Pitching dos and don'ts30 Jun 2014
Guy Rigby offers tips for those trying to secure funding for growth
It is often assumed that raising external, or third party, equity is a prerequisite to business growth, and in turn, success; writes Guy Rigby. In the majority of cases, this could not be further from the truth. Most businesses start with very limited funding, and as these businesses develop, they bootstrap their growth, using their own profits and assets to finance their needs. As a result, they get to keep their potentially valuable equity in the hands of the founder or the family, along with the choices and freedom that brings.
For some companies, however, the size of the opportunity or the need for fixed or working capital exceeds the available resources. In these cases, raising external equity is one of the options available.
So, let’s summarise some pitching dos and don’ts when trying to obtain external equity...
- Do make a good first impression before you open your mouth. Wear suitable clothes. Clean your teeth! Do create a good storyboard – a strong proposition that the investor can visualise and believe in.
- Do present with accuracy and confidence. Understand your numbers, your audience and your markets in order to gain credibility.
- Do be specific about your goals, i.e. you need x amount in order to develop or promote your product, win contracts, scale up, acquire another business or pay off debt.
- Do create a sense of exclusivity or scarcity. “You have to create that sense that if they don’t give you a better deal, a better price, or better terms, they’re not going to get the deal,” advises Julie Meyer.
- Do focus on both emotional and analytical persuasion. “Securing investment is all about seduction up front,” adds Julie. “You have to seduce the investor with the attractiveness of your proposal, and then switch gears by revealing how you intend to execute and how you would manage the things that could go wrong.” If you focus on seducing the investor with a passionate plea about your incredible opportunity but fail to explain its implementation, you may lose out. Similarly, if you only focus on how you’ll execute without sharing your exciting vision, you may not gain their interest in the first place.
- Do put a value on the investor’s knowledge, experience and contacts. They can probably offer you a great deal more than money, so ask them how they can help.
- Do consider walking away. If you have offers on the table that don’t come close to your own valuation, you should be prepared to walk away, but only if you are sure that the investor won’t add so much value that you need to revisit your original thinking. Always consider the bigger picture.
- Don’t do a sales pitch. “You’re not trying to close them and you’re not trying to tell them about the product,” advises Bill Morrow who has amassed data from speed pitches about what does and doesn’t work. “Nobody wants to be sold to because it’s an investment pitch not a sales pitch,” adds Bill. “It’s almost as if the product isn’t necessarily that important. It’s more about the revenue model that accrues from that product and the individual and team behind it.”
- Don’t waffle. Keep to the point and avoid jargon.
- Don’t be rude or arrogant. You may know your business well and passion and enthusiasm are welcome in a pitching environment. However, you should also listen to and learn from experienced investors. If they say something you particularly disagree with, challenge them politely and make your case clearly and concisely.
- Don’t argue.
- Don’t be afraid to create competition. In general, you should see a number of potential investors. If they are interested, let them know that they aren’t the only show in town.
Guy Rigby is Head of entrepreneurial services at Smith & Williamson. To find out more call 020 7131 8213 or email firstname.lastname@example.org.