If you’re one of the 350,000 start-ups in the UK this year, the chances are you’re considering raising finance from a business angel - a wealthy individual who invests in early-stage businesses.
A tiny percentage of companies manage to pull this funding in. It’s not because the money isn’t there; despite the economic climate, there is still investment to be had. Often, a start-up just doesn’t do enough to engage an angel’s attention at pitch.
So, how do you create the perfect pitch for funding?
• Do your work pre-pitch. Don’t go in cold – your email is likely to get junked. Get an introduction, or join a referral network. Create awareness of your business ahead of your pitch. If an investor Googles you, what will they find? Raising your personal and business profile (for example, by joining relevant blog debates) will ‘warm’ an investor pre-pitch.
• Prepare. Keep your presentation concise, giving an overview of your business. The detail will come later. Twenty minutes is enough for an investor to know whether he or she is interested. Rehearse, and anticipate questions.
• Open by introducing yourself and your business. Address three main questions: What does your business do? How does it make money? What is your market?
• Give a short summary of your management team. What is your experience? What qualifies you to succeed?
• Then go into more detail. Describe your product or service. Why is it unique? What problem does it solve? How big is your market? Base projections on real, current research.
• What trading have you done, or what confirmed interest do you have? If you are pre-revenue, what have you achieved, such as awards, patents, or product development?
• How much money are you asking for? What will you do with it (product development, for example)?
• What is the exit plan for an investor? An angel will expect strong financial returns within two to five years. What are your projections, over what time frame? Know your figures, inside and out.
• Finally, sum up by repeating the key points of your pitch: why you are a good investment.
Here are the five biggest reasons why pitches fail:
1. Your research is old. Don’t pitch market potential on last year’s research.
2. Your sums are wrong. Check your figures and be realistic. A savvy investor will see through financial hype quicker than you can say ‘credit crunch’.
3. You want investment to pay your own salary. Big mistake. No investor is going to put you on their payroll.
4. Your idea isn’t unique.
5. The return is less than an investor could get in a high interest savings account, or will take too long to make.
Creating the perfect pitch requires you to be brutally objective. Remember: a business angel has no emotional attachment to your business and no interest in anything other than the financial return. Having a great idea isn’t enough.
Emmett Kilduff is founder and CEO of business network, www.cmypitch.com, which helps start-ups grow and find funding.