When I decided to start my Translation Services company, I soon found out that I didn’t have the necessary resources to guarantee that the first year or two will be smooth sailing. Therefore, I decided to look for investors to whom I could pitch my business idea. After delivering hundreds of pitches and having bombed a few, I decided to present the 5 worst mistakes an entrepreneur could make when he or she offers a pitch to an investor.
And since we’re touching upon this subject, I cannot recall how many times I wish I’d had a video camera to compile a list of the funniest bloopers an entrepreneur makes when he/she gives a pitch to an investor.
The first pitch I ever bombed, as I recall, was to a group of business angels from Amsterdam. I had to get there but guess what, my flight was delayed by two hours, so I had to show up only five minutes before the actual meeting took place. And since I didn’t have time to check my notes, I started to ramble on and on, not actually touching on the subject at hand. When the meeting was over, I felt embarrassed and a bit sidetracked. And if that wasn’t enough, during the meeting I started to sweat and look nervous, which made me to take the eye off the prize.
This led me to consider actually taking the pitch dead serious so that the next time I had to give it to investors, I would succeed. So I decided to deliver it as much as it was possible so I didn’t have to look at the slides when presenting the content. While practice makes perfect, sometimes, the best way to learn to do a certain thing is by not doing it in the first place.
So here’s what you should avoid at all costs:
1. Don’t waste the time of the investors, rather respect it. You should know all facets of your pitch and practice it multiple times (in your head or out loud). Moreover, prepare different versions from a time perspective: 30 seconds, two, five or ten minute versions.
Moreover, don’t fall into the trap of thinking about it similar to the way you would read a piece of paper. Instead, practice the content and deliver it like the true professional you claim to be. Also, prepare for interruptions and know when and how to get back to the pitch.
Don’t get wrapped up in yourself. Otherwise, you’ll run out of time before you’re halfway done. Investors will feel like you don’t respect their time, nor are you prepared. In addition, they will consider that a business working relation between them and you will be difficult if and only if they decide to fund you.
2. Ever heard of the “hockey-stick” chart or financial growth model? As its names states, your financial model should resemble a hockey-stick. However, avoid sharing your numbers behind your numbers, i.e. your financial assumptions. Angel investors are more interested in how you’re going to be able to get revenue, scale it over the first year and also retain the customers.
Five-year financial projections are outdated (old-school or the bad kind of vintage) and nobody really cares or considers them relevant anyway. Investors care so much more about your financial growth model.
3. By using acronyms and technical terms your investors will feel offended. Do so and you’ll bore investors to death. While technical terms or acronyms are important share, make sure that it will not make your investors lose interests and check their Twitter account or their Facebook newsfeed instead.
Never assume your investors are aware of both your business and the market you wish to activate in. Probably, if they actually were experts in the field, they’d rather start their business than invest in yours. If you’re not delivering your pitch to a highly technical group of investors, keeping it simple is the best way to go. Sell them on the need in the market for your product.
4. Don’t make stuff up! At this stage, you start to share aspects about your market potential without actually doing research. You’ll probably say to yourself “I would do no such thing”, but you’d be amazed of how many entrepreneurs tend to do just that. They do this not as a way to pull the wool over the eyes of the investors, but rather because they are excited about their products and services and they consider their assumptions to be true before actually putting those assumptions to the test first of all.
So what solution is there not to fail and not to use the “pulling the wool over the eyes of your investors”? The safest way to go is to pretend that you’re an angel investor and you have your business partner pitch to you. If you don’t have a partnership, consider delivering the pitch to a mentor or an advisor and ask them to be blunt.
Afterwards, pretend like that investor is interested in your pitch. Break down each component of your pitch by asking questions such as: “How are you able to tell if this is true?”, “What sources have you used to produce this data?”.
By doing this you are more prepared because angel investors will want to begin the due diligence process with you and you don’t want to be perceived as someone who hasn’t done his or her homework.
5. Never tell angel investors that you haven’t discussed with customers because your product is still being developed. Don’t apply the well-known and used creed of “If I build it (product or service, they (customers) will come)”. While determining who your market is and will be is the first stage, you then need to start and reach out and listen to the customers or target customers.
Identify potential customers and ask them for their input regarding the product or service you’re building. In most cases, their feedback will shape the way in which your product or service is built. Also, you should include all your learnings in your pitch. They like seeing that you’ve done your fair share of market research. Whenever possible, include some testimonies from real customers. Happy customers are able to sell a product best.