Part three of a three-part series focusing on refining your pitch and lessons I have learned along my entrepreneurial journey

Pitching to investors can be a hair-raising experience since many entrepreneurs think it is their only shot. Often, angel investors will let an entrepreneur pitch a second time after a 6- to 18-month time period if the startup has met milestones, made traction or improved the business model.

Think of pitching to investors as an important opening conversation. Typically, the CEO and founder should present. A good presentation by the founder is often more effective than a great presentation from the marketing person who is not a founder. Two or, at most, three people may present if the expertise lies within the different role or responsibility. A good CEO should still know the key numbers, such as cost of product, gross profit, revenue and cash flow. Investors want to know the CEO can present to customers in a reasonable fashion as they are looking for passion, leadership and being genuine.

It is important to remember that no matter how interesting the technology or service is, it has to solve a business problem that people are willing to pay for. Avoid being wrapped up in the technology or service itself and focus on how it can create profitable and sustainable revenue. Investors get excited if the product or service does something faster, cheaper or better. However, it is important that it’s not just better, but significantly better – such as 50 percent the cost – or much faster. It also needs to solve a big pain point – there needs to be a big market potential.

When you pitch to investors, they do not see any return until you sell the company or do an initial public offering. Therefore, investors will also want to know that your company will attract acquisition. Be sure to show investors a way they will eventually get a return on their investment, such as likely acquirers and examples of similar acquisitions.
As I previously covered, investors are looking for entrepreneurs who show passion, are genuine, and are coachable. If your startup is in the very early stage, explain what the team will look like after funding. Nothing scares an investor away quicker than someone who appears untrustworthy.

After the presentation, there will often be a 10- to 20-minute question and answer portion, which is a crucial time for the entrepreneur. Investors are not only looking for what your answers to their questions will be, but also they are interested in how you answer them. There are a few sure-fire ways to be rejected during this time:

• Arrogance is rarely tolerated – it creates the impression of insecurity and a potential perception of a CEO who may not listen to feedback.

• Not answering the questions the investor asks – if you don’t know, say you don’t know. Pay attention to the question, and answer the question asked.

• Arguing with the investors – it is fine not to agree, but how you handle conflict and pressure in this situation is a reflection of how you will handle pressure as the CEO.

Follow up some of your answers with “Did I answer your question?” This will show the investor you are thoughtfully responding to their question. Remember: pitching comes down to communicating a plausible business plan with passion. Do your homework, be prepared, listen and show investors you are the entrepreneur to make this company scale and be a big success.

Find me on social media:
LinkedIn: @RichardSudek
Twitter: @RichardSudek

Read Part 1 and Part 2 of this three-part series. 

*Cover: Chad Trainer, CEO of Proboknow, pitches to a crowd in UCI Applied Innovation’s Screening Room. Photo: Yuxin Cha