Getting a pitch deck to investors — what exactly does it entail and how do you increase your chances of raising the finance to start, grow and optimize your business?
Many moons ago I, along with my business partners, had to raise a substantial amount of money.
We didn’t have the luxury of the Internet, or any other “angel” investors and had to work it the hard way — this meant that we needed to produce a business plan and the only chance we had of enticing or even exciting investors was through the reading of an executive summary.
The whole exercise cost us £12K and it was produced by a leading UK accountancy firm that was chosen to “rubber stamp” the deal — although when you read the disclaimer, you would think that they produced it at gunpoint!
We were raising £150K, so the fees were less than ten percent, but when you are drastically short of cash, it feels like you have lost everything before you have even started, but that was the only option…and we did raise the cash.
Today, there are so many options on the table…crowdfunding, traditional bank lending, and the good old angel investors, just to name a few, but what I want to talk about is how you prepare to raise finance and the mindset you have to adopt.
A Quick Word About Investors
There is a lot of money floating around…just as there are a lot of ideas and business propositions…but you have to understand the mindset of an investor before you try to raise cash.
Investors don’t have as much opportunity to gain easy returns on their money — just forty years ago, you could earn around ten percent of your money from simply holding cash.
Today, you are virtually paying the banks to hold your money!
There is also the issue of hyper-competition and probably the most volatile economy that has ever existed, plus the fact that start-ups are doomed to fail…at least statistically.
But, there is no arguing that investors can make substantial returns from backing companies that will grow fast and furiously and give them returns that are dream-worthy.
Now, on the other side of the fence, you have a fantastic idea or business that you want to start or scale, but you need cash to do it.
How then, do you bridge the gap between the money and the idea?
The pitch deck is exactly that bridge — it’s where you put the exciting conversations into something a little more formal and it’s when you emotionally “hook” your potential investors so that they demand more…and then feel compelled to hand over their hard-earned cash.
The good news is that it doesn’t need to cost a penny…if you observe and obey the rules.
Start With The Basics — Why Do You Need The Cash?
It amazes me when I sit through presentations from businesses that are looking to raise money and they simply cannot explain or justify the reasoning for their requirement to raise cash!
I’m working with a business right now that is looking to raise cash to expand its leadership team and fund growth. It’s a no-brainer proposition because they will either trickle along as they are and I say “trickle” with a little humor as they are a successful business, or they get some serious investment to hit the big time.
The money will go into employing people, purchasing equipment and stock.
And when you look at the financial projections, you can clearly see the impact that the investment will make, so it becomes a “no-brainer” investment…if of course, you are the type of investor that will suit that company.
Don’t be shy to explain in very clear and simple terms why you need to raise cash.
What’s In It For The Investors And What Should You Give?
So many business people are too greedy when it comes down to sharing their success and I should know because I was one of them.
Think about this — you need the money to help you get to where you want to go, so if you don’t get the cash, you will not reach your dreams.
Therefore, think about the investor’s point of view — that means understanding that they need a reward for their investment and the risk they are taking. Yes… you are doing the work, but it’s a fine line to address and hopefully not to cross.
A few years ago I invested in an executive car business in the US — the guy who was operating the business simply didn’t want to acknowledge that the money I had put up needed to be paid back.
His view was that I should invest the money and accept that as a risk but I begged to differ.
Years ago, I was bailed out of a business that went bust — my new investors put up around 300K to re-finance us, and my business partner was given twenty percent of the new company, which was the old company minus the debt!
The deal was simple — in order for us to have the opportunity, they would finance the new venture and also give us the opportunity to own the majority of the shares (sixty percent). But they would require the initial investment back in order to trigger the uplift from twenty to sixty percent.
Seemed fair enough to me.
What I am saying is that you should be more concerned as to the value of your company after investment, rather than the value you have right now, because you need that investment to reach the new value!
Therefore don’t be greedy and learn to share success.
Pitch Deck To Investors 101
It’s all about sales and you had better learn to sell yourself, your ideas, and then your ability to give a return to your investors, so I will break each component down:
Selling Yourself/Management Team
Nothing irritates me more than when I hear sales trainers banging on about your unique selling point (USP).
Unless you really have re-invented the wheel, then it is unlikely that you will ever have anything that is truly “unique,” and even if you have (which I did have in one business), then you will find it extremely hard to market and sell, simply because there is no competition.
But…there is one thing that is absolutely unique and that is YOU!
Your DNA, your thinking, outlook on life, and everything related to you is unique and that is why you have to learn to sell yourself.
When I receive a pitch deck, I do two things — I look at the financials and then the management team.
There is no particular order for the two and I will go with the look and feel of the pitch deck to lead me to either one, so if you are selling your idea to me, then I need to know a lot about you and your team if you have one.
There is a saying in the world of recruiting — “you hire people for what they know and you fire them for who they are.”
Many people in business and especially when they are raising finance, spend too much time promoting the benefits of their idea and not highlighting the qualities of themselves and their management team.
I am interested if you were the captain of your soccer team at school…I love the fact that you won awards and I am keen to look at what you do in your spare time, how you live your life and everything about you…because I am investing primarily in you.
You don’t need to give me your life story, but you must try to convey your personality in your deck…that is the key and the hardest part.
Make sure you write how you speak and when it comes to writing your bio, then you absolutely must make sure to highlight each and every key achievement in your life, no matter how insignificant you think those points are. And if you feel you have nothing to shout about, then please make sure you convey your passion at the very least.
Sell The Idea
Now we come to the main event — can you articulate very quickly and easily exactly what you do for your customers?
You would be surprised as to how many people cannot — it’s not that they don’t know their businesses, but more that they cannot explain it to the normal, everyday audience that is sitting right under their noses.
And there is a lot to be said about being able to explain your business to your grandmother.
