investors are looking at you and they are wondering:
- Is this the right person to steer this ship and help run this company and make this product a success?
- Do they have the background in this?
- Are they a good person with a positive outlook and great work ethic who they can envision themselves working with?
- Are they credible?
- Do you have skin in the game? (Do you believe in the idea so much that you’ve put your blood, sweat, time, and hard earned money into the idea thus far to carry it across the finish line?)
Investors aren’t investing in “an idea” and they aren’t investing in “your idea” they are investing in the total package. They are investing in you, your team, your idea, your ability to help bring it to fruition.
Remember, you are trying to EARN an OPPORTUNITY, approach it tactfully, with strategy, and humility.
But most importantly, believe in yourself and be confident. If you don’t believe in yourself, no one else will.
TLDR: (Too Long Didn’t Read)
HOW TO PITCH TO INVESTORS:
- Make sure you know how this idea can make money and how long it should take before you can pay back an investor with a return on their investment.
- Do your homework, know all of your costs, your target customer, your marketing plan, the size of your market, what your plan is for the company or the product, your exit strategy, everything from a to z.
- Get a pitch deck. Don’t have bad form or look bush league. Deliver the information investors want to know in a way they want to see it that is respectful of their time so you can look as professional as possible and make the best first impression.
- Be realistic and make sure you realize investors are not chasing people down for ideas and that ideas are worth nothing, it is the execution that generates income. Be someone the investors can see themselves working with and show them you are the right person for the job.
Need help with any of this? Give us a shout and we’d be happy to help you prepare and put you in touch with an investment opportunity. Just give this link a click: Fundraising Consulting
Ready to pitch to investors? We can put you in touch with the right investors based on your industry that can not only help fund your invention but also support and guide you to where you want to go. Click this link: Invention Investors
Already running a small business and looking to take things to the next level but need funding? Then click here: Small Business Funding.