The Entrepreneur Insiders 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 Waverly Deutsch, clinical professor of entrepreneurship at the University of Chicago Booth School of Business.

There are many great posts about the content of your pitch and how the investors evaluate them. In fact, M2M’s Mark Montini and Nasdaq’s Nicola Corzine offer two great perspectives in this series. But I want to approach this a little differently and talk about two ideas—when to approach which investor and the stages of fundraising courtship.

When to approach an investor
Before you set out to pitch any investors, know where you are on the risk-reduction journey and match the target investor to that stage.

When you are in the idea stage, everything is imaginary —who your customer will be; if your product will work; if you can execute; what the economics look like—everything. Sure, you’ve done a lot of research (I hope you’ve done a lot of research—you better have done a lot of research) that has given you confidence it will work. You’ve built a model of how it will work using your best guesses. But you haven’t proven anything. You haven’t made a new product or executed a service engagement. You haven’t won a customer or created much value. You haven’t scaled your production processes or found efficiencies in your cost structure. You are still proposing an idea.

The idea stage is not the time to pitch an investor.

See also: This Is When Investors Will Take Your Company Seriously

Investors are constantly making risk-reward equations. It is essential that entrepreneurs understand what this means: Investors are calculating how much reward they believe is possible to counter the risk they will be taking. At the earliest stages of your venture, the risk is exceptionally high, so the reward has to be huge—10 to 100 times the amount of money investors put into your startup. Later, as you’re able to take some of the risks out of the equation, the need for such high returns will diminish.

So your job as an entrepreneur building your business and creating your pitch is two-fold: 1. Start removing risks one by one, and 2. Model the path to a company that can either get really big or be sold.

The proof-of-concept phase of your business is about answering two critical questions: Can we do this? Will anyone buy it? If you create a working version of your product, you lower the feasibility risk. If a few customers are using it, or better yet, paying for it, you have already begun to decrease the product-market fit risk. Now you can talk to angel investors about a seed round. Proof-of-concept is often the stage at which they get involved.

As you move into the early-growth stage, the questions change. How many people will buy it? Can we make money selling it? Having data from many paying customers that demonstrate that you have a repeatable sales process—as well as having a grasp of the full cost of creating, delivering, and servicing your solution—go a long way toward reducing market-acceptance and business-model risk. At this growth stage, you might be able to engage venture capitalists in a Series A investment.


To get the Series B conversations started, you need to answer the questions, “How big can it become?” “Do we have the capabilities to take it to scale?” “Can we protect it in the market as we scale?” Your plan is no longer about an imaginary business. It is about a thriving company that has the potential to become huge.

Courtship: from the coffee date to marriage
The second thing I want to discuss is courtship, or what your pitch is actually trying to accomplish. Most entrepreneurs think the pitch is designed to get an investment. That’s all wrong. Its purpose is either to start or continue a conversation. Finding the right investor is a dating process. It takes time, patience, and a lot of fact-finding. Plan accordingly.

If you are meeting an investor for the first time at a networking event, your elevator pitch is a pickup line. You want to engage him or her in a conversation—make that investor want to know more about your business. Your job in this interaction is to get a coffee date—20 to 30 minutes of the investor’s time where you can begin to get into some of the details of your business plan. You will not be able to cover everything in that coffee date, so emphasize those elements of your business that are the most compelling for investors—the size of the opportunity, your momentum, and what uniquely qualifies you to win in your market.

Your next goal is to get a meeting with the investment firm. I call this the dinner date. Now you have an hour or two to dive into some details. Hash out risks. Discuss alternative strategies. You won’t cover everything, but that is what due diligence is for. You can think of a term sheet as an engagement ring: It means you’re pretty sure you want to work together and the investors are committed to learning everything they can about you, while helping you in the process.

Signing the contract and getting the funds is your wedding—from now “until exit do you part”—the investors are your firm’s life partners. You have obligations to them and they to you. You don’t get a relationship like that with a pitch, folks. If you’re patient and picky, you’ll find the right investor to marry.

Waverly Deutsch is a clinical professor of entrepreneurship at the University of Chicago Booth School of Business and coach for the school’s New Venture Challenge, a business launch program that includes competition for funding.