I recently attended several investor pitch competitions, and came away from them all feeling that none of the pitches gave me what I’d need to be interested as a potential investor. So, I began to think about what might be the elements of the best, most powerful investor pitch.
I spoke with a selection of Angel Investors 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 to, and so I feel are the elements that not only attract stakeholders, but represent the most powerful investor pitches.
Value Proposition. This is a term in business parlance that most everyone talks about like they know what they are talking about, but generally get 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. So first, describe what the problem (the opportunity) is. Now, all opportunities have a current solution. So next, tell your audience what the current solution is. Because yours is a better approach, tell them next what your solution is and why it’s better, faster or cheaper. Follow this up with what you need to execute. Make this a punchy, staccato overall statement that doesn’t take more than two minutes to present, and at the end of those two minutes the investor completely understands what you are doing.
Management Team. Investors don’t invest in products or services. They invest in people, because it’s people who make the business happen…or not. So, sell the management team as full-time, committed and passionate people who intend to make this business happen. Don’t forget to also discuss the team’s collateral resources, like a value-add Board of Advisors, who can bring an immense amount of credibility to the overall management team.
Market. Investors are attracted to large, primary markets, although niche markets 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. Because market share is a zero-sum game, when a new company enters a market and begins to get sales, it is accumulating share, and that share is coming at the expense of another competitor. But, if the market is growing, that competitor’s sales may actually be increasing. If that’s the case, he may not take immediate action to thwart your efforts. And, that all you need: time – time to accumulate strength so that you can more effectively respond when he 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, they do have to be addressed. What investors will take notice in though is a management team’s discussion of a clear path to profitability and positive cash flow. That tells investors that the financial projections have been thought about 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.
Finally, enthusiasm is infectious. Said another way, there’s absolutely no way that you can get a potential investor enthusiastic about the prospects of your new company unless you first are enthusiastic yourself. So, include these five things in your investor pitch and exude passion and enthusiasm, and you will have a much more powerful investor pitch than any I listened to at the competitions I attended.
William Rossi is Professor Emeritus of Entrepreneurship at the University of Florida, having taught at both in the undergraduate and graduate Entrepreneurship Program there for 15 years. Prior to teaching, Professor Rossi initially held several senior level positions with Ford, Goodrich and Picker International. After relocating to Florida in 1986, Rossi worked in executive management positions in smaller entrepreneurial companies and was a principal in several. Rossi holds a Master of Science degree in Operations Research from the University of Massachusetts and an undergraduate degree in mechanical and industrial engineering from Ohio University.