Funding is critical for early-stage ventures to scale up.
After utilizing all the bootstrapped money and the funds acquired from friends and family, entrepreneurs are always on the lookout for an external investor(s) to invest in their idea.
Entrepreneurs consistently face one challenge: that of convincing investors of, and impressing them by, their innovative idea, strong founding team and sound business plan. All of this, of course, is apart from actually setting up the business. To make all of this possible, they are expected to make an amazing pitch to the investor.
“Fund-raising is a brutal business“
– Praveen Chakravarty, Co-founder, Mumbai Angels & Political Economist, IDFC Institute
The Rush To Start-Up
As correctly said by Mr. Chakravarty, there is a big hustle among entrepreneurs to claim investor funds. The number of start-ups in India, pitching their ideas in order to receive funds, has grown significantly. In India alone, angel investors (excluding VCs and other investors) have around 5,000 to 6,000 ventures approaching them, in a year, to pitch for angel funds.
The whole Indian startup ecosystem is growing dramatically with the number of start-ups and investors growing year on year. As per a study conducted by NASSCOM, India has been ranked 3rd with regard to the global startup ecosystem – having more than 4,200 start-ups.
India is expected to have around 10,000 start-ups by the year 2020. In addition, the number of active investors is also on the rise. The number of investors in the country has doubled from 220 in 2014 to 490 in 2015.
Putting The Key Into Ignition: Pitching For Funds
Pitching simply means presenting a business idea by an entrepreneur to the investor(s) who make investments in exchange for an equity stake in the firm.
Pitching is both a science and an art. You, as an entrepreneur, need to be logical in your thought process – when it comes to the idea, its opportunity and scalability. You also need to be creative and skillful to make the pitch interesting and captivating for an investor. This requires you to be artistic too.
If you see the pitch deck of Airbnb, you will realize that their founders have very logically presented the problem statements in just three bullet points. They have also described the solution, market size, competitive advantages, etc, through infographics for their venture idea. Now that’s called being creative entrepreneurs!
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Ankit Pruthi, CEO and Co-Founder of Unicommerce, talked about the top three ingredients for the right pitch deck, in an interview with UpGrad. As per him, the first element is a strong team. Thus, entrepreneurs must pitch their ‘team’ rather than themselves. They should pitch the opportunity, which should be big enough to excite the investors. And lastly, they have to pitch their product. It follows that ‘TOP’ (Team, Opportunity and Product) are the three essential ingredients of an investor pitch.
If you feel that you have a great idea and will be able to crack the funding issue, then allow me a word of caution. It’s not as easy as you think.
Investors typically fund only 7% of the proposal that comes to them, maybe even less. What you need is a perfect blend of a good and scale-able solution/idea for a relevant pain point; a strong team; a decent amount of traction; ideally a prototype; and a logical plan to achieve the financial projections that could impress an investor. If you have reached the phase of pitching your idea to investors, many people will tell you what you should do, and it’s tough to decide what advice to take and what not to take.
How To Not Break Out In A Sweat Before Pitch Day: An Entrepreneur’s Guide
So, we have tried to make it easy for budding entrepreneurs, by providing a list of 17 things you should AVOID (& what to do instead) to make your ‘pitch perfect’:
NO: I can handle it easily!
(YES: It is critical for me!)
Pitching is not just about making a presentation. Rather, it is an opportunity for new age, young, enthusiastic and ambitious entrepreneurs to achieve the goal of a lifetime.
If you have bagged a chance to pitch your idea to an investor and are taking it lightly or sensing overconfidence, then beware; you must take every such opportunity extremely seriously. Your attitude should reflect the seriousness and the passion that investors most often look for.
I distinctly remember a pitch presentation that I was once evaluating. There was no doubt about the work that the entrepreneur had done for the venture, but his attitude caused concern. Despite his confidence, he was too casual in his pitching. That attitude ensured his pitch was unable to deliver the right impact. One should not take pitching so lightly. The path to achieving success is never easy.
“I was taught that the way of progress was neither swift nor easy”
– Marie Curie, French Physicist & Chemist
NO: I should just go for it!
(YES: I should prepare, prepare and prepare!)
You may be passionate about your idea and confident enough to pitch it, but you can’t predict the scenario on your actual pitch day. You may be confronted with questions that you may not have been prepared for or predicted. In such a case, you may feel stuck or like the pitch may be slipping away from you.
