As a financial advisor I stress the value and importance of diversified long term investing to my clients. Some of my clients have invested in early stage/small startup companies or entrepreneurs as part of their investment portfolio. This is called “angel investing”. I have no objection to this as long as the investment represents a small portion of an otherwise well diversified, conservative portfolio.
My father, Bill Rossi, recently attended several investor pitch competitions and came away from them feeling that none of the pitches gave him what he needed to be interested as a potential investor. We began discussing what he was left wanting from the pitches and ultimately what we consider the elements of the best, most powerful investor pitches.
In an effort to further understand what investors look for in a powerful pitch I spoke with a selection of our angel investor clients to learn what they look for in an investor pitch and what causes them to want to look more deeply into a potential investment. The following elements are those that were mentioned by all of the investors I spoke with; therefore, I believe these are the elements that not only attract stakeholders but also represent the most powerful presentation tools from the entrepreneur’s side.
THE ELEMENTS OF A POWERFUL PITCH
Value Proposition. This is a term in business “legal-ease” which most everyone speaks but generally gets wrong. A simple,clear definition, and the way it should be discussed in an investor pitch, goes like this: Every problem is an opportunity for a creative solution. First, describe what the problem, or opportunity, is. Next, tell your audience about the current solution. Then tell them what your solution is and why it’s faster, better or cheaper than the current solutions. Follow this up with what you need to execute. Make this a punchy, catchy overall statement that doesn’t take more than two minutes to present, and at the end of those two minutes the investor should have a crystal clear understanding of what you are doing.
Management Team. Investors do not invest in products or services, they invest in people. These people are ones who can make or break the business. Therefore, sell the management team as a full-time, committed and passionate group who intend to make this business happen. Don’t forget to also discuss the team’s collateral resources, like a value added Board of Advisors. These experienced professionals can bring an immense amount of credibility to the overall management team.
Market. Investors are attracted to large, primary markets. However, a niche market can be interesting because they often represent an underserved audience. Investors like markets that are growing because it’s easier to enter a growing market. Market share is generally a zero-sum game. When a new company enters a market and begins to obtain revenue and market share another competitor may be losing revenue and associated market share. Rather, if the market is growing, a competitor’s sales may actually be increasing. If that is the case, they may not take immediate action to thwart your efforts and that is all you need: time – time to accumulate strength so that you can more effectively respond when the competition does come after you.
Financials. Frankly, financials are much less important than most people think. Investors know that the management team doesn’t have a crystal ball and the numbers are no more than a projection. However, projections and the future do need to be addressed. Investors will take notice of a management team’s discussion of a clear path to pro tability and positive cash flow. That tells investors that the nancial projections have been carefully thought out and might be more than a simple guess.
Technology. If technology is involved and it generally is with today’s new companies, describe the technology as both proprietary and protected. Software, for example, can be protected by trade secret. Intellectual capital can be protected with trademarks or other legal shields. Cyber security is also a hot topic in today’s business world so investors need to know the company’s data and technology are protected.
NEVER UNDERESTIMATE THE POWER OF PASSION
Enthusiasm is infectious. There’s absolutely no way you can get a potential investor enthusiastic about the prospects of your new company unless you are enthusiastic yourself. So, include these five things in your investor pitch and exude passion and enthusiasm. You will have a much more powerful investor pitch by incorporating these ideas with the potential to attract savvy and long term investors. Get out there and innovate, create, and build amazing products and services to deliver real value to consumers.