Being an entrepreneur is one of the most rewarding careers out there. It’s tough to beat the thrill that comes from turning an idea into something real, and there are few better joys than supporting yourself using nothing more than your creativity, discipline, and hard work.
However, like most of the things worth doing in life, entrepreneurship is difficult, and at times, it can also be quite terrifying. There’s a lot of risk involved, and there will also be a lot of rejection and negativity coming your way.
Because of this, part of the secret to success is learning how to keep going even when things get tough. Another major part, though, is being prepared.
Pitching to investors is one of the most important stages in starting a business. Securing funding for your project will dictate the path you take, which means it’s critical you nail this first step, no matter if you’re pitching to a bank manager, a group of venture capitalists, your parents, or the interesting yet intimidating hosts of the famous show Shark Tank.
You need to have a plan, and it needs to involve the following four things.
Too many entrepreneurs get caught up discussing their product’s features. But features will always come secondary to the value something adds to people’s lives because people will pay to have their problems solved, but they won’t pay for a bunch of exciting features they don’t really need.
If you’re having trouble determining your UVP, don’t worry, you’re not alone. But you do need to get started, and this involves thinking more critically about what you’re offering to people.
It may also require you to do some market research, such as performing a survey or conducting some interviews.
In the end, it doesn’t matter how you get there, so long as you find something that makes you unique and a way to demonstrate that to the investors to whom you are pitching.
Check out this guide to help you determine your UVP.
HIGHLIGHT YOUR UVP
Never forget that your business exists not to support you and your lifestyle but rather to solve other people’s problems. You provide a solution to the pain people experience, and as a result, they give you money.
This is called your unique value proposition (UVP), and it needs to be the first thing you introduce during any presentation aimed at securing funding.
PROVIDE A CLEAR ROI
We must never forget the intentions and motivations of investors.
Some may say that they like to invest in businesses because they believe in entrepreneurship, or because they feel they are doing something that’s good for society, which may be true.
But in the end, investors invest so that they can make money.
As a result, when pitching your idea, it’s important you make it clear exactly how investors will get their money back.
There are a few ways you can do this:
• Offer shares/partial ownership: Giving someone a stake in the business helps to put them at ease. They know they will make money as the business does, and they will also be able to weigh in on some of the decisions you make, something that is always comforting.
• Interest: In this situation, you’re really just taking out a loan. Before money is exchanged, you’ll agree to some terms, and you will be responsible for meeting these. This is tricky, though, when asking for startup money, as there is always a risk that the business doesn’t work out and the investor(s) have no way of getting their money back. If this happens, they will be forced to go after your personal assets, and this process can be just devasting.
• Exit strategy. Demonstrating a well-thought-out plan for exiting the business is often reassuring to investors. In this scenario, you would agree on a payment that would be made to your investors after you sell the business.
Paying attention to ROI (return on investment) is smart because it not only shows investors how they will get their money back and earn a profit, but it also shows that you’ve thought about the business in a long-term way, which is always comforting for anyone looking to invest in a new business.
It’s one thing for people to say they’re interested in your idea, but it’s quite another for them to open up their wallets and give you money. And investors know this, which is why it’s so important you offer some tangible proof that your idea works.
If you don’t have any, then you’d be wise to spend time gathering some, both for your meeting with investors, but also for your own sake—you shouldn’t go too far until you know your business has a chance to work.
This could include starting a pop-up store, or setting up a stand at a local market/convention center, or anything else you could think of that gives you the chance to test out your idea.
The most important thing is that you have some examples of people spending money on your products/services. This shows that the market you’ve conceptualized for your business isn’t simply theoretical. It actually exists and needs to be exploited.
INTRODUCE THE TEAM
Anyone who has the money and is interested in investing in a business likely has some experience in launching a business of their own. As a result, they know how much work goes into getting things off the ground.
This is why they will want to know as much about the team you’ve put together as possible. In fact, often times they may want to meet those you’ve gathered to help you turn your dream into a reality.
If this is the case, make sure you highlight experience and function. People don’t care if you’ve been friends with your team forever, and it actually might be better if you’re not.
Character traits are obviously important, but investors really want to see who’s going to be doing what, and also how their experience positions them to succeed.
P.S: Pitching to investors is difficult and daunting. We’re not going to sugarcoat it. But you can do it.
If you keep in mind what we’ve discussed here, and if you promise yourself not to give up even when things don’t go your way, you’ll soon find someone who’s willing to fund your project and set you up to turn your dreams into reality.