Our friend Cam Sinclair from Ammo Marketing and a couple of Startups, most recently Veri.vote/Mithryl has put together a great post with tips for pitching for investment. This article is about fundamentals to convince your audience, not about building pitch decks (that’s for another post). Cam was the first to respond to our call for guest bloggers or topics put out in a recent Techboard newsletter. Over the coming months Techboard will be bringing insights from a variety of different sorts of investors to its readers. If you have any suggestions as to issues you would like addressed OR if you would like to contribute a guest blog post please contact the Techboard Team.
Pitching your startup to investors can be a daunting experience. You have to convince a room full of decision makers that your little pet project is better than the thousands of other investment options out there. You must compress the highlights of months or years of blood sweat and hard work into a matter of minutes. All while remaining calm, confident and convincing. As a keen tech startup pitch nerd, I have taken part in many of these things (you can see my pitch for veri.vote here), and watched hundreds of others sweat bullets while trying to persuade a room full of onlookers that their idea is worth considering.
After sitting through plenty of pitch nights and competitions, and seeing everything from rolled-gold professional presentations to utter trainwrecks, I have observed a pattern emerging around what constitutes a ‘good’ pitch’.
I believe there are three core pitch elements you can guarantee will help improve your prospects with investors:
- Emotional hook
Regardless of your content or purpose, if you include the following three elements in your next pitch, you will certainly perform better than 90% of all other presenters. (Provided you avoid the obvious pitch faux-pas of talking at your feet, fidgeting or using Comic Sans font on your pitch deck!)
1. Kick things off with an emotional hook
You need to grab peoples’ attention – fast. In fact, most investors will decide whether they like you and your business within the first 30 seconds of your pitch. If you can’t pique interest quickly, human nature will take over from politeness and people will begin to tune out, regardless of what you have to say during the rest of your talk.
A bit of ‘science’: humans process information in roughly this order: stimulus, emotion, reasoning. By speaking and displaying a slide deck, you should be creating stimulus, however before what you are saying is properly processed and understood, a certain level of emotion needs to be engaged. Engaging emotion allows your audience to relate which motivates them to really listen and understand what you’re saying. Without this motivation, it is more difficult for information to be passed through to the rational processing parts of the brain, which allows logical consideration and creates memories.
What is emotion? Well, one reason humans love stories from a very young age is because they convey useful information in narrative form by appealing to empathy. We imagine how we would feel in someone else’s position – angry, sad, afraid, happy. In fact, when we engage in a story, we often feel an emotion as if we were part of it. This connection allows us to process the situation in a very real sense. Just as we learn better while doing, we process information in a more holistic way when there is a genuine engagement. So, although emotions may be an irrational response to a made up story which has no basis in reality, they can be a seriously powerful motivator.
Bringing this back to your startup pitch, if you want investors to really engage with your business model or technology idea, tell them a story. Often, all people really need to understand is your motivation. Did you have a personal experience which led you to leave your job and risk everything on your startup? Have you been a part of something great or something not so great which has led you to want to make things better? Really ram home the pain of the problem you’re solving. Tell them why you’re building it – make them feel something by creating an emotional hook.
2. Build trust and credibility
This next element is rather obvious, but it’s where many people come unstuck. Proving your ability to execute is just as important as the concept itself. An idea alone isn’t worth much, but being able to make it happen is definitely worth something.
Investors often say they invest in a team rather than an idea, so briefly share your team’s background and skill set. Past results are always the best indicator of future performance. Rather than only talking about your technical abilities, show the outcomes of recent projects you’ve worked on, both the successful and unsuccessful ones (failure in the startup scene is a good thing, right!?), and what you learned that will help you succeed this time. Don’t go overboard on full blown CVs.
Another great way to build your credibility is by positioning yourself as an expert in your field. Writing content and earning media mentions and social media attention is powerful social proof that you’re genuine.
Third party endorsements are one of the most powerful ways of showing your ability to deliver – if someone else goes out of their way to say something nice about you, it’s likely to be true. Testimonials from well-known individuals or companies can be very helpful to demonstrate your credibility. Think about how many companies name drop by listing logos of their big clients on their websites. It looks pretty impressive huh? This is about leveraging the reputation of others.
Building trust and credibility is really all about proving to investors that you can actually follow through on your business plan, and that you’re a worthwhile investment.
3. Demonstrate Momentum
Validation and traction are the words often used in the startup scene to describe early signs of a potentially successful business. What this really means is you have momentum – people are taking notice and things are moving for your startup.
Demonstrating momentum helps prove your worthiness to investors by showing the market is receptive to your idea. If customers are engaging and buying, it means your business plan has validity. People naturally want to be involved in things which are moving and stimulating, so by showing you have already achieved some traction in the marketplace you’ll be much more likely to get people excited about your project.
The golden key is proving you can turn your efforts into sales revenue. For example, do you know how much you need to spend to acquire a lead? What percentage of leads will convert to sales? What’s the lifetime value of that customer? How many customers do you need to be profitable? Being able to produce this info is a massive indicator of success to investors because it shows you know your business plan and have done the research to back it up. It proves you’ve found a business model which will work once it scales. Investors look for ways to reduce their risk and maximise their returns and showing momentum is definitely an indicator.
Other examples of momentum people often use include website visitors, media mentions, or people engaging on social media. Many investors don’t consider these metrics to be validation. In fact, they are often referred to as ‘vanity’ metrics. While they do represent a level of interest from which bigger things can grow, you will be far better off showing an early user base, especially paying customers.
Showing genuine momentum gives credibility to your future plans or roadmap. What are the specific next steps you intend to take your startup to the next level? Why do you need funding and what will you do with it? What else are you looking for in the way of team members, mentors or introductions? By showing you have thought through your path to success, potential investors can visualise where you are headed, how fast you will get there, and how they can come along for the ride. That truly is momentum.
I have seen some amazing results from startups who proactively include emotion, credibility and momentum in their investor pitches. While I don’t believe there is such a thing as the ‘perfect pitch’ you will absolutely impress investors if you ensure these three elements are front and centre.
Take the time to consider how your pitch hits these fundamentals and don’t be afraid to ask for feedback. Happy hustling!
Cam Sinclair is the founder of Ammo Marketing, a full-service marketing agency working with Startups to launch, commercialise and pitch to investors. Ammo has worked with a bunch of Perth tech startups to develop their pitches and successfully raise. It’s so important for startups who are creating amazing new tech to be able to tell their story in a simple way which their customers and investors can relate to. That’s where Ammo comes in.