Nobody wants to walk in the shoes of a startupper who is trying to figure out how to frame his business idea for the investors. Truth be told, most of the entrepreneurs rely on themselves, their friends, or family when it comes to funding a business launch.
If you take a look at the statistics provided by Fundable, venture capitalists and angels support a real small percentage of startups in the U.S. Venture capitalists are responsible for just 0.05% of startups funded, while angel investors invest in a bit larger number (total of 0.91% funded ones). However, they also write far bigger checks (average VC investments are over $5 million) in these individual rounds which is why you should feel lucky if you find yourself in the group of chosen ones.
But how do you sweep investors off their feet and make them see the greatness of your idea?
We at Domain.me have decided to break down the formula of a successful pitch for you! Of course, it depends on how you implement it. We’ve went through various speeches from startup pros in order to unlock what makes them so captivating. Read on to find out actionable tips you can use to bring your performance to a higher level.
The Structure of a Successful Pitch
When you pitch your startup to investors, what is your main goal? If you’re about to reply with “to get money”, better hold your breath. Your main goal should be making a connection and seeking agreement for your idea. There are many great ways to achieve that.
First of all, you need to plan ahead. This means you prepare the outline of your pitch, write the first draft, try it out, and then let go of the big chunks of texts that are unnecessary. Then you need to section your speech so that it has a clear three-part structure and well-organized sections of time:
- Introduction (consisting of exposition and positioning)
In the exposition part, you’re supposed to open your pitch by introducing yourself and it is crucial to hook the investors’ attention right there. If you have a weak opening, they are less likely to listen through carefully. This section of your pitch should make up for about 10% of the total time you have on your hands.
Positioning is where you prepare them for what’s coming. This is where you set their expectations and introduce them to a problem that exists, but which you’re set to solve. It is kind of a promise you give, something that will assure them you’re worth listening. This part is about 16% of your total pitch.
Argumentation is the main part of your pitch, taking up to 60% of the time you have. This is where you offer a unique solution to the mentioned problem (be it a product or a service), explain who your team is, show your competence, guide the investors through your business plan, and help them understand you have reasons to believe there is a place on the market for your idea.
Conclusion is the closing part of your pitch that’s about 14% of your speech. This is where you underline your startup’s mission and remind the investors of your key notes. Make sure to give a strong ending with a clear call to action, so that they know the amount of money you need and the expected results.
Don’t take these percentages too strictly. They don’t mean you should grab a calculator and organize your pitch exactly according to the mentioned ratio. But startuppers do make mistakes of talking too much about the things investors don’t need detailed information of. This is why it’s good to focus on the time organization. It doesn’t matter if you have 2, 5 or 20 minutes for your pitch – try to respect the ratio. Once you’re clear on what you’re going to say, it’s easy to make a great pitch deck.
What Investors Want to Hear
In addition to the mentioned pitch structure, there is one technique that’s extremely useful when writing a speech you plan on presenting. If you want investors to really sink their teeth into your idea, you need to expose them to the blankness of the current world (the so-called status quo) and show them how your idea changes the world directly, that is – the future world that is bound to be born if they choose to support your business. The bigger the gap between those two worlds, the greater the chance for getting the funds you need.
Contrary to what most startuppers think, venture capitalists are not only about getting the return of their investment. They are not bankers, but entrepreneurs. It would be foolish to exclude money from the equation, of course. But if your startup doesn’t have a clearly defined meaning it wants to create, you’re likely to crash and burn. Money cannot be your one and only goal.
So, what is the thing you need to underline in your presentation?
It is the famous why: why are you launching your startup, why is it important for the world, and why should they care.
Steve Jobs was one of the entrepreneurs who always combined this before-after technique when presenting new Apple products to the public and he always focused on the why. That’s exactly what Simon Sinek, author and marketing consultant, spoke about in his TEDx talk. Sinek tried to explain how people inspire action. He shared the idea of the golden circle consisting of three parts: the core part – why, the middle part – how, and the third one – what. Knowing what’s your purpose, cause, and belief is knowing why you are doing something. This is what investors need to hear, besides the fact you can show there is a market for your business. Remember: money is simply means and profit is the end result.