One simple suggestion that could help to avoid such a situation is preparing well beforehand. Try to assimilate each expected question that could be asked of you and gauge the best answers, and what course you should take, in your preparation. You must practice your pitch at least a couple of times before the finale. A well-practiced, rehearsed and prepared pitch has a better chance of grabbing investor funds.
At the time of pitching, if you say that the companies in the selected industry will grow 200% year-on-year when in the past, the businesses in that industry have grown by 50%-60% – it will show ill-preparedness. It gives the impression that you have not properly researched the industry that your company will belong to. If you put forth some facts, make sure that you have strong sources to justify your point. Investors attach a lot of importance to entrepreneurs preparing and rehearsing their pitch before presenting it before them.
NO: I need not know about the investors!
(YES: I should research the investors, well!)
Preparing for the pitch also includes researching the right audience (investors) whom the pitch is for. You have to understand what type of investments they make, in which sectors/industries do they typically invest, which aspects of a venture interests them more, etc. If you know the investor, you can work on your deck and pitch accordingly to suit their expectations.
Debadutta Upadhyaya, CEO and Co-founder, Timesaverz.com talked about this very aspect, in an interview with UpGrad. He suggested that entrepreneurs have to be very precise or specific regarding the funds or investors that they want to reach out to. Some funds are tech-focused, some are focused on social impact, and there are funds which are focused on high asset-based kind of growth phase. Thus, entrepreneurs need to be very clear as to which is the fund/investor that they need to go after and get their pitch ready for them, specifically.
(Check out the Leadership & Management program now, for many more such insights from leading entrepreneurs!)
NO: I should pitch as early as possible!
(YES: I should pitch at the right time!)
There is a right time for everything. Anything done at a wrong time never yields desired results. This rings true for pitching as well. If you think pitching as early as possible will help your business to grow soon, then let me officially be the bad guy and burst your bubble – that is not the right way of thinking at all.
You might end up wasting your time in pitching an idea that is not well nurtured. Instead, you should conduct a comprehensive study on your idea, validate it and develop a running prototype to show something tangible to the investor. A business idea which has received some initial traction by hitting at least a small market always has a better chance of receiving funding. The experiences of many founders suggest that these days new entrepreneurs should have some proven traction for their venture before approaching investors.
“Almost all the capital in India is growth capital and not risk capital. Investors want proven ventures. They like to come to the rescue of victory.“
– Sramana Mitra, Founder, One Million by One Million
The Start-Up Guide: What Do Investors Look For?
NO: I should ask for high funding & high valuation!
(YES – I should not give undue attention to money and valuation!)
Image source: Funders and Founders
At a very early stage, valuation has no meaning. It is tough to assess the value of any business when it is just an idea or a prototype.
Moreover, at a later stage too, your focus should not just be on the money. Everyone understands that pitching happens to get monetary investment for the business, but putting unnecessarily high emphasis on the amount of funds and valuation would dilute the strong impact your idea could have made.
By means of proper negotiation, the valuation and funding amount can be taken care of at a later stage. But the prime focus while pitching must be on swaying investors towards your idea, team, opportunity and plan. Sharing your vision is of utmost importance, rather than money.
“Chase the vision, not the money, the money will end up following you”
– Tony Hsieh, CEO, Zappos
NO: I must go on and on and on!
(YES: I must keep it short and crisp!)
One of the biggest mistakes many entrepreneurs commit is failing to keep track of the time while pitching.
If you think that you know hundreds of things about your idea, industry, competition, etc, and can impress investors by sharing all of them, then you could not be more wrong. A good pitch has to be short, crisp, and yet effective.
An ideal pitch should be made in around 10-15 mins. In fact, your pitch should not be more than 20 minutes in any case. Utilize the little time you have, properly. Rather than just being bland and plain, you should add some exciting elements in your pitch for investors.
“Spend 40% of your time on what makes your business most exciting to invest in”
– Vani Kola, Managing Director, Kalaari Capital
NO: I have a jazzy and funky PPT!
(YES: I have a formal PPT with the right aesthetics!)
Image source: PowerPoint Ninja
If you are proud of creating a PPT with lots of cool pictures and images, you should be. However, don’t fool yourself into believing that this will seal the deal with your investors – something that has such high stakes riding on it.
There is a thin line between a creative PPT with the right aesthetics and a jazzy PPT which may look cartoonish or over the top – taking away rather than adding to the key points. It’s important for you to support your PPT deck with the right set of pointers, tables, infographics and images that look creative, catchy and impressive rather than too funky or as though going overboard.
