Pitching to Investors: What You Need To Know

It’s hard to think of anything more closely associated with the startup experience than pitching to investors.

Think about it: virtually every hackathon ends in a pitch competition. The promise of pitching to real, live investors is the grand prize at incubators everywhere. There are whole television shows devoted to following people as they pitch their company. Podcasts, too.

And no wonder: when you’re pitching to investors, you’re putting your heart on the line, spilling your guts about why you believe down to your bones that this business needs to happen – and you need to be the one to lead it. It’s not hard to see why that makes for compelling viewing/listening.

But there’s another reason the investor pitch is so iconic: because it’s so dang hard to get right. Closing the deal with investors is like trying to blow up the Death Star: the target is tiny – and there are about a million ways to mess it up.

If startup founders are all hoping to be Luke Skywalker making his final, heroic X-Wing approach at the end of Star Wars, Invisu.me Co-Founder and CEO Donna Griffit is the voice of Obi-Wan urging them to use the Force. She’s a verified Jedi master of pitching, and she’s helped countless founders distill their pitch down to its Death Star-destroying essence.

Recently, Donna had a chance to sit in “the room where it happens” and listen in on what VCs say about a pitch after the founders leave the boardroom.

We asked her to stop by and share some of her insights on what it takes to blow investors’ minds during a pitch.

What we got was the startup equivalent of “use the Force”: Be prepared. Be yourself. Be so awesome, investors have no choice but to say yes.

“WHAT ARE INVESTORS LOOKING FOR?”

We won’t toy with your emotions: this is the answer you want, right? It’s the answer we all want: what are investors looking for in a pitch? What’s the detail that makes them decide whether to invest – or not?

If only it were as simple as one single thing, or even a checklist that would guarantee you the money in the bank every time. But the frustrating reality is that every investor is different. They all have slightly different things they tend to look for when evaluating a potential opportunity.

One may be a strict by-the-numbers person who look for strong numbers. Another might be a sucker for a giant market size and the potential of a 100X return. A third might just go by their gut, or a feeling that they have about the Founder standing in front of them.

That being said, there are some things that all investors tend to look for when they’re listening to your pitch. The way Donna sees it, the essential investor wishlist for any potential investment breaks down into three core buckets: Credibility, Likeability, Momentum.

Credibility

Do these people know what they’re talking about? Do they know their company and their industry backward and forward? Have they done their research? Do they have the right knowledge and experience to make this happen? If they don’t have the knowledge, does it seem likely that they’re able and willing to gain it?

Likeability

Do I like this company and this product? Do I feel good about what they’re doing and what it will mean to the world? And, just as importantly: do I like these people? Do I feel good about spending hours and hours with them over a span of who knows how many years working to make this business happen?

Momentum

Do these people have the GSD factor? Are they getting shit done on their own, or are they waiting for my money to magically make it happen? Would my money be kindling on a fire that’s already dead? Or would it be gasoline on a fire that is already burning strong and just waiting for some fuel to blow it up?

The element that seals the deal may be different from investor to investor, but if you evaluate your pitch in light of these three core values, chances are you’ll be speaking investors’ language more often than not.

NEED HELP crafting A kickass investor Presentation?

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Check out our Funding Plan.

INVESTORS ARE PEOPLE, TOO

VC’s and angel investors have taken on somewhat mythic proportions in the startup universe. They are the gatekeepers. The hitmakers. The Mean Girls who make the call about whether you’re cool enough to sit at their table or not.

Because of their vaunted status, there’s a tendency to think of investors as these all-knowing, all-seeing beings – fortune tellers crossed with supercomputers, who listen to pitches, tweak a few numbers in their algorithm, and spit out the decision that makes or breaks a startup’s future: yes or no.

But here’s the thing you need to realize about investors: they’re people, too. And, like a lot of people, sometimes what investors want more than anything is just a good story.

“I was blown away by how much they all were craving the story,” observes Donna of her time behind the scenes in the boardroom. “The story of your customers, the story of your product, the story of your audience.”

