A compelling investors pitch is a critical element in a startup’s ability to successfully attract investors. In fact, often it’s the first information investors receive about a new startup company. It greatly determines the chances of the entrepreneurs to get a meeting with an investor. Therefore, it’s essential to create a captivating investors pitch. But how?
For the past four years, I’ve been working with inspiring entrepreneurs and startup founders to build great companies. In particular, I work with them on value creation, business model generation, and I also help them raise money. During that time, I’ve seen and helped create hundreds of investors pitches. As a result, I’ve developed a simple and effective recipe for a successful investors pitch. It is based on what I call the “4 Why’s“.
What is your story?
These days, there is no shortage of great templates for investor pitches. Also, much has been written about the number of slides your should have, the size of fonts you should use, the importance of high-quality photos, and other formatting tips. Indeed, these are all useful tools and tips. And yet, they miss the most important part of the pitch – the story. What is your story?
Stories are the best method to deliver your messages. Since the beginning of time, humans have been using stories to share information, knowledge, and motivate to action. Stories are captivating, inspiring, and memorable. They can move people to take action.
So, if you want to attract investors, don’t show them well-designed slides with plenty of information. Instead, tell them a story that will captivate their imagination and move them to take part in your endeavor.
A good investment story, like any story, has a clear structure and flow. AND, it also needs to address some key questions that your audience, in this case investors, have. These are the 4 Why’s.
The 4 Why’s
The first thing that a startup needs to determine is who are my audience? In order for your story to be effective it needs to fall on the right ears (and eyes). Thus, it’s important to identify who are the right investors for you. To whom would your story be most relevant? In a previous post, I’ve written about how to select your target investors.
After you’ve selected your audience, it’s time to understand and address their interests and needs. There are four basic questions that every audience has the first time they hear your story.
Why should I listen to you?
The first question your audience has is why should they listen to you? Who are you? What is your credibility as it relates to the topic of your story?
This is where you need to provide a short introduction that focuses on your relevant experiences and expertise. The purpose of this intro is to establish your credibility and get their attention. It can be done orally, if you’re meeting your audience, or with a slide, if you are sending them your story in advance of a meeting.
This is not simply a formality. Unless your audience think you’re credible, they will not listen to what you have to say.
Why should I care?
Now that you got their attention, it’s time to address their next question – why should they care? Why is your story relevant and important to them? How does it address their needs?
This is where you need to impress them with your purpose. What problem are you solving? Why is this problem significant? And why is it important to them? Investors need to understand how your endeavor matches their investment focus and strategy. In other words, why is it a great investment opportunity for them?
Also, your story needs to articulate your business model. How do you intend to solve this problem such that you will be able to build a profitable, scalable, and high-growth business.
As innovative as your idea may be, you are not the only one who has identified this particular problem or need. Moreover, your target customers have other alternatives to choose from. Therefore, investors need to be convinced that you have a significant advantage over the competing offerings.
So, it’s critical that you can prove, or at least convince, that your solution is 10x better than that of any of your rivals. It cannot be an incremental improvement. Nor can it be based solely on your assessment. There need to be objective, measurable, preferably demonstrable, advantages that you can point to. Ideally, these advantages should also be sustainable.
Lastly, your audience may be impressed with your story, and even interested in your investment offer. And yet, in any given moment, investors always have multiple opportunities on their plates. Their business model is built such that it creates a consistent deal flow. Their challenge is to select the best deals, at the right time.
You, on the other hand, in most cases don’t have that luxury. You need to raise money now! Furthermore, as entrepreneurs quickly learn, it always takes much longer to raise money than you anticipate. Even after you get a “YES” from an investor, and even receive a term sheet. Investment deals are a process that can take anywhere from 3 to 6 months. And in some cases, even longer.
Hence, you need to create a sense of urgency with your investors so the process can begin ASAP. This requires that you address their 4th question – why now? Why should they do anything now?
You need to persuade them that if they don’t take action now, they risk losing a great deal. You need to explain your timeline, and their window of opportunity. And, this window cannot be vague or indefinite. It’s also helpful if they understand that you are in discussion with other investors. Never underestimate the power of perceived competition and FOMO to drive people to take action and make fast decisions.
In summary, entrepreneurs need to be good storytellers. So, the next time you are preparing your investors pitch, before you pick a template or worry about the number of slides in your deck, think about your story. Do you know who are the right audience for your story? Do you have a compelling story for them? Does it convincingly and effectively address their “4 Why’s“?
Once you have a great story to tell investors, your pitch becomes more simple, clear, and effective.