How to Pitch to Early-Stage Investors as a Technology Startup
Are you the entrepreneur of an early-stage, technology startup? If you are, you likely will have to pursue investment opportunities at some point in the lifecycle of your business, and that means you have to craft your all-important "pitch." We talked with Arizona-based investors and came up with some of the most important aspects of an investment presentation:
1) Focus on the business model and the problem you solve
“Grasp of a good business opportunity…”
Entrepreneurs are often enamored with the technical aspects of their product or software solution, and their pitch ends up centering on a discussion about features. The simple fact is investors are not typically interested in how it works, they want to know that you have a viable business model that will pay on their investment. Demonstrate first that there is a pressing problem your technology solves (in a few brief sentences) and then show how you are going to reach these potential customers with your solution - - that is a surefire way to be memorable in the mind of a potential investor.
2) Be receptive to feedback
“It starts with attitude…”
Confidence is sexy, but arrogance is a turnoff. That is good advice not just for romantic relationships but in investment pitches too. You may be an expert in your technology, you may have years of startup and corporate experience, or you may just be a whiz-bang kid with a great idea, but you do not know everything about running a successful business. After all, you probably would not be seeking their financial help if you knew it all. If there is an opportunity to hear feedback from the group, listen to it attentively and do not interrupt. Do not be argumentative during any Q&A portion of a pitch because it is the investors’ job to ask tough questions; along those lines, it is perfectly acceptable to say that you do not have a clear answer to a question. Instead of BS-ing your way through it, give an answer like this: “That is a great question, and I will speak with my advisory board and follow up with you in 24 hours…” or “We need your investment to compensate for the deficiency you are describing…” That will build credibility and help you avoid hyperbole or even dishonesty, both of which will be outed during the due-diligence process.
3) Be realistic about your financial projections and valuation
“The uncertainties are enormous…”
Projections are not perfect particularly for a pre-revenue startup, but you can apply a scientific approach to provide a realistic valuation of your company. Avoid using adjectives such as “conservative” or “promising,” particularly if there is no substance behind those terms because the quantification of potential sales and a solid business model will give those numbers tangible meaning. Review comparable businesses – not the one-in-a-million shot – in order to arrive at some middle ground that shows potential.
4) Research your audience
“What are the investors interested in…”
Just like a job interview in which you survey the potential company for whom you are applying, entrepreneurs should do some basic research on the investor(s) to whom they are pitching. For example, the Arizona Technology Investors (ATI) state clearly on their website that they “do not invest in retail, services not driven by technology, or real estate.” Exploring the investment history of a particular group or individual as well as a cursory understanding of those individuals and their backgrounds will go a long way to crafting an appropriate pitch. If entrepreneurs do not do their homework, then they tend to focus too much on technology and features instead of the business opportunity in which they are proposing.
What other suggestions would you give an enterepreneur going out for investment? Answer in the comments below!