THE MYTHS OF PITCHING TO INVESTORS
Monik Durmus, a principal at Fuel Ventures, debunks some of the myths about pitching to investors and offers her advice to delivering a successful pitch.
There appears to be a widespread misconception around seeking investment and pitching to investors; that it’s stressful and investors want to trip you up. This is down to TV shows like Dragon’s Den and the Apprentice, where entertainment can be a priority over accuracy. It’s understandable - I’m sure what actually happens in a pitch meeting wouldn’t make good TV, regardless it is not necessarily an accurate representation of what the pitching process is like.
All investors want to do is get to know you and your business, so they can make an informed decision on whether they want to invest. It’s a normal business conversation like any other but there are specific things you need to consider. As a Principal at early stage venture capital fund Fuel Ventures, I’ve sat in hundreds of pitch meetings and receive countless pitches daily. Below I’ve outlined the myths around pitching and what you should do to give yourself the best chance of securing investment.
Myth 1 – investors are trying to catch you out
This couldn’t be further from the truth. As previously mentioned, investors want to get to know you and your business. When they ask questions about your lifestyle and business, it’s not an interrogation tactic - it’s genuine curiosity which is perfectly understandable. My advice would be to act personable and friendly and don’t get nervous or uptight when they ask what you do in your spare time or if you have a family. A lot of business is about building relationships and if an investor likes and trusts you, they’re more than likely going to invest in you.
On the flip side, you don’t want to go on too much about your interests or personal life. It’s important that the dedication you have for your business translates otherwise there is a chance that you won’t be taken seriously. A general rule to follow is if it’s relevant or if the investor brings it up, talk about it. For example, if your business is aimed at the cycling community and you’re an avid cyclist, tell them that. If an investor asks if you have any children and you have a baby on the way, say that (if you’re comfortable to do so), neither will necessarily act against you.
Myth 2 – you need to dress to impress
I’ve seen entrepreneurs arrive at pitch meetings looking like they’re about to walk the red carpet. I’ve also seen entrepreneurs that are scruffy; neither sets a great first impression, although the latter is worse in our opinion. Today, business is much more relaxed and wearing a suit won’t make your business appeal to investors any more than if you wore a blouse or shirt and jeans. Smart casual attire is the best option. Being presentable is a lot more important than a tie and cuff links.
Myth 3 – you need to know all the numbers
This is something that’s been perpetuated on reality business shows, but unless you’re a genius it’s unreasonable for investors to expect you to reel off business data off the top of your head. There are some figures that you should have prepared, such as revenue and market size. More useful numbers to have to hand are profit margin and growth percentages. It’s fine to have this information written down on a piece of paper, it won’t make you look amateur or unprofessional. If you don’t know these figures for whatever reason, then be honest. It’s not a deal breaker if you don’t know these from the top of your head as you can easily go away and email any requested information after the meeting. What is a deal breaker is lying or inflating numbers as this will always come out during the due diligence process.
Myth 4 – you need to deliver a Powerpoint presentation
This is a common myth of the pitch process. Everyone thinks that when you go to an investor pitch meeting you need to have an elaborate presentation with pie charts and 50 slides. Most of the time you don’t have to present anything as you may have already submitted your deck to the investors prior to the meeting and they will most likely have it on their laptops or printed out in front of them. If this isn’t the case or you want to present more, an eight to ten slide presentation will suffice with minimal content. The most important information to include in bullet point format is who you are, what your business does, what does the future look like, why an investor should invest in you and how much investment do you want. A good format to follow is who, what, when, why and how. It’s also important to include competitor analysis, what are they doing in the space well and what aren’t they doing well.
Myth 5 – only seek investment when you need it
It is important to plan ahead when fundraising. The whole process can take 3-6 months from end to end, sometimes even longer. When an investor agrees to invest, negotiations can take place and that’s something a lot of entrepreneurs need to be open to. It’s also beneficial to have a few different funding scenarios prepared in case it’s not a clear-cut process. This can save a lot of time, for example, if one investor only wants to give you half the money or wants to invest in instalments, then you may need to be in talks with another. It’s never a good idea to put all your eggs in one basket, even less so in business. As an entrepreneur who’s seeking investment, you should be talking to at least three to five investors or funds because the sad truth is that the majority will say no. A way to avoid this is to do your research on who the investors are and their investment thesis (most of this is usually on their website).