The time allotted to you to pitch is usually very limited. You also have to try and maintain the number of slides to around 10-12. More slides than these will require you to have more time to be spent, which you may not have, and is not such a good idea anyway. Guy Kawasaki, a Silicon-Valley based speaker, author, evangelist and entrepreneur, has suggested having 10 slides in a pitch deck.
“You have a very short amount of time to make a first impression. If you’ve got a long rambling slide deck…you’re done”
– Naval Ravikant, Co-founder of AngelList
NO: I can sit, relax and present!
(YES: I should present in the most enthusiastic way!)
The style and the way of presenting gives entrepreneurs a chance to showcase their passion, enthusiasm and zeal. It is imperative for you not to look like a lazy, laidback and lackluster person.
You must have and display a strong conviction about your business idea, and that can only happen when you present using the right body language and gestures to support a strongly projected voice. Just imagine an entrepreneur sitting on a chair and reading out the slides in the deck. Would investors ever be engrossed in such a pitch?
Good communication becomes critical while pitching. A clear and perfect diction, along with a strong message must be delivered to investors.
“If you want to glide toward money, you have to make sure your message is clear as a bell, and you need to ensure that you have a unified team capable of communicating it”
– Alejandro Cremades, Co-founder & Executive Chairman at Onevest – The Art of Startup Fundraising
The Idea Called UpGrad: A Start For Start-Ups
NO: I must crack this one way or another!
(YES: I should try not to sound too desperate!)
Desperation can kill your pitch. Try and avoid desperation creeping into your mind and subsequently your voice and demeanor. You do not have to be desperate to get funds.
Instead, you have to have faith in your venture idea’s strength in attracting investors rather than trying too hard to attract them. Moreover, don’t ask them upfront what it is they can offer. Rather, be confident regarding your projections and justify the amount that you truly need.
NO: I should focus solely and only on my idea!
(YES: I should talk about every critical aspect!)
Although, the foundation of every new business venture is its idea, i.e. the solution for catering to a relevant pain point or gap in the market; there is a gamut of other things about the idea that needs to be considered and explained while pitching. If you think you can impress investors by just explaining your idea, well, think again.
A perfect pitch should include some critical elements. You have to voice the following aspects while pitching:
The problem which you plan to solve through your venture idea/solution
Opportunity and potential market size for such a possible solution
Existing competition and differentiation (secret sauce)
Credentials of your founding team
Revenue model i.e., how you plan to earn
Logical financial plan covering cost, revenue and profit projections
Traction achieved till date
“Occasionally, an entrepreneur hoping to launch their first business puts so much thought into the concept that he or she neglects the financial and legal plan—and unfortunately, this often becomes apparent early in a meeting, when an investor can lack clarity in what exactly the proposed deal is going to look like”
– Richard Branson, Founder, Virgin Group
NO: I will give an amplified or exaggerated picture of my idea!
(YES: I don’t have to exaggerate things!)
One lie is bigger than a hundred truths.
You have to give an accurate representation of your idea. Investors are smart and experienced, they can catch exaggerations or the slightest falsehoods immediately. It is always advisable to speak truthfully and present all the correct facts and figures. The assumptions made for any estimation have to be logical and thoroughly researched.
If an entrepreneur presents an idea of say, developing a smart and automated bed for luxurious homes in India, then saying something like ‘it is an 800 Billion US Dollar market’ will sound foolish to investors knowing the extent of the high-income category, in the country.
Entrepreneurs usually exaggerate financial projections to venture capitalists and angel investors. They feel that higher projections will help them attain higher funding which may not be right. One should start slow and gradually grow.
NO: I will earn/take over everyone’s share in this industry!
(YES: I must do an extensive competitor analysis!)
Investors are of the view that when an entrepreneur approaches them and says that they don’t have any competition, it gives them a chance to laugh. A statement like this makes them think that either the person has not done the competitor analysis properly or is arrogant.
Every company will have competition. Even the innovative offering will replace some older product, or there would be some overlapping components or prospects. You have to show how your business is different from others after talking about the real competition.
Let me quote one of the instances that took place with Deepinder Goyal, Co-founder, Zomato. He presented his idea (of Zomato) to investors and was asked a question – “How are you different from the others?” There was a straight reply. Nothing about the fancy features on his website or any such thing – “We’re not different. We are better. And we have a million customers every month to speak for us.” Hence, it’s not just thorough competitor analysis that is required but also the development and sharing of the secret sauce that will make you different or set you apart from the others.
“The competition slide in your pitch presentation is important but so is your differentiator slide”
– Sandeep Aneja, Founder & Managing Director, Kaizen Private Equity
Indian Start-Up Ecosystem Today: All You Need To Know
NO: I have another business idea!
