This is the first in a series of posts about raising money from investors – whether individual or institutional.
Over the years, I’ve given 100+ pitches to raise money and, as both a Venture Partner at a private equity (PE) fund and as an angel investor, have been pitched 100s of times. I’d guess that in 95% of the pitches I’ve received, the entrepreneur or executive forgets to start the pitch with the most fundamental thing of all: the problem they are trying to solve and whether or not people have (already) shown a tendency to pay for having that problem solved.
As an entrepreneur, you become very close to your business concept and product or service. You live it and breathe it day in and day out and it becomes a part of you to the point where you take for granted that it’s a major part of the universe. But the challenge that marketers have – and as a fundraiser, you are a marketer – is to remember that their audience does not think about that product 24/7. If you work for P&G and are marketing toothpaste, you have to develop marketing content that works on customers who don’t think about toothpaste for a living. If you are selling stock in your startup to an investor, remember that they don’t think about your business or the market you are in 24/7.
Even the most well-intentioned VC or angel might not have gotten a chance to read over your pitch before you arrive (there are pros and cons to sending one in advance – most of the time you won’t have gotten to a meeting without sending one). Even if they are a specialist on your market area (there are real advantages to pitching investors who specialize), they still won’t have all the context that you have in your head.
Before rattling through ten slides about your execution to date, your latest press, what analysts say about the “hotness of the market,” the market background, competitors, and your personal history (there is an important exception on this one), spend two minutes to tell them what problem you believe is desperately in need of being solved. So desperate in fact that you’ve committed your time, energy and money to bringing this new solution to the world. Particularly for products sold to consumers, if the VC does not believe in the fundamental consumer insight you have (the problem you are trying to solve), there won’t be much to talk about. Guy Kawasaki has a good PowerPoint outline here.
The main caveat to all of this is that if you’re already an incredibly accomplished executive, product manager, or entrepreneur, start the pitch by telling the investor what you’ve already done. Don’t presume that the investor has done a lot of research on you in advance. They might have but don’t assume it. Whether knowingly or not, we always contextualize what we hear with who we are hearing it from. The receptivity of the potential investor to your pitch will vary a lot by what you’ve done before. If you are not particularly accomplished – yet – but have a great idea, then lead with your strong suit – the idea. And never ever lead with “my board of advisors is” – ninety-nine times out of one hundred it’s tacky and lacking substance and is the equivalent of name dropping the stars you saw on Rodeo Drive on your last trip to L.A. If Steve Jobs is personally reviewing your product decisions because he is your uncle, then by all means mention it. But unless that Board of Advisor member is very close to your business AND has invested a lot of money in it, don’t waste your time talking about it. More about Boards of Advisors in a later post.
