It’s always a challenge to present your business to someone. Making the decision to raise funds requires a good understanding of what investors want to see and the factors they assess a business with before deciding to put in their money. Money is something every business needs to operate. If you are searching for capital and get a first meeting with investors, the impressions you make in the first meeting alone could mean the difference between receiving a signed cheque and you never being contacted again. This article highlights some of the biggest mistakes first-time pitchers make when meeting with potential investors.
- Giving a wrong valuation: When pitching your business , it’s very important to know what you’re worth. Giving a wrong valuation can affect your pitch in different ways. A valuation that’s too high will chase potential investors away, while one that is too low can leave you feeling like you got the short end of the deal if investors eventually decide to follow through. Getting a proper valuation for your business could be tricky, so read the article “How to value your startup” for essential tips to help you make sure you’re not going in too low or high.
- Having no proper structure: Young entrepreneurs, most of whom have no previous experience with investor pitches often make this mistake. They make their pitches so hard to follow that their audience still doesn’t get the central idea halfway through the pitch. If your presentation has no proper structure, it will raise more questions than it provides answers. Young entrepreneurs, when pitching their businesses, have the job of constructing a clear, logical message, devoid of ambiguity and leaving no room for misinterpretation or confusion. The reason why an investor refuses to sign a cheque should be that they don’t want to partake in your idea, and not that they cannot figure out what it is in the first place.
- Not knowing who you’re pitching to: Making this mistake is not only slightly insulting to potential investors, it also calls into question your ability to perform any kind of market or product research. Social media and other online sources have an overabundance of information about virtually everyone and thus provides no excuse for not knowing who your audience is. You are better-prepared when you have more information about the investor’s background, interests and affiliations. Knowing more about the decision-makers will demonstrate that you do your homework and will be to your benefit if the investor takes serious interest in you.
- Not knowing the size of your target market: To properly communicate the opportunity your business provides when pitching to an investor, you must know the size of your target market. Knowing this market will help you better identify your direct and indirect competition and know how you’re different from them. Have a map showing your competitors and how your product or service measures up against theirs both in strengths and weaknesses. When you show investors your sales cycle and how you plan to build a growth company, you give them a proper sense of the time and effort that will go into increasing your sales.
- Making “guesstimates”: Never make promises like “ my startup is going to be worth $1 billion by its fifth year” to potential investors when pitching your business. Investors want conservative estimates, rooted in facts that they can trust, not fantastic “guesstimates”. Also, when pitching, never make forecasts about your company winning a slice of an existing market. This is called a “top down financial forecast”. Instead, go the “bottom up” route by basing financial forecasts on actual budgets. By this i mean the number of items to be sold, multiplied by what each item costs.