What does this mean for your pitch? It means it’s not enough to spit out impressive market size figures and well-thought-out revenue projections. Alongside that, you need to be building a compelling vision of what it all means: for your customers, for your company, and for investors themselves.

How does it feel to be your target customer living in a world without your solution? Why do you personally feel so strongly that this solution needs to exist? How will the world be different and better five years from now, when customers have adopted your solution?

These are the kinds of storytelling details that add depth, dimension and, above all, humanity to your pitch. They help investors see your company, not as a collection of slides in a pitch deck, but as a living, breathing thing.

As Donna puts it, “Don’t let them OD on numbers – give them the meaning of the numbers.” Give them a peek into the “why” behind the “what.”

YOU’RE THE EXPERT. BE THE EXPERT.

Another important thing to keep in mind about investors-who-are-also-people: try as they might, they don’t have perfect knowledge of every industry or every emerging technology. But don’t let that scare you away from pitching your business.

“Don’t assume an investor won’t invest just because they don’t ‘get it,’” advises Donna. “Investors are smart people – but they might not know a thing about your field.”

If an investor doesn’t “get” the industry you’re working in, or the solution you’re building, your job is to help them get it. That’s why you’re the founder, not them. You’re the one with the vision. You’re the one who sees the whole board and how the pieces are moving. Sometimes, you have to help investors see what you see.

We’ve talked elsewhere about the importance of cultivating radical empathy for your audience and their needs. There are few places where that empathy is more important than when you’re pitching investors.

Remember: investors look at dozens and potentially hundreds of pitches every week, month, and year. With all that data taking up space in their hard-drive, their processing speed is not always the best.

“Investors aren’t always very good at figuring out the nitty-gritty,” Donna points out. “We need to help their poor, overloaded brains.”

A helpful analogy, Donna says? Think about pitching your business to investors like you’re explaining it to your parents. “My husband works in UX consulting,”

Donna explains. “When my mother asked what it is, I didn’t go into wireframes and AB testing and all this technical jargon. I just said, ‘Mom, you know how there are some apps you love using because they’re so intuitive? And there are some you can’t stand, and make want to toss your phone out the window? Jonny helps companies make them like the first type.’ And she got it.”

Pitching investors works the same way. Sometimes you may have to back up a bit, or lay the breadcrumbs of your idea out just so for them to follow. But if you lay it out well, follow they will.

Because here’s the thing: investors want you to succeed. They want your business to be the next game-changer, the 10X return success story that fuels their bottom line and yours. They want to believe. So give them a reason, and they will.

YOU STILL GOTTA BRING THE GOODS

At this point, you might be thinking that a lot of this advice sounds like touchy-feely nonsense about tucking investors into bed with a story and making them feel good about your company. But don’t get us wrong: you still have to bring it. Because as much as investors may want to believe in your pitch – their job is to look for every reason not to.

When you’re pitching investors, you’re basically putting your company on trial. You’re the defense lawyer, and investors are the prosecution. As the defense, your job is not only to build your own argument for why your company will succeed – it’s to dismantle the prosecution’s argument for why it won’t.

From the moment you start talking, investors are going to be looking for holes: flaws in your logic, failures in your calculations, inconsistencies in your story. Your job, according to Donna:

“Aim to melt all the investor’s objections in the first 3 minutes.”

One surefire way to fail the test? By not knowing your numbers. “You have to know your numbers inside and out,” says Donna.

Which numbers, exactly? Here are a few of the big ones:

Customer acquisition costs (CAC) / costs per customer  (CPC)

How much is it going to cost you to get customers to use your product?

Growth (MoM, QoQ, YoY)

How fast are you going to be able to grow month over month, quarter over quarter, year over year?

Market size

How much money is there to be made in this space, and how much of that can you reasonably expect to capture with your business?

And, of course, the big one…

Revenue

[Insert record scratch sound effect here.]

Wait, revenue? But some of the most successful startups in the world have raised countless millions of dollars without taking a cent of money from their customers. That must mean revenue doesn’t really matter, right?

Wrong. So wrong.

“Look not everyone will be making money right away, and that’s fine,” says Donna. “But you need to have a clear vision of how you will monetize, and that the market and margins are big enough to see significant revenue.”