Keep it simple, stupid!
Remember those words and don’t make the mistake that I did with a tech startup that I co-founded in the early 2000s.
We had a very complex business that was based on mathematical modeling, but in reality, the outcome of the business, or what we did for our clients was extremely simple.
I say that now, looking back, but at the time I was convinced by my co-founders that the business was exceptionally technical and we needed to appeal to a technical audience. This was absolutely true…but the people who signed the checks didn’t care about technicalities, only the results for their customers — the outcome.
Have you really “tested” your idea?
I ask all of my clients to try to put themselves out of business!
I am being serious here — I ask them to imagine they are starting afresh and that their current business is the key competition and they must gain market share and beat the competition.
It’s amazing how creative people can be when they take on this challenge…at least for those who “get it.”
I am simply asking you to be super critical about your business or business idea and not to get married to it…yet!
I want you to look at your business as a total and impartial outsider and then to re-invent it because the chances are that you are missing something and that “something” can be the difference between success and failure.
The best way to do this is to jump into the shoes of your customer — what do they really want, what questions do they need answers to, and what would compel them to buy from you?
Mapping Out Your Business
Now it’s time to go through the 6 “M’s:”
- Mission — what is your mission?
- Market — what is the market you are going to serve?
- Message — what message you are going to deliver to the market?
- Model — what business model are you going to operate
- Monetization — you know this one, but how are you going to do it?
- Metrics — how are you going to measure your performance?
I will talk specifically about the mission because many companies don’t have one!
Just like a military operation, you have to have a mission — it could be to gain a specific percentage of the market, or it could be to sell the business within 5 years…it really comes down to you.
But you must be specific here for investors to buy into your goal.
Then it comes down to the specifics that I’ve mentioned above — delivering a compelling message to your audience in relation to the market you are going to serve. Then you have to create the business model — is it online, offline, or both?
How are you going to monetize your business?
What are the target gross profit margins and net operating margins?
How are you going to measure your performance?
All these questions will be at the forefront of the minds of your investors.
Now we come to the big one — what are the risks?
You’ve heard of the Strengths, Weaknesses, Opportunities, and Threats (SWOT), part of a business plan, I am sure!
But let’s go beyond that and really dig deep into the real risks that could affect your business…savvy investors will have already gone to the extremes and simply because they obviously want to get a return on their money, but they also need to weigh up the risks.
And this can be explained by the simple question that asks as to why your customers should buy from you.
It really is that simple and it opens up a can of worms — is the product or service sustainable, is the price point correct, what are the alternatives and how do we stack up against them?
You also have to factor in geopolitical factors and get a handle on the world economy.
I once had a discussion with an owner of a dance school and I was talking to her about the implications of the global economy in relation to her clients having the income to spend for their children’s dancing lessons.
She could not grasp the fact that if certain economic factors changed then disposable income would be affected.
I like to work through all of the details and leave nothing to chance — that is nothing that I can see that would affect any business model and I will split hairs to do so…and so should you!
Can You Deliver?
That’s the question my youngest son gets asked every week when he plays soccer — can you deliver the crosses into the box for the strikers to score?
It’s a simple job but requires a ton of work!
And that work is put in daily.
My son eats, sleeps, and breathes soccer — he wants to be a professional soccer player and is looking for an academy to sign him, so he is “selling” himself daily and that includes a return to those who believe in him.
As a winger, he needs to have pace, be skillful and deliver those all-important crosses into the box and even score a few goals — that is what he needs to return on the investment made in him.
You need to ensure that you can deliver the return to your investors…but do you really know what they are expecting?
It is essential to now jump into the mind of your investor, just as you did with your customers. Many people produce pitch decks with no thought as to what those investors are really looking for.
It is not rocket science that investors are looking for a return on their investment, so do some homework and figure out what the typical expectations and returns are for your sector.
It would seriously impress any investor if you have made sure to look at the investment from their terms, rather than simply asking for a sum of money to build a business.
But what is it that you actually have to deliver?
Here are my key points on this:
- Can you clearly articulate your business model in the simplest of terms?
- Can you clearly explain why you need the cash?
- What is the return for investors?
- Do you/your management team have the experience?
- Are you resilient enough to handle the pressure and challenges?
- Are you aware of the risks?
- Do you have any contingency plans should things go wrong — what happens if key members of the leadership team leave, for example?
The above points are not conclusive, but they will be the points investors will require specific answers to, so make sure you are prepared.
Business is about risk and reward — investors are well aware of this and are, in reality, desperate to invest in your business…but you have to make sure you are aware of life from an investor’s point of view.
Whatever your reasons for raising capital, it is vital that you understand the purpose of a pitch deck, slide deck, or whatever else you want to call your presentation that is going to give you a fantastic return on your time…if you produce it correctly.
And at the forefront of that production should be the specific reason(s) as to why you want to raise the money.
Once you have established this point, it comes down to how you are going to spend it and what return you are going to deliver for your investors.
Remember that you are constantly “selling,” when it comes to starting, operating, and raising finance for your business and that process starts with you being able to “sell yourself.’
I have my own views on sales and selling — for me, the whole process has become massively overcomplicated and despite all of the sales training programs and gurus in the market, there is still a huge global shortage of good, consistent, and reliable salespeople.
Take a look at my article below to understand and apply my views:
Over the years I’ve been on both sides of the fence — trying to raise money for my own concerns and also sitting through endless presentations where, to be honest, I have been bored, had to decipher the jargon, and even worse, listen to long-winded speeches where the presenters had clearly not understood their business well enough or were asking for huge sums of money and offering very little in return.
If you want to discuss anything further on this subject or you need help in preparing your pitch deck to investors, then please don’t hesitate to get in touch:
Last modified: November 30, 2021