So you’ve got your idea, you’ve got a working prototype, and you want to break into the market. Now all you need is: money.
No matter how amazing or useful your new product may be, it’s pretty unlikely that investors will be knocking on your door begging to be allowed to invest in what you’ve created. And that means that, if your funding plan includes investors, you’re going to have to approach a few on your own.
So how do you do that in the most effective manner? Here are 5 tips for how to pitch to investors.
- From the start, realize that most investors don’t want to invest in your product – they want to invest in your business. This is a critical distinction, as it will help you cultivate the right mindset when formulating your pitch.
- Create a profile on AngelList, Gust, or another investor-startup social media site. These websites connect startups with angel investors. The way they work is you create your profile and include as much detailed information as you can about yourself, your product, your company, and your team members, if you have any.
- Carefully craft your business plan. Since you’ve recognized that what investors want to hear about most is your business, you’ll be well-prepared to put the time and effort into creating a solid business plan.
- Make sure your finances are in excellent order. Depending on your situation, you may already have some revenue and expenses related to your business, or you may be starting from zero. Either way, investors want to make sure that they’ll get a return on their investment – and if you don’t have any financial history for your business, then they’ll want to get that assurance from your personal financial history.
- Do your homework. Angel investors are generally busy people, and you don’t want to waste their time – especially when you’re asking them to give you a sizeable amount of money. So before you approach anyone, you need to make sure that they’re actually interested in investing in a business like yours.
You can spend all the time in the world talking about your product, but if you’re not able to show them how you’re going to build a successful company around it, you’ll most likely be out of luck.
Investors, who also use the site, can then find you easily by following the field you’re working in, or you specifically. Some entrepreneurs choose to send a personal (emphasis on personal – no copy and pasting a mass email!) note to investors that follow them or their field. Just use your best judgment when it comes to reaching out.
You can also share your profile with friends and acquaintances to widen your reach.
For some detail on what to put in your business plan, you can read our post “How to Start a Company to Create Your Own Product.” As for other pointers, one of the most important things you can do to increase your chances of success is to know your numbers.
You should be able to rattle off any important numbers in your business plan from memory, and you’ve got to be able to explain them, too. You don’t want to have to go flipping through your own presentation to find answers when a potential investor asks you a perfectly normal question like “How fast can you scale this business?”
That means that if you have delinquent debts, overused credit cards, or other poor marks in your credit history, you may want to spend some time cleaning up your credit before you start asking people to invest in you. Unless you’ve got some truly extreme extenuating circumstances, a shoddy credit history will get you a “no” pretty quickly.
That can get a lot more complicated than you may think.
For example, maybe you’ve found an investor whose interests include new medical products, which is what you’re producing. But what kind of exit strategy timeline are they expecting? If you project an exit strategy in 10 years but the investor you’re pitching is looking for a 5-year exit, then that’s indicative of a mismatch. You want to pay attention to these bits of information, because often investors will offer up very detailed plans of what kind of investment opportunities they’re seeking.
Now, not everyone will, of course. And investors do change their minds, like anyone – an investor who wouldn’t have been interested in your product a year ago might have shifted her focus in the past few months. All the same, you simply can’t afford to pitch anyone without knowing as much as you can about their interests and desires first.
Building a company can be an arduous task, which is why Pivot offers Business Development services in addition to our Product Design services, Manufacturing services, Regulatory services, and other offerings. To find out more about how Pivot can help you build a company around your product, read our e-book “Turn A Great Idea into a Thriving Company.”