There’s a reason the ABC show is called Shark Tank. If investors smell blood in the water – if they can tell you don’t know your numbers or you haven’t thought through your business model – they will attack.

DO YOUR HOMEWORK

There’s endless amounts of information out there about the work you need to do on your company to get it ready for investor meetings. But there’s a flip side to the equation that’s not discussed nearly as much: the work you need to do on investors.

“You need to do your due diligence on investors, just like they would do on you,” Donna points out. “See if you can find their sweet spots – their portfolio, their blogs.”

Doing due diligence on potential investors before you pitch to them helps you determine what aspects of a company different investors care about the most, so you can tailor your pitch to hit those key components.

But there’s another advantage: it helps you decide which investors you want – and which you don’t. Which brings us to another one of Donna’s big hints for successful pitching:

“Try to only pitch investors in your space.”

To a cash-strapped Founder desperate for money, the idea that there are right and wrong investors for your business might sound completely crazy. But take our word for it: not all investor checks are created equal.

There are good and bad fit investors for your company the same way there are good and bad fit customers.

Take the time to identify which investors that your company is a good fit for – and which. You’d amazed how much more successful your pitching experience will be if you do.

NEED HELP IDENTIFYING YOUR IDEAL INVESTORS?

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PRACTICE, PRACTICE, PRACTICE

Once you find those investors that are the perfect fit for what you’re trying to build, advises Donna: don’t pitch to them.

We know what you’re probably thinking: wait, what? But hear us out.

The first few times you give your pitch, chances are it’s going to be rough. There are going to be questions you didn’t anticipate, details you didn’t think through fully.

Do you really want your ten minutes with your dream investor to be the time when you discover those holes?

We didn’t think so.

Investor meetings aren’t just meetings: they’re workshops. Every time you’re in a room with an investor, you’re going to get feedback on your pitch and your business. That’s feedback you can take and incorporate into your pitch to make it stronger. So why not spend those first couple feedback cycles on some audiences that are a little less high stakes?

“When you start pitching, maybe start with a few investors you aren’t truly interested in,” Donna suggests. “Get some friendly meetings. If you know entrepreneurs who have raised, investors who are friend-ish and you know won’t invest with you, ask to practice with them. Cut your teeth. And then come in more polished for your dream investor.”

Trust us: you need the practice. “Founders are sooooo close to their product that it’s nearly impossible to tell the story through another person’s perspective,” Donna points out.

Don’t let a meeting with your dream investor be the first time you realize your pitch doesn’t make sense to anybody but you. Find someone – find lots of people – who can look through the eyes of the investor and ask all the tough questions an investor would ask. Then – and this is the big one – incorporate the answers into your pitch.

As with anything in the crazy world of being a Founder, messing up is not worth crap until you learn from it.

Learn to love rejection

There you have it: all the ammunition you need to go into your first (or second, or tenth) investor meeting guns a-blazing and ready to set the world on fire.

Not to end the post on a down note, but there is one final thought we want to leave you with: as a Founder looking to pitch to investors, you’re going to have to get used to hearing the word “no.”

Investors may say no, and that’s okay. Investors aren’t the be all and end all of the startup universe. Believe us, we know it can feel that way. Oh boy, do we know.

But let’s be real. If investors had all the answers, they wouldn’t need Founders to come up with ideas and build the damn thing; they’d do it themselves. So no matter how many investors turn you down, or flat out refuse to answer your emails, listen to your gut above everything. If your gut says go for it, go for it.

Every investor has a list of “the ones that got away”: multi-million dollar companies they had the opportunity to invest in, but didn’t.

Your company could very well be the next one on their list.

WANT MORE GOOD STUFF ON PITCHING TO INVESTORS?

Check out our Startups University courses featuring pitch experts Ullas Naik and Nancy Duarte, as well as more great resources.

Picking Winners: Ullas explains how investors really evaluate a company.

Presentation is Everything: Nancy teaches how to give the perfect pitch, including how to map your story and the importance of knowing your audience.

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