Many small business experts agree that a ‘chasm’ exists within the early life stages of small businesses. What they mean by this is that within the first three to five years of a small business’ life, it will have to undergo some significant changes to successfully develop into a medium sized business, and enter the next stage of growth. For many businesses, a major focus at this stage is raising capital. It allows them to bring on more staff, purchase equipment, reach a broader market and start turning some of those small ideas into big realities.
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But you can’t raise capital without first knowing how to pitch your business. Developing a winning pitch may seem easy, but it’s one of the toughest challenges that small businesses and entrepreneurs face as they attempt to bridge this ‘chasm’. It is amazing how quickly small businesses can scale following a capital injection, so it’s important to nail your pitch the first time so you can get on with running your business and putting that capital to work.
Below are a few of the major principles that I have successfully used to pitch for investor capital.
Tell a story
One of the most important elements of a strong pitch is finding a compelling narrative. Design your pitch to have a distinct beginning, middle and end, so your audience can follow along more easily and don’t get bogged down in the detail, or worse, bored. Within this narrative, your job is to outline the problem you want to solve, how you are going to solve it and your method of reaching your target market.
The beginning should outline the problem. This is the problem that your target market is currently experiencing and the one which your product or service is intending to solve. Inject personal experience and use real world examples in this section, so that your investors are put in the shoes of the consumer and can empathise with their problem and desire for a solution. A strong pitch will include testimonials from people who currently experience this problem.
The middle should provide an overview of your value proposition, or how your product or service is going to solve this problem. Be as specific as you can: product specs, design, functionality, interface, service model, etc. The more specific you are, the more trust investors will have in your operational leadership.
The final section should detail your go-to-market strategy. Review your team, marketing plan, distribution channels, partners and competitors, as well as other key stakeholders who are relevant. Finally, you should include a clear revenue model for how you business is actually going to make money.
Don’t forget ‘the ask’. Be precise about how much investment you need and what percent of your business you are willing to give up for it. Know the investment term norms for your industry and stage of business, because your investors aren’t going to veer too far from them.
Use visual metaphors
During your pitch, you want to have your audience focus predominantly on what you are saying with visual aids and stimulus backing up your main ideas. A solid technique to increase the engagement and retention of your audience is to use visual metaphors, as they are a great way to instantly establish context.
A classic example is ‘the tip of the iceberg’. This metaphor could be used in the early stages of your pitch where you outline the size of the initial expected market and then zoom out to reveal the initial market as just the tip of the iceberg to a much larger ultimate market that you are planning on reaching with your product or service.
Zoom into the numbers
Relevant market research is one of the easiest ways to validate your idea or business model while showing your investors that you have done a serious amount of work just to get to this point. Big picture data like Total Addressable Market (TAM), which is an assessment of the total theoretical market size for your product or service, is one easy way to show investors the potential of your business. It is important, however, to also include your initial target market (a segment of the TAM) so that your investors understand that you are, in fact, realistic.
If you have launched your product/service and have customers, say so: “We launched our product X months ago on an initial capital investment of Y and already have Z customers”. Include specifics that are relevant to your business model: month over month growth rate, return or retention rate, etc. A successful launch story will help you build the case for additional investment.
End with a bang
The end is just as important as the beginning. End your pitch with a bang by using an image, graphic or figure that you want the investors to remember most of all. A surprise ‘final reveal’ of an updated product, service, revenue outlook, investment opportunity or product demo is almost always effective. Steve Jobs was a master of this, always keeping his audience hanging on for the classic, “There’s one more thing”.
In 2012, the exec team for Parkland Fuel Corporation used Prezi to deliver a knockout investor presentation to launch their five-year strategic plan. It is a great example of a presentation that captures the attention of the audience through a combination of visual stimulus. Tom McMillan Director of Marketing & Communications at PFC, said that the presentation’s success at capturing the attention of the shareholder base, coupled with their successful strategic plan, helped the share price reach $21.31 in March 2014, a 56 per cent increase from two years earlier.
Drew Banks is an NCSU engineer turned MIT business guy who spent two decades in Silicon Valley split between former computer visualizstion giant, Silicon Graphics, and the home networking company he co-founded, Pie Digital. During his first three years at Prezi, he built and ran the marketing, sales, and support organisations. Now, as Head of International, Drew fans the fames of Prezi’s growing global adoption. Drew also writes. He’s published a couple of business books on communications and social media, as well as a couple of novels on … life.