When is the best time for entrepreneurs to pitch their business ideas to potential investors? The short answer is: when you have a viable business plan, know how much financial assistance you need, and are clear on how those funds will be used. Getting proper funding can mean the difference between a great business idea that continues to grow, and one that stalls before it gets off the ground. But there’s a right way and a wrong way to sell your investment proposal to venture capitalists, angel investors, and other potential financial partners.
The Do’s and Don’ts of Pitching Business Investors
Pitching your business to a prospective investor is all about assuring them that their financial support will be money well spent. As a minimum, it’s up to you to connect the dots between:
- your promising new business idea,
- your detailed plan for executing that idea,
- the personal traits and relevant skills that qualify you to bring your plan to fruition, and
- how your business plan and goals translate to profitability
Being prepared is key. So let’s take a look at some of the Do’s and Don’ts you should keep in mind as you put together and execute your pitch.
Investment Pitch Do’s
Do choose the right audience: There’s little point pitching your idea to an investor who isn’t a good fit for your business. Angel investors, for example, are often the best avenue for entrepreneurs seeking less than $500,000 in capital, who have exhausted their private funding options (think: family, friends, and associates), and whose projects don’t meet the criteria of traditional lending institutions.
Do incorporate storytelling into your pitch: Storytelling is an effective way to gain an investor’s attention and help your proposition stand out. Explaining the revenue forecasts and valuations associated with your product or service is essential. But even the most data-driven investor wants to be able to visualize how your mission and the right team dynamics will help forge the path to financial success.
Do highlight your background and experience: Investors need to know who they’re partnering with before they can feel comfortable advancing funds. Demonstrating your passion and commitment is a given, but financiers may also look for specific business or industry experience and a management team with proven performance and leadership skills.
Investment Pitch Don’ts
Don’t pitch without performing market research: If you don’t know who your target audience is, how you’re going to reach them, and why they’re likely to buy from you, you’re not ready to pitch your business idea. Investors want to partner with companies that provide solutions to problems affecting large target markets, markets offering significant growth opportunities, or markets where a business like yours will have a strong competitive advantage.
Don’t present a plan without timelines: Presenting a business plan without well-defined timelines is akin to telling prospective investors that your expectations for success are little more than wishful thinking. Not only is it critical to establish realistic goals for your enterprise, you need to demonstrate exactly how you’re going to achieve those goals, and when your investors can expect to benefit.
Don’t approach investors until you understand your numbers: Investors are in business to make a profit. And while they don’t necessarily expect to see that profit emerge right away, they do look for solid assurances that they’ll eventually see a return on their investment. No matter how promising your business idea – or how enthusiastic or competent you may be – make sure you have a thorough understanding of the anticipated expenses, income, and projections associated with your venture before you set up your first meeting.