(YES: I have to focus as much as possible on this one idea!)
While pitching, sometimes you may get the sense that investors are not looking too impressed by your pitch. You may have an alternative idea that can be presented. What would you do? Would you present that alternative idea to them? If your answer is yes, then you shouldn’t expect that investor to come back to you.
Sometimes, even if the idea is reasonably good, the pitch may not have other strong elements and thus, the investor may like to give you constructive feedback on the same. This still keeps the door open for approaching the same investor after you have worked on their comments. Straightaway sharing another idea will lend the impression that you have no passion for your business and fluctuate between ideas, just for the thrill of being an entrepreneur.
Moreover, many entrepreneurs feel that their job is a backup. If they are unable to get funding, they can go back to their well-paying jobs. This is a major blunder any true-blue entrepreneur can commit. While pitching, you should shy away from saying that you want to work on your job till you get funds.
“Never say – I’ll quit my job when I raise money”
– Emmanuel Amberber, Co-founder, FlyingCocoon
NO: I can hide my deficiencies!
(YES: I should be open to acknowledging shortcomings!)
Every business plan may not be 100% full proof. If investors find some loopholes or flaws in your business plan, you should be open to acknowledging the same.
Ideally, you should be ready with a counter or response by sharing a plan of action to correct these deficiencies identified by the investor. For instance, when investors point out that you do not have a strong product head in your team, which can be essential, you should be able to respond with your plan of hiring for such a position. This will place the investors’ confidence in you for having the requisite knowledge of key business issues and immediate plans to resolve them.
“After presenting the benefits of your proposition, end by addressing the critical issues. Most presenters avoid these, but there’s always a critical guy in the audience who will bring them up. You’re much better positioned if you bring them up first and point out how you’re going to find the right solution together”
– Steli Efti, CEO and Co-founder, Close.io
NO: I will give 100% guarantee on returns on investment!
(YES: I have to show them a great chance for worthy future returns!)
This is one other major mistake entrepreneurs tend to commit. They become so confident (read overconfident) that they get ready to give guarantees for a specified percentage of returns to the investors. By doing so, you are not just fooling yourself but fooling investors as well.
Investors are experienced enough to know that nobody can really guarantee future returns. The better approach for you would be to present your idea in such a strong way that should give them an indication of having high probabilistic chances of getting good returns in the future.
“While a trend shown in the past is a fact, a “future trend” is only an assumption.”
– Benjamin Graham, Economist and Investor
NO: I will move investors with my emotions!
(YES: I should keep pitching professional and business oriented!)
You may be in a situation where you are to make your 100th presentation after 99 failures. But please avoid mentioning that you are emotionally broken now to attempt to pitch properly any further, for funds.
You should also avoid sharing any emotional stories with investors, at the time of pitching. They may not care and what’s worse, it could work against you rather than going in your favor. You have to keep your calm and be as professional and business-oriented as you can while pitching.
“Any blatant attempt to manipulate the investor will almost certainly kill the deal”
– Soorjoo, Founder, Pitch Clinic
Can Entrepreneurship Be Taught? Yes, And Here’s What It Takes
NO: I will ask investors to sign a Non-Disclosure Agreement!
(YES: I should not present investors with an agreement to sign!)
You will make a mockery of yourself if you ask an investor to sign a non-disclosure agreement at the time of pitching. Investors are in a business where they hear and evaluate numerous new ideas every day – they are not in the business of building products themselves. Any sophisticated and serious investor would not like to be presented with such an agreement, in fact, it might hurt your prospects. You risk losing their trust in the very first meeting.
“As a potential investor, I won’t sign an NDA until I know that the business meets my investment parameters.”
– Ken Forster, Managing Director of ThingMUSE
Evidently, pitching is not a cake-walk for entrepreneurs. There are a lot of mistakes that can be made but I have tried to list them out in such a manner that they can be avoided if one is careful. Let me quote Sanjay Sethi, CEO and Co-founder, Shopclues.com in one of his interviews with UpGrad.
“For every successful pitch, there are probably 3000 failed pitches. All you need is one person to say yes, but be ready for hearing NO.”
– Sanjay Sethi, CEO and Co-founder, Shopclues.com
This quote aptly portrays the hardship that goes into making a pitch, perfect. Hence, entrepreneurs should stay patient and continue working hard towards their goal of getting the perfect investor in the bag, through a perfect pitch of their business ventures. Good luck!
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