The title of this blog is a statement that I hear many times.
For me, it is the biggest red flag of all.
I understand the rationale behind it: you have a brilliant idea and once you get the chance to talk about it with an investor, you believe that they will get it too, money will be handed over and you will be on your way to making your business work. Simple!
The fact is that this is anything but for the average CEO seeking funding.
The reality in my experience is that the average fund-seeking CEO has not considered the critical questions that anyone on the funding journey must at least be seen to have thought about:
- What is your Unique Selling Point? (this is a lot harder than it seems and many businesses don’t have one)
- Why do I need you? (If you do not have any Intellectual Property/Patents you will always be vulnerable to this question. The real question is: What’s to stop me from starting a rival business myself and taking significantly more equity in it?)
- What is your route to market? (An investor is likely to want to know what planned distribution channels you have, backed by the number of people this gives you access to, and your relationship with them.)
- How long will the funding last? (You absolutely need to know this and demonstrate a plan for the future funding rounds)
- How much has been invested so far into the business? (Sweat equity counts for nothing here and a pitch is likely dead in the water if this route is adopted. Investors mean hard cash. If you are not investing in your own business then why should they?)
Investor readiness v pitch readiness
This is the critical distinction that I draw when people tell me that they are investor ready. Your pitch deck and executive summary may well be investor ready but if you can’t answer any question about your business in under 30 seconds, you are not yet pitch ready.
Another mistake I see a lot during pitch events is the CEO who believes that they do not have a good answer to a question and talks about something else. This form of deflection can be useful in politics but is utterly frustrating to an investor who is often just seeking an answer to a specific question.
Being pitch ready is anticipating any question about the business and answering it well and succinctly.
To bring this to life, I remember being pitched a great innovation by a young, ambitious team, straight out of University. The question to them was: “Do you think that your team has the experience to make this work?”
Their answer was long and unconvincing. Not only did they turn off many of the investors in that room with their confidence/arrogance, they used all of their Q&A time not answering the first question.
They could have been a little more prepared!
In fairness to them, they took the time to come and ask me for feedback after, where I mentioned their weakness at the Q&A part of the pitch. What they could have said was something along the lines of: “We know we are a young team with little actual business experience, which is why we are not just looking for a passive investor, we are looking for a mentor.”
With the above response, they could have turned a potential negative into a positive and reassured any potential investors that this team knows where their weakness is and are coachable. Being coachable is often a high priority for an early-stage investor.
The average early-stage investor will likely want some involvement with the business, thus adding to the team and potentially the valuation of the company.
This is one of many ways to turn the hardest questions into your friends.
Being pitch ready is not just good for pitching your business, but also in a networking situation. The faster and more dynamic you can be with your answers, the more likely potential investors will keep asking you questions.
Nobody likes 10-minute answers.
Maybe you have been in that networking environment where you ask someone a question and a seemingly endless flow of words get vomited out, with no regard for your time or interest in the subject.
Being pitch ready isn’t just a good presenting skill, it is an essential networking and life skill.
If you want to be interesting, you first need to be interested….in what investors are looking for and how they like to be pitched to.
Being interested in succinct communication and pitch readiness is something that I highly recommend. I would also suggest finding out about the investor and what they are looking for before you start pitching them anything!
Personally, I stopped making introductions to investors many years ago to those who refused to work on their pitch-readiness.
Are you pitch ready?
You are welcome to get in touch and find out: firstname.lastname@example.org