Understanding your customers’ needs and providing a solution to meet them is likely to be the backbone of your business model. By doing this effectively, you can ensure the success of your enterprise and generate a healthy profit. When it comes to pitching to investors, the same principals apply to guarantee funding success.
When you approach a lender or investor, the focus is on understanding their needs in relation to financing your business. What are they looking to achieve as a return for their investment? How are you going to prove your ability to deliver it?
Every funding round will bring different challenges and each time you need to be clear about what investors are looking to find out about you and your business so that you can provide the necessary information clearly and concisely. You need to articulate an understanding of their needs and proof that your investment opportunity can deliver against it.
This is where your funding pitch comes in. Once you have secured time in front of an investor, it is essential to use it to put the spotlight on your enterprise and showcase the value you have to offer anyone who devotes their money. By doing this, you should enjoy success after every pitch, helping your business to reach its goals and secure the capital it needs.
Here are our eleven steps to building an attractive funding pitch.
- Present yourself
- Introduction
- The opportunity
- Your solution
- The competitive position
- Your team
- Business model
- Financial forecasts
- Required investment
- Key milestones
- The deal you expect
Present yourself
First impressions are everything. So, throughout your presentation, you should focus on coming across in a favourable light. Never overrun your allotted time, so be clear on how long you have in advance.
This doesn’t mean having to be a design wizard or put on a show. It means having a consistent and attractive design that is used throughout any slides or documentation you show during the session, making sure any representatives from your team look the part and spending time going through your pitch in advance to iron out any creases.
Remember to bring the personality of your business into your presentation to truly show investors who you are and what your working ethos is, and be consistent in this to highlight your professionalism.
Introduction
This should be your first slide and where you introduce yourself, your business and the contents of your presentation. Remember to be brief, while still capturing the attention of your audience – focus on highlighting just a few key strengths when you introduce yourself.
The opportunity
Summarise the problem that you have identified and the pain it causes for your customers, pinpointing the gap in the market that you propose to fill with your offering. Outline the market position, now and in the future, demonstrating an understanding of the key players and routes to market.
Make potential investors aware of how your solution will fill this gap and the opportunity that lay in doing so.
Your solution
Describe your solution and do it well. This is how you’ll generate a profitable return, so you need to sell the reasons why your product or service is unique and better than others, as well as the results you hope to deliver with your offering.
Be clear about who the target market is and explain how you will solve their current problem or pain point. Justify your ability to do this with evidence of your track record to date, sales history, existing customer base and existing routes to market. Letters of intent will support your pitch.
The competitive position
Having a great solution means nothing if the market is saturated with other similar offerings. You need to identify all of the comparable options that potential customers could also access, including an analysis of how you compare (and outshine) the others. Remember that competition also comes from your target customer doing nothing.
You need to demonstrate a thorough understanding of the competitive landscape too with a good knowledge of the key players, their market share and the total market value. This will help to cement the opportunity you are presenting.
Competitor research could also include identifying the results that companies have experienced before you and translating this into how your efforts will follow and supersede their metrics.
Your team
Investors always take a strong interest in the people behind the sales, and they need to be confident in those driving the business forward.
Define the company’s vision and present a robust leadership team, with a wealth of industry knowledge and expertise, to deliver against this. Be open about how the team is made up, including their skills and strengths, and how they will enable you to meet your overarching goals. Talk about your board, who sits on it and how it functions.
If you are the founder, consider whether you would step aside and appoint a new CEO for the next phase of growth. This is a question often asked. You should also consider the future of your business and how your management team may change, as well as how you hope to expand your workforce.
The business model
In this section, you should outline how your business operates and, equally as necessary, how it has been funded. Highlight the business model that you are working to with proof of how it delivers the projected revenue and how you will make it a reality within your enterprise.
Consider any challenges that may have implications for this, such as a change in structure, new routes to market or increased sales targets and explain how you will overcome any risks this presents.
Your business model should show longevity to build a sustainable business, but the ability for it to be flexible to meet changing circumstances is also a must. This may include showcasing any contingency plans you will utilise if required, to give the investors the confidence that they will get reasonable returns regardless of any situation that may arise.
Financial forecasts
This is the money section, and the big question on everyone’s lips is ‘how much profit do you realistically expect to make?’. This is the bottom line for most investors, so your forecasting needs to be thorough and realistic.
Your thinking needs to be longer-term to show sustainability; work on an achievable figure for annual revenue over the next five years. Be clear about the amount of money that is required to get the business to this level and your plans for securing this. You should also allow margins for when things do not go according to plan, and you need to find funding to fill the gap.
Make sure your projected figures are relative to the market size and opportunity and provide a reasonable justification for all of your forecasts and assumptions, particularly concerning cash flow, to help investors see how you have come to your conclusions.
Perhaps one of the most vital things to do here is detail when the investor will get their money back and the profit they may expect to see, so be sure to include this information.
Investment required
By this point, you should have done a lot of calculations to understand precisely what you need to achieve your next phase of growth. This should be aligned with how much you can afford to pay back (in the case of a loan) or have many shares you are willing to relinquish (in the case of equity).
Investors will be expecting to see a valuation for your business as well as the investment figure that you are looking to secure. Within this detail, you also need to outline what funding the firm has already received and the sources, especially where investment has been made by yourself. It is also worth indicating any loans or other finance you intend to seek later down the line, so to keep investors fully informed.
Remember to keep focus at all times on what investors will be getting for the money they inject into your business, as this will make them more willing to part with it.
Key milestones
How are you going to get to your intended end goals in a few key steps? What is success going to look like along the way? And what changes do you need to make to your business to get there? The answers to these questions should be presented as part of your pitch.
You need to produce a set of success measures, along with critical dependencies, to outline what you are going to assess your business against. This could include staff numbers, sales figures, profit levels and other milestones related to the growth of your company. Remember these as you may be required to report back on them later down the line to update investors.
Be clear about what success means and don’t forget to tell the investor how and when they will see their return once you have reached those goals.
The deal you expect
It is vital for you to secure the right investor for your business, so make sure you are providing a compelling offer to attract a good pool of potentials. Be explicit about what they can expect to receive in return for their money and what it is you want from them.
Investors tend to be in it for the profitable return, so you need to make sure you demonstrate a viable plan for them to get their cash back, regardless of whether they provided a debt or equity finance solution. This may also include how long you expected them to be involved in your business and how they will step away afterwards.
A debt finance return will simply be you repaying the money with interest and on time. The period over which this happens will need to be agreed with your lender, taking into account their preferences and your affordability.
An equity return will require you to present an exit strategy from the business for the investor, with an approximate timeframe as to when this will happen. In some cases, investors may remain with you for years. In others, such as venture capital, it may be a case of helping you to achieve your goals and then leaving.
By making the offer you want clear, you will be able to walk away with the basics of what you want, even if there is some negotiation to be hand beforehand.
Get advice
The above steps are simply an outline of the type of information an investor will be looking to see when approached for finance, but you can present it in any numbers of ways. The key is to make sure the content is factual and relevant to attract the right attention.
If you receive specific guidance from an investor before pitching, you should incorporate this into your presentation and tailor your content to the desires of your audience.
If you are new to seeking funding and creating pitches, we appreciate it can be a daunting prospect. As such, it is essential to get support to help you identify the right avenues for finance, prepare your business and finetune your pitches accordingly.
At Pegasus Funding, we have a broad network of investor and lender connections, enabling us to put you in touch with these sought-after contacts. We also know what makes a great pitch, so we can work with you to craft a winning version for your own business.