The Ultimate Guide to Pitching Investors for Fundraising

Introduction

The secret to fundraising is to build relationships before you need them.” The famous words by Jeff Brooks summaries the importance of pitching correctly to the investors for fundraising. The right fundraising can infuse a breath of energy in the business, giving it space to grow and generate revenue.

It does not matter what your aim for fundraising is; getting ready for it is like preparing for a marathon. You cannot just get up and run; it needs practice, planning, strategic thinking, and knowing the path you are going to take. The right pitching investor can secure you the investment, and the poor pitch will leave you empty-handed and low in confidence.

According to Fundable and Entrepreneur, 565,000 startups are launched every year, and just under 3% receive angel and VC investments. Pitching investors for fundraising can be to angel investors, venture capitalists, crowdfunding platforms, or government agents, and it needs to be a clear, persuasive, and data-driven presentation. In this guide below, we talk about how to craft the pitch for fundraising right.

What do the Investors Want?

This answers the important question: what your target group of investors will be looking for in the business opportunity that you are presenting? Flashy will not work with pitching investors, they want to see the metrics and real growth potential in the business.

Key factors that investors consider:

Is your product or service viable for the market demands in the niche?
What makes your business different and better (UVP)?
Will their funding boost the scalability of your business?
How will the business generate sustainable profits?
Do you have a strong team that can execute the vision you pitched?
Have you done the research and can present the users, revenue, or partnerships that validate your idea?

The investor is not looking to do charity; they are looking to make a profit with minimized risks. Waiting till the last minute to start looking for investors will only make things delayed. Research says the business should start building relationships with investors three to six months before they actually need the funding.

Preparing a Winning Pitch Deck

This is the most important step of any fundraising effort: Preparing an extensive yet concise deck for pitching investors. Here are some essential slides to be included in your pitching investors fundraising deck to make it visually compelling and inspiring the funder to fund:

Title slide: Company name, tagline, and logo clearly visible
Problem statement – What issues do you want to solve? Who is affected?
Solution: How does your product/service solve the market demand? Where does it fit?
Market opportunity: What is the target market? What is the size and growth potential of/in the target market?
Product demo: show how your product/service works in short
Business model: How does your business generate revenue and how well is it working?
Competitive Analysis: What is your uniqueness that sets you apart from the competition?
Go-to-market- strategy: How will you acquire and retain customers?
Traction and milestones: Metrics such as the product launches, users, partnerships, customer acquisition cost (CAC), customer retention rate (CRR), and conversion rate.
Financial projections: What will be the revenue growth in the next 3-5 years with a snapshot of expenses and profits included?
Funding ask: How much funding do you need, and how will you use it
Team: Who are the part of your team and what is their expertise?
Closing slide – Thank you and contact details

Here are some suggestions for the best practices for fundraising pitch decks:

Limit the slide count to a maximum of 15. Investors don’t have the time to listen to boring, long monologues.
Adjust the deck according to the audience. What one group might take as a joke, the other might find offensive.
Use minimal and precise text without the use of buzzwords. Minute and cluttered text is difficult to read and make sense of.
Be precise with metrics and transparent with the financial figures.
Investor is not going to be impressed by looks; focus on data, qualification, and expertise, including user growth. Remember you are raising money.
Avoid demo videos; they can go wrong. Use high quality visuals for high engagement.
Use colours but not the confusing gradients and shades.

Ask the investor how they want to see the pitch deck. Some might want a prior introduction and see the full presentation quickly, while other will prefer to walk through it conversation-free. Follow the 30-20-10 rule: 30 seconds for the objective, 20 minutes for the presentation, and 10 slides for the story.

Mastering Investor Pitch Presentation

You are going to spend a lot of time getting the pitch deck for pitching investors right; the next step is pitching convincingly. You will have just minutes to present the deck for fundraising, just mere minutes. According to research data, pre-seed deck time spent is just 2 minutes 20 seconds.

Here are some tips to structure your pitch:

Use a great hook for a strong first impression in the first 30 seconds. The hook can include statistics or a story, making it impossible to ignore.

The elevator pitch sets the tone for the next few minutes. Include information about the business, structure, founders, product, and value propositions.

Explain the problem, solution, and market opportunity. Talk about the niche you are going to fill and how your solution is the surefire thing that people will need immediately. Focus on the most urgent problems.

Make a compelling story and paint a vivid picture. Use data backed statistics and scenarios to make the pain point impossible to ignore and maybe how the funding will help the consumers.

Talk about the business model and other financial aspects.

In the final minutes, explain your funding request and how it has a massive potential for significant returns. Include how their funding will help extend to similar markets, and how it will be an accelerating growth opportunity for both.

The investor probably knows about the competitors; they want to know what your competitive advantage is. How can you reach the consumers who other have not been able to? Present a defensible market position, clearly highlighting the differentiation.

In the end, show that you are resilient and adaptable to navigate the challenge. Add a clear call to action.

Each element of your pitch needs to come together to form a compelling and emotionally engaging story. Avoid jargons and lengthy narratives; and speak confidently about how you are the best person to give them significant returns. Practice your pitch multiple times to perfect, refine, and iron out all the kinks.

Handling Investor Questions and Objections

Of course, the investors will have tough questions to evaluate risks and gauge your preparedness. Some common investor questions:

Why this investment?

Show how the company is poised to take the next step with fundraising.

What problem are you trying to solve?

Answer with stats, demands, pain points, and urgency of your solution.

How will the company use the funding?

Answer with clear figure breakdown of fund allocation.

What is the exit strategy?

Answer with your future plans for acquisition, IPOs, or in case of other liquidity events.

Why did you come to us?

Answer with the research on investors and how they have been investing in similar products, or their interests, etc.

If you don’t know the answer, commit to a definite date with a follow-up and make sure you stick to the timeline you promised.

Negotiating the Terms of Investment

Once the investor is hooked and satisfied with your answers, it is time to begin the negotiations. Here are some key terms you should be ready with

Valuation
Equity dilution
Convertible Notes Vs Equity
Vesting and Cliff Periods

When negotiating:

Know your bottom line and don’t accept unfair terms.
Read the terms carefully and seek legal advice before signing on the dotted line.
Chose the investor carefully on the basis of their strategic value.

Don’t Forget to Follow Up After the Investor Pitch

It is not necessary that the investor will decide immediately on your fundraising pitch. Follow up regularly and professionally to keep the communication open. Here are some tips to make sure that the investor does not forget you:

Send thank-you email with a summary of the discussion
Provide any additional data as asked
Keep sending regular updates on new things and business progress even if they have not invested yet
Be persistent; don’t give up after one rejection

Final Thoughts

Always keep in mind that the investor is not funding your idea; they are looking to know your plans for execution, the market potential, the strength of your team before funding. Make a compelling pitch deck, master it and present it with confidence. Be prepared to deliver the pitch at any time and situation. You don’t know where you will meet the potential investor or how. Be prepared to negotiate and secure the funding that your business needs for sustainable growth.

Amit Bhateja