Your pitch is your moment to shine. How do you, as a founder, master your pitch in a way that reinforces with investors that you – and your company – are a low-risk, high-return investment? It is simple: Show them you understand your audience, your data supports your work, and you have the right team in place.
Well, it is easier said than done for many entrepreneurs, says Brian Pohl, Chair at TIGER 21 and a member of YPO. As a venture capitalist, fund manager, entrepreneur and CEO who has done successful roll-ups and recapitalized companies, Pohl has been on all sides of the table. At TIGER 21, a leading peer-to-peer learning network for ultra-high-net-worth individuals, he chairs groups where members meet to improve their investment acumen and to navigate wealth creation, management, and preservation.
“I have a cynical view of how most of the fund industry works, but I have regained my conscience and try to do deals that are good, all the way around,” Pohl explains. “When it comes to fundraising, one of the key things is understanding what business that the investor is in.”
Funds are inundated with investment proposals, so know what they expect up front to make sure you meet their criteria before spending any time on a proposal. ”
— Brian Pohl, Chair at TIGER 21 share
Pohl recently joined a group of YPO entrepreneurs for a workshop on mastering the business pitch. From prework to pitch day, these key takeaways will give you an advantage.
- Know what drives your audience. You are not selling your product or service; you are selling shares or debt in your company. Come into the pitch focused on the investor, not your product. Come with a great story and understand how your story can be part of the investor’s story. “A venture capital or private equity fund wants to increase their assets under management,” says Pohl. “You fit into their story as one of the products that they are subsequently pitching to their investors. Ultimately a fund is looking to raise the next fund, the next and so on – returning capital to their investors along the way.”
- Do your due diligence. “When talking to a fund, think of the conversations as having off-ramps on a highway that you want to avoid,” says Pohl. Take a close look at the fund and talk to people inside the companies that your potential investors have been successful with – and also with those companies where they have struggled. What is it like when things are not going to plan? “Fund managers are going to talk a good game,” says Pohl. “Find out how many of them actually deliver that good game and are supportive.”
- Understand your potential partner. This is going to be a long-term relationship, so know who you are looking to partner with. He recommends knowing the fund’s hard investment criteria before approaching them. This can be size of company (EBITDA, revenue, etc.), geographic location, target industries and other criteria; these are usually defined by the fund to its limited partners. “Funds are inundated with investment proposals, so know what they expect up front to make sure you meet their criteria before spending any time on a proposal.”
- Structure your pitch from the investor’s point of view. Create your deck assuming your audience does not have a detailed understanding of your product or your market. Pohl recommends a five-to-12-slide deck with appendix slides that go into specifics to answer investor questions in more detail. Cover introductions and headlines first (10 minutes); what you do, the problems you solve for your customers, and why your solution works (10 minutes); how investors can make money in this sector such as recent exits, consolidations, etc. (10 minutes); then Q&A and next steps.
- Steer clear of the hockey stick forecast. In other words: Don’t make an unrealistic forecast for future sales growth.Investors look at the company and the investor team separately. When researching competitors in your market space or the product or service you’ll be competing for share of wallet, find out how fast they’ve grown. “Use those growth rates to define the top and bottom of your projection, the high and low targets, so you can say to an investor confidently where you think the company will land,” says Pohl. “One, this shows you know a lot about the sector and your competition, and two, you’re making decisions based on real information and not thin-air forecasts.”
- Have multiple people in the room. For in-person presentations, Pohl recommends one person presenting and one person tasked with observing the investor group, “reading the room.” Social cues from the group let you know what points resonated with the audience (nodding heads) as well as those that caused concern (frowns, fidgeting). Establish before the meeting who will take what questions and provide concise, thoughtful answers. “That way you can address questions quickly to get those issues off the table,” says Pohl.
- Take copious notes. Listen to what investors are asking. It indicates their key areas of interest and concern. “This helps to be prepared in follow-up meetings and in company documentation,” Pohl says. He also recommends going back and looking at the investor’s portfolio and talking to people at other portfolios to see if your investor had a bad experience somewhere else so you can mitigate issues from the start.
- Come away with two recommendations. If your company is not right for your investor and the meeting ends with a “no thanks for coming in”, ask who else your company might be suitable for, perhaps someone they co-invest with. “That way you broaden your network,” explains Pohl. “As soon as you have one investor seriously interested, work twice as hard to find a second and a third because it gives you confidence to negotiate. Pohl recommends having your deck ready with two-page summaries so you can respond the same day to indications of interest. “Tracking information on a spreadsheet is imperative so when your company comes to market, you are ready to go quickly and get the fundraising done and track your success.”
Founders have thousands of meetings, pitch hundreds of times. Knowing your audience, providing supporting data and tracking feedback for the all-important follow-up are key to leaving a positive lasting impression of your company wherever you go.
YPO members can find out more about upcoming masterclass session hosted by the Deal Network.