What are the common mistakes startups repeatedly make when they pitch to investors?
This article covers do’s and don’ts that startups should keep in mind when pitching to investors. You can do a few important things to make your pitch on target.
As a startup, you may have done a lot to make your pitch to investors. Don’t waste this opportunity to get the investment of your dreams.
Unfortunately, many startups fail to convince their ideas because of a lack of proper planning of pitches. So, how can you make a pitch stand out and be remembered?
Some interesting startup statistics of 2023
- The country with the highest number of startups is the United States.
- Highest valued startup in the world: Bytedance from China with a valuation of $ 275 (mother company of Tik Tok).
- Only around 40% of startups can become successful.
- Greatest challenge: competition and lack of product demand.
- Most startups operate in the technology field: fintech 7.1%, life science and healthcare 6.8%, Artificial Intelligence 5.0%
- A startup will take 2-3 years on average to make a profit
- India has the 3rd largest startup ecosystem globally.
- India is in 2nd position in terms of the number of startups.
- 60% of startups begin at home.
How to prepare your pitch deck
Preparing a pitch deck requires “Homework.” After you find your right investor, homework is the first thing you must do to create a pitch successfully. Using a pitch deck template helps to save time and to create a professional presentation.
It includes getting to know your investor about their areas of interest and what kind of companies they usually prefer to invest in. Along with this, there are a few things you must include in the 15 or 20-slide pitch deck. These are:
- Customer requirements
- The problem you want to solve
- Your proposed solution
- Your product’s features
- Your target audience
- Market competitions
- Business strategy
- Expert team
- Current state and future state
Do’s and don’ts of pitching to investors
1. Tell a story
Do: to avoid a boring, dry pitch, you can include a compelling story in your pitch by using a presentation video. However, investors would like to hear simple and short stories, so you need to cut your story short. But the story should be interesting and relatable.
As people naturally tend to hear stories, frame your pitch in a sequence and add short stories for a narrative flow. Investors may remember you when you structure your pitch like a story—a strong start with what your product/service will solve.
Lastly, tell the investors what you expect them to do next. Focus on highlighting what makes your business unique and why you have such confidence to solve the problem.
Don’t: use too many explanations and story narrations. It should have the tone of a business pitch rather than a literary meeting. Avoid long stories.
2. Focus on the future
Do: investors want to see that you have a clear vision of where your company wants to go. So, detail your plan for how to get there.
Don’t: talk about your old ventures (if any) and why you quit by blaming partners or employees. Investors don’t like to hear your past, even if you think they want it. One more thing, keep in mind when an investor shows interest in you, they will do their “homework.”
3. Add special space for asking questions
Do: Usually, investors have questions after hearing you. So, put a special space for Q&A, whatever presentation device you choose to pitch. Above all, be prepared for questions investors might ask and prepare accurate answers for each one.
This will show how confident you are about the idea of your business. Think about every nook and corner where investors will likely ask questions.
Therefore, you must be prepared for them. Before your pitch, make sure you have answers to all common questions that an investor expects to ask.
Don’t: your fumbling may cause you to lose investor confidence in you because they think you need to take the project seriously. So, give accurate answers without muddling.
Don’t answer a question with a question. If the question is unexpected, tell them we can discuss it together.
4. Short and to the point
Do: it is important to be concise. Investors often have little time to hear you, so avoid winded explanations. Investors have had pitches all the time. So they won’t have time and patience to spend on a long-tailed presentation. Therefore, get straight to your point and ensure your important messages are passed.
Don’t: don’t ramble when you are pitching to an investor. So, avoid excessive explanations on matters. Similarly, using jargon may need more time to explain. So, avoid jargon and unpopular technical terminologies.
5. Include numbers
Do: It is hard to explain in brief if you don’t have numbers for financial projections. This means having market analysis and data to back up your claims; you need the support of numbers. For example, you can include conversion rates, monthly or daily active users, customer retention rates, and monthly recurring revenue gains.
These data will show how much customers love the product or service. So you must include it in your pitch deck.
Don’t: forget numbers when you are pitching your startup. A prompter will help you when talking with investors if you want to avoid “reading” texts. Reading texts from the presentation device may ruin the sequential flow of your investment pitching.
6. Focus on the problem
Do: when pitching your startup, ensure you precisely address the problem that needs a solution. Investors want to know if there is a real need for a product or service that you recommend.
Don’t: talk about self-love; you are only the person who can solve this problem with your expertise and skill set.
7. Have the best business model
Do: before you start pitching to investors, ensure you have a solid business model. By this, investors could understand how your startup will make money.
Don’t: exaggerate your business model.
Most common mistakes made when pitching
There are many digital marketing mistakes done by entrepreneurs when they go for investor pitches. Let’s check each one.
1. Not having a precise executive summary
As the first impression is the best, you should have an elevator pitch in brief that includes what your business does, your unique selling proposition, who your target market is, and how to overcome competition.
If you don’t have clear and concise descriptions encompassing your business model in one minute or less, investors may understand you don’t have a well-out business plan.
2. Lack of homework
A business plan should contain your business goals, strategies, and tactics.
Only you can create a well-structured pitch if you continually search for a new sphere of knowledge related to your business idea so that your investors can understand that you are well aware of the industry and what ingredients need to succeed in it.
So, if you do not have a detailed and well-researched business plan, investors will be less likely to invest in your startup.
3. Having no idea about the target market and completion
You can only position your startup accordingly if you know the target market and competition. Obviously, investors will only show interest if you have a marketing plan and strategy.
4. Nothing about team
Your idea might be a great one. But investors want to know your entire team profile to calculate your success ratio. They know great ideas alone can’t provide turnaround results. So when you prepare an investor pitch, you must add about your committed team.
5. Cramming with vanity metrics
- “We have more than 100 beta users.”
- “We have got 200 app downloads in just two months.”
- “We have the plan to recruit more than 30 people within one month.”
- “30 people signed up for the program within a week.”
These vanity metrics never tell the value of your solution for users. Don’t ask for money with these types of metrics. Investors are interested in the market but would like to see how long your business will take to thrive.
Pitching to investors is an essential step in the lifecycle of a startup company. So, your pitch should be specific to your investment needs. But knowing how to do it right brings investors to your company. The only mantra behind success is preparation and homework.