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What You Need To Know When Pitching Your Start-Up Venture to Investors
Richard Branson on Raising Investment Capital
Defining The Framework for Success
If you've decided to look for investment capital to fund your start-up venture, you should know what to expect before pitching your business proposal to investors.
Although venture capitalists and angel investors typically have their own specifications for deciding if a business opportunity is worth entrusting their dollar in, they'll both expect to see a solid, well-designed business plan.
An effective business plan defines your goals and lists the objectives that need to be completed to in order to accomplish those goals. It should communicate your purpose, vision and how the company will be competitive. Furthermore, investors will want your business plan to clearly state how much capital you need to run your company and how you will invest your profits.
Pitching investors means translating the strategies of your business plan into a dialect that communicates how your company will succeed. The key to delivering a solid pitch is make sure you answer these questions:
- What need does your product fulfill?
- Who are your customers?
- Why will they buy your product?
- What is your marketing strategy?
- What makes your company unique?
- What is the potential market share?
Know Your Financial Statements
Investors will also want to know the kind of management structure you plan to operate your business under. In describing how you'll manage and lead the company, transition into a detailed account of how you'll manage the financial aspects of the business. They may not admit it, but investors care more about your ability to balance your company's budget more than anything else.
That's not to say that angels and V.C's don't look for a unique and effective business model, because they do. However, your business proposal should be loaded with positive indicators that suggest sustained growth and profitability.
When presenting your financial statements, be ready to answer questions about how you obtained the data to calculate your estimates. Your marketing analysis will demonstrate how sales estimates were calculated, and how the numbers reflect expected customer demand.
Pitching Your Financials
When pitching your financials, investors want clarity, details and simplicity. But more so, they want realistic calculations, especially in your profit and loss estimates.Make sure your estimates are accurate and that they forecast both monthly sales revenues and total expenses.
Investors want to know their dollar is safe and that you're business will earn them a profit. Your cash flow statement is what demonstrates the potential for capital investments, while showing a projected balance sheet of your assets, liabilities, and capital earnings over the first three years of business operations.
Once again, be accurate when projecting assets and liabilities, accounts payable or credit card balances. Investors understand there will be expenses, but they also expect your business plan will be accurate in its analysis of costs.
Your expectations for future sales should show stable and consistent sales estimates that are organized according to the first three years of business operations. Investors may be more inclined to reach into their wallets if your business plan shows that your company has earning potential based on accurate industry data, and analysis comparing that potential to market volatility. .
You'll also want to show the amount of profits that will have to be made before your company's start-up expenses are paid off. The break-even analysis in your business plan will provide investors an idea of how long it’ll take before they see a return on their investment. It's important to note that some investors may base their final decision on how long it will take before the business earns them a return on their investment.
Only $149.00 was $400
Less Risk and More Reward
Just remember, a break-even analysis should be clearly communicated so investors understand what the total fixed costs are and how they represent the selling price of your product, minus the variable cost per unit. From this equation investors can determine what sales revenues need to be earned before your business starts earning its way out of debt.
If you can convince investors that your business proposal has less risk and more reward, they will be more confident to invest in your operation. The key is knowing the financials and then demonstrating the ability to balance the company budget. They’ll be more likely to invest in someone who knows how to manage costs and company resources rather than someone who can’t exercise practicality in their spending habits.
It's important that you earn the trust of investors. Make sure you articulate a solid understanding of your industry, and prove that you have the experience and know-how to run your operation. It's also very important to be prepared, organized and dress your best. First impressions are crucial in the business world. Dress in a conservative business suit. Nothing too flashy.
Getting the investment capital you need many times depends upon your ability to deliver a solid elevator speech. You should be able to summarize your business plan in your sleep. Remember, investors want clarity and simplicity with realistic forecasts that accurately calculate your financial needs to get your business up and running. Don't over exaggerate your expected profits, and don't underestimate your losses. Do all of that, and you're chances are pretty good.