Five Things To Know Before Pitching For Angel finance

Written on August 21, 2010 – 6:09 pm | by Michael Harris

Before you pitch your venture to a small business investor you need to be sure that you are completely ready for what could be the most important few minutes of your life. I mean, how often does anyone get to present in front of a wealthy, successful individual who has the financial clout to literally change your business fortunes in an instant?

Let me answer that one for you … not often, not often at all! This could be your one chance to get it all right, to present the perfect pitch; to reply to questions with measured wit and devastatingly accurate and convincing information. Now, with that sort of pressure wouldn’t any help or advice on how to handle this situation be worth its weight in shiny, shiny coinage, or at least thanks? So here’s our five top things to remember when pitching to a small business investor:

Your name – And yes, before you ask, this is the level of humour we will be displaying in this blog article! However, it’s surprising how many people go blank, I mean completely blank when put under this sort of pressure. You’ve seen the sweaty, twitching victims, I mean contestants, I mean entrepreneurs on Dragon’s Den falling foul of this I’m sure – umm-ing and ahh-’ing their way through vital moments of airtime. Don’t let this be you. Practice, practice, practice in front of friends, family, colleagues, anyone you can so your nerves are under control on the big day.

Your numbers – There’s nothing more annoying for a small business investor than a pitch where the entrepreneur does not know his or her numbers. Being able to present your gross and net profits over the coming years and effectively showing investors how they will make their money back with an obscene amount of profit is the foundation that your pitch’s success is based on. If you stumble at this point your pitch is as good as over. The fact that you may have an accountant to do all the figure work for you is irrelevant because as the person stood in front of a small business investor it is you who has to know the intricate financial workings of your company.
Your grasp on reality – Your expectations must be realistic and well researched or you’ll lose an Angel’s interest and respect in an instant. One of the most common mistakes a new entrepreneur will make is to overvalue their company. By asking for x -amount of small business investor funding for y-amount of equity, some forget that these figures tally up to a valuation, and this valuation needs to be justifiable. The other school-boy error is to woefully underestimate your business’s financial needs or incorrectly present the potential allocation of these funds. All of which can only result in the small business investor quickly deducing that your lax grasp on financial reality makes funding your venture too risky.
Your product or service’s unique qualities – Whether it’s because some entrepreneurs get caught up in their own hype, or they once knew the fundamentals of their uniqueness, but the practicalities of launching a business have pushed those thoughts so far out of their conscious mind that they stumble when asked. You have to know your product or service’s unique qualities or your pitch is dead in the water. Investors are essentially looking for a return on their capital and they know that your business is most likely to succeed if you are offering something that nobody else is. Now, whether the uniqueness of your business is that you are doing something completely new, or that you’re going to be doing something better than anyone else in a sector, it is essential that you are able to express why you will stand out from the crowd to a small business investor…and be able to get that crowd to open their wallets.
Your exit strategy – This is the small business investor’s payday. It’s lovely to think that a business Angel will be interested in investing because you have a wonderful company that they can feel as emotionally connected to as you do right now, or that they are being generous, or that they’ve always dreamed of helping a business like yours off the ground. However, the reality is that the vast majority of Angels are most interested in the bottom line, which in most cases means the exit strategy. Your plans for an exit strategy will affect their investment, so have a clear plan in mind that will benefit them as well as yourself and you’re on your way to winning their funding. This might be a part or full floatation, a buy out or a sale to a major competitor, but whatever it is your plan must be clear and financially rewarding for all concerned.

Good luck in your pitches. Keep in mind all we’ve said here in this article because however much you might think that this advice is obvious and you don’t need to follow it, I can almost guarantee that you’ll wish you had when you come face to face with a small business investor that you’re keen to impress.

Perfect Business!