Mark Pearson is the founder of investment fund Fuel Ventures, which specialises in early-stage companies and offers a London-based incubation studio to its start-ups. Fuel Ventures currently has more than 20 start-ups under its umbrella and delivers a 70 times average return on investments in the European e-commerce sector.
The investment fund recently closed a £20m round from multiple high net-worth investors and corporate institutions, which span China, the Middle East and Europe.
As a new entrepreneur, drawing up a meticulous business plan is often just the beginning – it’s the investment that brings an idea to life. Achieving investment bridges the gap between having a great idea and building a successful business.
However, pitching to an investor can be a high-pressure task, with entrepreneurs pinning their hopes and dreams on one meeting.
It’s a nerve-wracking moment, but sometimes it helps to step back, take a deep breath and remind yourself that the investors in front of you are just people, like you, and they want to be wowed by your business – they’re not looking to trip you up at the first opportunity!
As the founder of an investment fund, Fuel Ventures, I am pitched to weekly. Some are great and some fall flat, but there’s always something to take away from such a meeting. With the right planning and preparation, there are ways to make pitching easier – for yourself and for your potential investor.
This might seem obvious, but you’d be amazed how many entrepreneurs I’ve had meetings with who quite clearly spent only a few hours on their pitch presentation.
I’m not saying that you should slave away for weeks, but it should be well put together and informative. Essentially you need to pre-empt what questions the investors will ask and be able to answer them confidently. Investors will want to test your knowledge of your industry and business.
If you can’t answer questions like how much money your market generates, how you plan to scale your business and how much disposable income your key audience has, then investors will have no confidence in your abilities as a business founder. There’s plenty of entrepreneurs around now, if you can’t demonstrate your value then there’s always someone who will.
Make it personal
Again, I’m going to point out that investors aren’t inhumane monsters, we like to talk and essentially a pitch meeting is about getting to know an entrepreneur and their business.
Be personable and friendly, which I know can be difficult if you’re nervous, but if an investor’s going to invest in you, they need to get to know you on a professional level at least. Allow investors to ask questions during the presentation, or say at the start of the meeting, ‘if you have a question at any point, please feel free to stop me’.
Tell a story
There’s often a lack of human connection when it comes to pitches – charts and spreadsheets might include some key information, but they don’t tell an investor why you’ve started your business, how you got to where you are and the lessons you’ve learnt along the way.
Effective storytelling is one of the best ways to engage an audience. If you turn your pitch into a story, you will make your business memorable, which is a big bonus for investors who sit down with multiple entrepreneurs every day. Tell the investor about you, your history and what inspired you to start your own business.
Remember, we’re not just investing in your company; we’re investing in you, so it’s important that we believe in you as well.
Once you get in front of a potential investor, an essential part of your pitch should be about establishing credibility and trust, both in you and what you’re doing. The best pitches will take the investor through failures as well as successes, and the lessons learnt from the experience.
Investors are effectively taking a chance on you and your business, so if you have made mistakes, can’t answer every question or your figures aren’t quite what you’d like them to be, don’t hide the truth, shy away or exaggerate the numbers.
An investor will know if you’re trying to avoid a particular line of questioning and it will lead them to wonder what else you’re not telling them. Respect their intelligence and be up front.
Understand your sector
You need to have as much information about your sector as possible. Investors will want to hear that you know your industry inside and out – what’s the market size, what’s the market value, do you have competitors, what are your competitors doing in the space, what does your audience look like, etc. These are all important questions that you should know the answer to.
Investors will expect you to be the expert in the room when it comes to your industry, even if they have invested in similar sectors, so it’s your job to educate and inform, giving them as much information as they need to help them reach a decision.
One of the most important questions business owners need to ask themselves is “how much money should I ask for”?
Some entrepreneurs will start with a huge sum and overestimate how much they will actually need, while others will underestimate their requirements in fear of putting off an investor by asking for a larger sum. Neither strategy is likely to result in success.
When sizing your request, you should consider your company stage, the type of investor you’re pitching to, investment terms, what you’ll be using the funds for and the projected return on investment. It’s no easy task – if you’re greedy or change your request under pressure, you will be at risk of losing your credibility – but it’s one of the most crucial factors when it comes to securing investment.
When you walk into an investor meeting, you’re asking them to put their trust and money into you, which is a lot to ask of a perfect stranger in most cases. To help sell yourself and your business, the best thing you can do is be passionate.
If you’re excited about what you’ve created and built, it’s so much easier for an investor to get onboard. We want to see your eyes light up and your hands flail when you tell us about your idea and why we should be involved, because behind every great business, is a passionate founder.
Starting your own business is hard, it’s probably one of the most challenging projects someone can pursue nowadays, so without passion driving you forward, the wear and tear of founder life can really grind you down. It’s one of the main characteristics I look for in an entrepreneur, if I can’t see or feel the passion then I know the business will likely fail.
Getting in the room is one thing – when you can successfully capture an investor’s attention, give them an air-tight business plan, tell an inspiring story and back up your numbers, you will have a truly compelling pitch.