4 Tips for Pitching Investors

With the venture capitalist space continuing to grow and evolve at a rapid pace, it is no surprise that startups are in need of funding, and quickly. While many seasoned founders have specific approaches to raising capital, there is technically no clear set of guidelines defining best practices, things to avoid, or even the critical components that should always be taken into consideration when pitching an investor. Though there may not be an official guide in place, there are some clear tactics that have earned the most positive track record for startup executives and the investors they are looking to appeal to. To make sure you are adequately prepared to make the best impression once you’ve made contact with a potential investor, here are a few recommendations that help our clients to stand out from the pack.

First and foremost, don’t forget the basics – and be strategic about which investor(s) will ultimately serve as the most valuable resource for your company. Take the time to do the legwork and necessary research. One tip at the starting point of the process is to identify the investors that either specialize or have significant experience in your industry sector (i.e. software, digital media mobile, cyber security etc.) Once identified, you want to be sure that your investor partners are able to help you navigate industry challenges and that you may also be able to leverage additional resources they have established through years of industry experience and networking. Regardless of your headquarters, we also recommend exploring investors in your target demographic locations. If you are based in Los Angeles, but see a significant need or market gap for your product or service in Charlotte, NC, you may want to consider looking into investors that have developed a significant footprint in that region.

Although it may sound obvious, there are times that we have encountered executives or founders that do not have a practical understanding of the venture capital market. There is enough money to go around, but it is your job to figure out the best ways to secure it. Research shows that from 2014 to 2017, the average VC fund has doubled in size as investors become more aggressive and competitive with the companies they choose to fund. Circling back on our point mentioned above regarding being strategic about the geographic location of your investors, and because there are so many more micro VCs and funds outside of traditional startup hubs (i.e. SF, NYC), the chances that you are able to find an investor in an ideal market for your company is more likely now than ever before. Be flexible with the way you choose your money, whether it be through crowdfunding efforts, equity crowdfunding, convertible notes, etc. True to its definition, ‘tradition’ is more a thing of the past, so be nimble and explore alternative options that could be just as beneficial.

Along with understanding the venture capital market also comes understanding the standard VC structure. Familiarize yourself with industry jargon as well as the various debt and equity options. You’ll want to at least have a general grasp of these concepts for scenarios that require quick decision-making or when interacting with investors that may want to test your knowledge. You also want to have a full understanding of the type of agreement you are committing both yourself and your company to. Here are a few terms that might be helpful to add to your research list:

  • Priced equity rounds
  • Convertible debt
  • SAFEs
  • KISSes

Lastly, if you want to hit a ‘home run’ with investors and give yourself the best shot at securing the money you need to continue scaling your business – create a strong pitch deck. This will be the tool that highlights your company’s most attractive accomplishments and outlines the ambitious vision you have to ensure your company’s long-term success. Every detail should be calculated and tie back to a bigger theme that will help convince an investor of the legitimacy of your business and why they should ultimately trust you with their money. Don’t be afraid to include potential issues or challenges your business may face. Use this as an opportunity to display your knack for strategizing, problem-solving and team leadership. Sell your solution and make sure you have hard evidence or support to back it up! A strong pitch deck should always include – a solid company overview, breakdown of the mission/vision, background and strengths of the leadership team, industry challenges, your unique approach to solving them, the market opportunity and any other support that will help your company stand out against competitors.

Good luck!