Innovative Strategies for Startups and Small businesses
It is a truism that a good idea sells itself, but then, for a good idea to sell itself, it must first be presented in the best possible way. Many startups have failed to secure funding not because they were unviable businesses or ideas, but because they were not presented in the right way to attract investor interest. Having a great business idea is indeed the first step to starting a business, however, every startup needs an injection of funds at some point.
For most startups, this means looking to external sources to provide the funding needed. This involves presenting all the things about the startup/business idea in a way that makes a compelling business case attractive enough for investors to back it. Once you have determined how much money your startup requires and decided that outside investment is the strategy for you and your business, the next step will be to determine which investors to contact and pitch the investment opportunity.
Pitching to investors can be one of the most demanding experiences of the startup journey. There is no right way of making a pitch, but there are generally accepted guidelines on what the structure of every pitch should look like and this usually includes the problem, the proposed solution, the ins and outs of the product, the market size, the business model, the financials and investment ask and the exit strategy. One of the best ways of putting together the pitch is to create a pitch deck with each slide showing a component of the pitch structure. A great pitch deck is more than just putting information on a PowerPoint, coupled with animated graphics, financial charts and bullet points. It demands strategic planning, thoughtful word choice, and purposeful design, and if done right, the pitch deck acts as a great visual complement to help potential investors engage with the pitch, visualise the market data and understand the business model. Depending on the time available and the setting, the pitch can be presented in its entirety or may need to be summarised. Either way, it is imperative to get the basics right.
Start Right
There are several interpretations of what a pitch or pitching involves, but the consensus is that the simpler the pitch, the better. The starting point for a great pitch is simplicity. When an idea is presented in the simplest clearest form, it eliminates ambiguity and the tendency for misinterpretations which may inadvertently lead to questions that will poke holes in the idea. When entrepreneurs have the opportunity to meet a potential investor, there’s always an inclination to overly impress and in so doing may fail to effectively communicate the salient part of the business that the investor needs to know in the first instance. In its basic form, a great pitch would be easily understood by a potential investor well versed in your industry and by your neighbour who knows nothing about your business or industry. That will make things truly clear to the widest possible audience.
By eliminating ambiguous and complex descriptors, adjectives, adverbs, etc. you can distill your pitch to a concise form that can be easily understood. The purpose of a pitch is to create a foundation for curiosity and excitement. The aim should be to get potential investors excited enough to ask anticipated questions. When a pitch is communicated clearly, it will usually answer the three fundamental questions: What is the product (solution), what is the problem and who is the customer.
Concision gives secondary information about you, it shows efficiency, if you are efficient with your words, it is most likely that you will also be efficient with your thoughts and actions which goes to show that you will be efficient with the way you run your business as well.
Be Truthful
As simplistic as this might sound, entrepreneurs might at times be tempted to project their business/idea to be bigger than it really is, usually to impress potential investors. This approach will always be more injurious than beneficial to the business. Every investor has specific investment interest, so when meeting with a seed-stage founder or first-time entrepreneurs, it is usually because that is in their interest area, and therefore are aware the business is in its infancy. What investors look for is a business/idea with the potential to scale given the right support and nurturing to make a profit. It is thus advisable to present a holistic and realistic view of the business/idea – the size of the market, the competitive advantage, the team behind it, the business model, the marketing plan and a breakdown of the fundraising ask. A simple way of looking at this is to put yourself in the place of the investor and present the investment opportunity.
Paint a picture
When a potential investor hears your pitch and can imagine in their mind what you are offering, then you are on to a winner. Again, this involves clarity and concision, once you paint a clear picture, potential investors would ask more anticipated questions to get all the information they need, to make a decision. Depending on how you are meeting with the potential investor, painting a clear picture might involve a demonstration of the solution such as a website, app, a unique proprietary design (in the case of a tech product) or the physical product.
Be specific with the investment ask
Admittedly, it can be a tad intimidating and risky to be specific with the exact investment ask, and as such some entrepreneurs may try to avoid this. However, this is undoubtedly the most important part of the pitch for most investors. Investors want to know the exact investment required from them and what the investment will cover. By being specific with the investment ask, it shows a thorough understanding of the financial needs of the business. Granted that sometimes being specific may not guarantee funding, it will ease investors’ concerns, and elicit confidence in the business model and strategy.
Be ready with answers
A great pitch will lead not only to the excitement, but also questions. Anticipating possible questions will help you present well thought through ready answers. One way to anticipate questions is to prepare a Q&A and have a colleague go through with you. Another way is to look at the pitch from the investor’s perspective, and address issues that may need clarifications such as the business model, the market, RIO, exit strategy, etc.
You are the Pitch
Investors are people, and people connect with other people first before they connect with an idea. Investors do not only invest in businesses; they invest in the people behind the business and as such a pitch cannot be devoid of the entrepreneur. Investors are interested in why you are seeking to raise money for your startup. What will it do for you? What will it mean for your venture?
Involve your story in the pitch. Tell investors about your entrepreneurial (or personal) journey, what are the problems that inspired you to create the business in the first place. Describe the success and setbacks so far, and most importantly, show where you are headed, first as an entrepreneur and as the business. By sharing these things in your pitch, not only will it pique the investor’s interest and keep them engaged but will also help create a logical sequence to the pitch if doing a presentation.
Remember, the first meeting might not always close the deal, it is important to build a relationship with the investor, keep them informed of your progress, e.g. through your newsletters to show firsthand the customer experience with your product(solution) and when the opportunity arises, ask for a second meeting.
Ultimately, pitching to an investor is an important step in the journey of any startup. The difference between startups which get funded and those that do not lies in the pitch. The key is to choose investors carefully, prepare well and when the opportunity arises, pitch right.
Naa Otua is a digital Marketing professional and entrepreneur. She is the Founder of naamita.com – an online marketplace for women entrepreneurs and the Owner of Q&A Concepts – a Digital Marketing and Design Agency. Naa is also the Co-founder of the Wami Project – a skills share platform for budding entrepreneurs and Co-founder of the Gurl Kode – a community of Ghanaian women empowering each other and causing change through conversations.
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