The Entrepreneur Insider network is an online community where the most thoughtful and influential people in America’s startup scene contribute answers to timely questions about entrepreneurship and careers. Today’s answer to the question “What’s the best way to pitch a startup idea to investors?” is written by John Boitnott, advisor to Startup Grind.
TV shows like Shark Tank have given the impression that anyone with a great idea can pitch to investors. In truth, most successful business owners spend months preparing to stand in front of investors, and during that time, they gather market data, perfect their financials, and polish their pitches until they win over even the most skeptical investor.
Once you know your customers and have a fully fleshed-out business plan, the next step in winning investor funding is to craft a solid pitch. You’ll only have a limited amount of time in front of investors, so it’s important to make sure your presentation packs a powerful punch. With so many other startups and small businesses competing for attention in front of VCs, if your brand doesn’t stand out right away, you may find your pitch is declined early in the meeting. Here are a few tips for successfully pitching investors:
Know your customers
Sure, you’ve done plenty of market research while building and growing your business, but how well do you really know your customers? If you don’t have people buying your product yet, you should know exactly who your target market will be. This goes beyond merely searching for data online. Survey customers and learn what they want when it comes to products like yours. After many months of surveying buyers, you should be able to develop an investor pitch that speaks directly to how you’ve addressed their demands.
See also: Never Meet an Investor Without Doing This First
Your first step in pitching investors is getting in front of them. Take advantage of networking opportunities, either in your own community or at industry conferences. Before you attend, you’ll need to perfect your elevator pitch, which should be 30 to 40 seconds. If it’s longer than a minute, you’ll risk losing the investor’s attention. If an investor is interested, you’ll get a meeting where you can discuss your project in depth. You can also use your elevator pitch when reaching out to investors over email.
Do your homework
Most of the work you’ll do with pitching happens long before you walk into the meeting. You’ve already thoroughly researched your own market and are fully prepared to answer any questions that might come your way. But before you set up a meeting with potential investors, you should put serious time into researching them. Once you know the businesses that are already in an investor’s portfolio, you can better craft a pitch that lets that investor see how your business complements the others. From there, you should make sure your pitch tells investors what your business can do for them, rather than focusing on what the money can do for your small business.
Robert Herjavec told me that investors mainly look to invest in entrepreneurs first and products second. If the entirety of your pitch revolves around your business idea, you’ll miss the most important part of the process. Spend time telling your story, including your journey to developing your current business idea and the credentials you have that make you the perfect person to run this business. Savvy investors know when they have an entrepreneur in front of them who has a sense of the market and the instincts it takes to succeed.
Have a plan
You already have a business plan, but to successfully pitch investors, you need to avoid one of the most common fundraising mistakes: not having a plan for what you’ll do with the money. Whether you’re already seeing significant sales or you’re still in the growing phase, investors will ask why you need funding and what you intend to do with the funds you’re seeking. If you have a full-time job and your business is a side venture, be prepared to answer questions about whether you plan to leave the safety net your day job provides and devote 100% of your attention to your venture once funded.
A generous round of funding can be a great way to push your business to the next level. However, with so many other small businesses vying for investors’ attention, it’s important to find ways to set yourself apart. Work on creating a presentation that will win investors over, and your pitch meeting will be a success.