When an entrepreneur makes a pitch in front of a venture capitalist or angel investor, there are some standard expectations of the presentation. However, the potential investor may also have some less obvious expectations with regard to the impression made and confidence conveyed by the entrepreneur. The physical content of the pitch deck slides is significantly important, but perhaps more important are the lasting impressions that the content conveys. In this blog post, we will describe five things an investor expects a pitcher to know.
- Know what is needed. First and foremost, the entrepreneur must demonstrate a clear understanding of how much money is needed and exactly how that money will be used. A vague request for a large sum is meaningless, and perhaps downright offensive, if the entrepreneur can’t specifically account for how it will be used and identify the expected increase in revenue and profits as a result of the investment. Know exactly what is needed, how it will be used, and what will be the result of getting the money in terms of sales and profits.
- Know the market. The entrepreneur must also demonstrate an in-depth knowledge of the market. Know what customer needs your product or service satisfies. Know the customer buying behaviors of the market segment and have a clear understanding of why customers buy the product or service. Additionally, know and demonstrate clear understanding of the pricing strategy and how the competition can be beaten. A simple way to prepare to meet this expectation is to complete a SWOT analysis and demonstrate knowledge of that analysis through a discussion of strengths, weaknesses, opportunities, and threats.
- Know the operations. A third expectation of investors is to verify that the entrepreneur is deeply knowledgeable about the operations of the business. For example, what are the vendors and why were those vendors chosen? The pitch deck content must demonstrate enough granular understanding of personnel, customer service, delivery of products and services, and payment requirements to assure the investors that the entrepreneur understands exactly how the business operates from top to bottom.
- Know the team. Next, the entrepreneur’s presentation must show a keen vision of the “team.” Who is on the team and why? What are the strengths of each member and how will they make the team a winner? Each individual in the business must contribute to overall success and the business owner has to know why that person is there and how they contribute. An investor is looking for expense “fat” and will want to make sure each person is needed and that the employee’s salary expense is worth it.
- Know the exit strategy. Lastly, an investor expects the entrepreneur to have an exit strategy. How will debt be returned to any lenders? How will equity be resolved with investors when it is time for the entrepreneur to exit the business? Know your exit strategy from the beginning. This might be couched in optional strategies depending on circumstances but knowing those options and their impact ahead of time is much more reassuring to the investor than going in with a “blinkered” hope for a wildly successful outcome.
Development of this depth of understanding can be achieved through use of a Business Model Canvas, which we mentioned in a previous blog post. The Gale Business: Plan Builder software available at the Naperville Public Library offers an electronic version of the canvas and will also support preparing a business plan and pitch deck. Each of these resources help to focus an entrepreneur’s ideas and knowledge.
These five “knows” are the extra factors that will assure success in a funding request. A pitch deck that demonstrates knowledge in these five areas will have much better odds of success than one that overlooks these investor expectations.
For more information about this and other topics, consider registering for the NaperLaunch Academy workshop series or scheduling a one-on-one appointment with a business librarian or NaperLaunch coach.