What makes a business pitch so daunting?

November 15, 2011, 5:30 PM UTC

Hans Steege, CEO of Dero Bike Rack Company, practices his pitch at the Inner City Capital Connections event.

By Shelley DuBois, writer-reporter

FORTUNE — It can be difficult to tell people you need why you need them. In business, for example, almost every company must raise capital from investors, and investors are eager to fund profitable business ideas. But no matter how great their business plan is, entrepreneurs stumble all too often when trying to communicate.

The only way to nail that tricky “we-need-you, you-need-us” message is practice. That’s why the nonprofit Initiative for a Competitive Inner City teamed up with Bank of America (BAC) and the U.S. Small Business Administration to provide a platform for small business owners to test out their presenting skills at an event hosted by Fortune last Thursday. Five small business leaders braved the tough love of a panel of investor judges. The exercise was just a practice run; participating panel members didn’t actually plan on investing.

Each person pitching received plenty of feedback. “They’re obviously a really, really talented group of humans to do what they’ve done,” says panelist Frank Baker, co-founder of Siris Capital Group. Every person pitching had already started a business from scratch, and that’s impressive. But that next step — securing a round of funding to grow a small business — can be brutal.

Investors want to hear answers to a couple of key questions, Baker says. Namely: who are you? What do you do? How is what you do different from the other hundreds of companies in your industry that are pitching us? Why do you need this money, and how will you turn every dollar we give you into 10?

“Getting a meeting is so important,” Marc Reich, president of investment firm Ironwood Capital, told the presenters, “don’t fail to exploit that meeting fully.” Yet, some of the entrepreneurs did fail last week. Some even left out basic parts of their pitch, such as what services the company provided.

High-pressure situations can cause us to put unnecessary fluff around the most crucial information. Ask anyone who’s ever written a personal statement for a college application or a grant proposal; it’s hard to argue under pressure and with limited space why you deserve to be recognized among the countless other people clamoring for attention, acceptance or money.

This can be especially tough for companies that specialize in something like information technology, because the things that give a company a leg up may be highly technical. But that’s part of the challenge: figuring out how to explain complex processes without getting in the weeds.

That’s particularly daunting for people who haven’t presented much before, Baker says, because they spend most of their time talking about their business to people in their own industry. Speaking to investors calls for a different language.

And of course, failure to communicate is part of the process — panelists advised companies in the middle of fundraising to meet with long-shot investors first, to practice honing their pitch so that it would be razor sharp by the time they present to investors who might actually give them money. By then, those doing the pitch should be able to talk without relying on notes or slides; they should be gauging their audience’s reactions instead.

But everyone faces these hurdles, Baker says, even big, well-known companies pitching in important meetings. In the real world, most presentations to investors lack some necessary information, often basic stuff. “One-hundred percent need the tweaks,” Baker says.

“Know who you are,” Mark DiSalvo, the president and CEO of VC consultancy Sema4 Inc., told the fledgling business owners. “Don’t change who you are to appeal to anybody.”