Dec 7 2011

7 rules for pitching to investors that almost everyone fubars

So you want an investor in your business. Here are some rules that I, as both an angel investor and entrepreneur have found valuable:

Don’t pitch to strangers: People very rarely invest in an idea. They invest in people with ideas. If you don’t know anyone, get started now. Investors are more accessible than you think…not just guys like me but professional VCs too. Especially accessible if you prove a consistent passion and progress towards a single, well-defined goal. Plus, you might just gain a smart friend in the process.
Ask questions: You want to seem like an expert and so on…I get that. But I can tell you from experience that as an entrepreneur, you’re in a very tight bubble. You can almost hear your own ideas echo. Don’t be afraid to ask the potential investor what he thinks. And for the love of all that is pappy LISTEN. Holy hell I can’t even count the number of times an entrepreneur has treated my genuine ideas for growing his business as an OBJECTION HE MUST OVERCOME. Exhausting. Listen to the man. He probably has a very good idea/approach, and you’ll get him thinking about your business. Double win.
Leave the powerpoint, take the whiteboard: Enough with the powerpoint. Everytime someone shows me a slideshow with projections and graphs and market size, I start thinking about ways to poke holes in it. It’s like presenting evidence to someone that is about to cross-examine you. Instead, bring a blank sheet of paper and a whiteboard. Know your stuff inside and out. Draw your concepts right there in front of your investor. Engage her, and again…get her thinking about YOUR business.
Short, simple and direct to the point: It’s not just laziness or b-plan overload that makes people want to see short versions of what you’re planning. It’s actually got more to do with seeing how executable the idea is. If you can show me an amazing idea and how you’re going to execute it through on one page of paper…I know your odds of success are much better than the guy that needs an entire tree to get his point across.
Be honest: If you aren’t good at one aspect of the business, don’t be afraid to say it. Part of the investment process is determining what amount of money will be needed…including for staff. If you don’t understand a question that the investor is asking, say so!
There is no maybe: Look, as an investor, I’ll take a free call option on your business for as long as you’ll let me. There is no reason why someone can’t turn around a basic term sheet within three weeks with a closing in 12. The 2nd best answer you can get in a pitch is a no. Enjoy the no. It frees you. Don’t be afraid to ask someone to commit to a no. If they don’t say yes or no, then find out what more they need to know to make up their mind.
NDA? GTFO: It’s extremely unlikely that anyone is going to steal your idea. Ideas just aren’t worth much. It is, however, very likely that someone will refuse to sit down with you if you make them sign an NDA. Too much risk for an unknown, unlikely reward.

Remember, you’re just two people sitting down having a conversation about a business that you BOTH want to make you BOTH a lot of money. You are trying him out as an investor and probable board member just as much as he is trying you out as a place to put his hard-earned money.

Engage, simplify, and respect.

Win.

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