Most businesses focus on explaining what, as they want to give as much details about their idea as possible. Or they make a rookie mistake and they waste too much time on convincing the investors they have the needed experience.
Here’s what you essentially need to include in your pitch:
- Hook for investors at the beginning (any kind of attention grabber)
- Outline of the existing problem
- Your solution and the explanation of your expertise
- Business model you thought through (including some proof or strong assumptions there is a need for your idea to come to life on the market; specific numbers are good, so this can be data, but it can also be feedback from customers you’ve tested the prototype with)
- Call to action (the amount of money you need for your business + clearly defining the results of their investment)
Your vision, your competition, current state of the market, the competence of your team, your growth plan, the amount of money you need and the spending plan – these are the things you have to know like the palm of your hand in order to carry out your pitch successfully.
It’s Not Just What You Say, but How You Say It
The power of communication is really something. We use words on a daily basis to negotiate, convince, seduce, or comfort. We cause emotions with what we say and inspire people to take action. Great speeches during the war motivated soldiers before the battle, they’ve strengthened the national spirit or even spread political propaganda. Words can be enchanting and those who are wise enough will understand the benefits of mastering them.
But when it comes to communicating ideas, you’ll encounter an intriguing paradox. One idea can be mighty or powerless without that having anything to do with its core nature. The key lies in the way the idea gets explained and presented to others. It is a must that you are a believer and an evangelist of your idea but it sadly means nothing if you cannot communicate the value of it. Delivery matters and so do all the things we communicate outside of words.
Take one glance of the findings by Albert Mehrabian, Professor Emeritus of Psychology at UCLA, and you’ll probably realize don’t really give that much credit to non-verbal communication. Mehrabian became famous for defining factors that are in play when we form an impression on someone who is communicating with us. Through research, he has concluded that 7% of the impression we leave is formed by the actual things we say, 38% by our diction, and 55% by our body language and non-verbal assets. Although these percentages might seem a bit too disproportional and extreme, they still make a good reminder to become aware of all your qualities when taking a role of a speaker.
Qualities of a Great Pitcher
There are three elements of your pitch that need to coexist in balance: the logical foundation of your speech (what you are saying), the credibility you have (what makes you the perfect person for launching that business), and the emotions you want to cause (emotions are very important when it comes to constructing persuasive pitch). Every word you say has to be supported with valid argumentation.
But, what makes a great pitcher?
Attitude, appearance, and communication skills. Hold your fire: when we say appearance, we don’t mean whether or not the pitcher is good looking. It’s not a superficial thing, but a real fact: you need to be well groomed and dressed for the occasion in order to make a good impression.
People judge you by the way you look. Attitude is more important, of course. It is the way you handle yourself and it’s mostly communicated through your body language – so stand tall! As for the communication skills, you have to show the investors what you’ve got. This means paying attention to the non-verbal message you’re sending (i.e. the mentioned body language) and awakening your voice and using its full potential (the depth of your voice, prosody, tempo, pauses, the pitch of your voice, and volume) in order to make your message come to life.
In addition, you have to adapt your message to your audience. Investors want to hear insights they never heard before, but they also need understand what you’re saying. Don’t use expert language to show off – it will do you no good. Instead, turn to analogies or the method of storytelling to help them get a grip of your idea. There are things that are important to you and there are things that are important to them. Figure out where these two circles overlap: that is the area in which you can operate.
Once you stand in front of the investors to pitch your startup, take a deep breath and remember why you’re doing this. In addition to all the possible preparation, one part of the result of your efforts will always depend on something you simply cannot put a finger on. Call it timing, call it luck, call it a bad crowd – but it’s liberating to understand there are things you cannot control. It’s not to justify your possible failure, but to realize the context of it.
In any case, you can count on Domain.me as your buddy when it comes to all startup related topics. We pride ourselves for being the online home of many world renown startups. Have a domain name on your mind? You can check availability here.