If you’ve made it to the stage where you’ve convinced investors to take a look at your business plan, you are already deep into the investment process. But be forewarned: The is the final hurdle and the point at which most entrepreneurs fail.
Assuming that your targeted investors are not already convinced they want to invest in you, here are six things they are likely thinking while watching you pitch your idea.
1. ‘Where’s the money?’
Ultimately, investors may think you have a pitch that excites and inspires, but they’re not clear on how you are going to actually make any money. And that’s important: A lot of great ideas in startup universe may change the world for the better, but investors are most interested in is how they’re going to get their money back.
A key part of your pitch, then, is to explain to them is how you are going to draw profit from your business. You should have a solid plan for how that’s going to happen.
2. ‘Your company is over-valued.’
Watch any major reality show, like Shark Tank or Dragon’s Den, and the same complaints come up time and time again during the pitch. Investors tend to complain that the company in front of them has been overvalued.
And that’s a common mistake entrepreneurs make because they obviously believe that their idea is worth a million bucks. To make sure that you are getting a realistic evaluation for your own company, speak to both a lawyer and an accountant. Take their valuations. Then you’ll know that the true valuation is somewhere in the middle.
3. ‘You have no plan for a long-term future.’
The pressing issues of getting off the ground and gaining traction are big matters, but entrepreneurs and investors alike also need to have one eye on the future as well as one on the here and now. Investors need to know that your product or service has a long-term future.
The chances are they haven’t thought enough about it to know that something has a future. Part of your pitch should be dedicated to showing them this. Demonstrate that your product has a long-term outlook.
4. ‘You have no growth strategy.’
Investors need to know that they are not only going to get their money back but are going to make a profit in the long run.
If your company has no strategy for growth moving forward, you are saying to investors watching your pitch that their money may be going to a good cause but they are not going to see a return on their investment.
You should have a comprehensive growth strategy for how you are going to take their money and grow the business. The crucial message to send is that you are not going to need to ask for more money in the future to reach the next level.
But be careful because studies say that scaling too fast is the number one reason for startup failure.
5. ‘What’s in it for me?’
It’s true that many investors want to see ideas get off the ground and want to manage something that changes the world for better. But they need more out of the deal than a warm, fuzzy feeling. Too many pitches focus on the business and not what potential investors are going to get out of it.
Tell investors exactly what they are going to get. This can be communicated in terms of their getting their money back through growth projections or having a say in how the business is run.
You should also make it clear that there’s room to negotiate. Investors don’t like being talked down to. They don’t like to be told: “how things are.” Remember that you are the one coming to them for money.
6. ‘Why are you the right person to win?’
As most investors would say, “We bet on the jockey.”
All this means for you, according to Chase Hughes of Pro Business Plans, is that those investors want to make sure that you have the tenacity and ability to succeed, no matter what hurdles arise throughout the journey.
In fact, this is one of the most important aspects for seed-stage investing, simply because it is usually too early for significant revenues or key metrics that can make a company a winner at first glance.
By Mark Branson