Successful business people know that the key to success lies in fully understanding their customers’ needs and desires, and delivering the right solutions to yield a profit. In the same way, when you're pitching to potential investors, you will need to understand what they want to know about you and your business while providing the necessary information in a clear and concise way.

Angel investors or venture capitalists are looking for growth that is above the norm and they appreciate that the risk will be higher. Indeed, the risk potential increases the focus on risk management, and explains the ‘grilling’ companies can be given when talking to investors.

The overall risk involved is a combination of the product or service simply being unsuccessful, and the potential for the entrepreneur or company to make bad decisions using the investors' money.

It’s hardly surprising, then, that the market opportunity and the management team will always be at the forefront of investors’ minds when facing a pitch. As a pitching company, you need to show expertise, confidence and trustworthiness, as well as demonstrate your familiarity with the financials and the market.

But what should you include in an introduction slide? How is your business solving a problem? And why is investment required? We’ll provide the information you need to know to answer these key questions, and more.

In this article, we’ll cover the following steps:

1. 1. Introduction slide
2. 2. The problem
3. 3. Your solution
4. 4. Competitive position
5. 5. Your team
6. 6. The business model
7. 7. Back up your key forecasts
8. 8. Valuation and investment required
9. 9. Key milestones (and how to hit them)
10. 10. The business exit strategy

How to structure your funding pitch

A typical presentation should have a structure like the one below. This provides a framework which will help you prepare strong answers to any relevant questions.

Assume you have around 20 minutes, and modify if necessary. But don’t make the classic mistake of doing all the talking. Listen to the responses, and consider what is behind the investors' questions.

Here’s what to cover in a funding pitch or presentation:

1. Introduction slide

Use your first slide to summarise the content of your presentation. Number each section, and outline your overall structure.

2. The problem

Use this slide to show the gap you have identified in the market and the market position today. Knowing your market includes having an understanding of the key players, and of the various different channels to market.

You also need to demonstrate your knowledge of where the market will be heading in the future, and how to stay one step ahead. How does your solution fill the gap?

3. Your solution

Why is what you do unique, or better than what others do? Explain why you have the only product in its class that can solve the customers’ real problems.

Where possible, back it up with your track record: your sales history, testimonies from real customers, or competitor analysis defined by credible sources. Be specific about the product category, the target buyer, and how you are distinct.

4. Competitive position

In this section, you need to identify how the customer can solve the same problem (the need or requirement that your business caters to) in another way. For example, if you are selling chocolate bars, your competitors aren’t just other chocolate or confectionery sellers, but other snack foods too.

What are the customers’ options, and how do you compare? Good entrepreneurs show a detailed understanding of the competitive landscape from an insider’s perspective – so make sure you demonstrate this knowledge!

5. Your team

Investors see a company’s team as critical to driving the business forward and making it a success. Demonstrate your record, industry knowledge and expertise.

What is your vision of a successful company, and how can your team deliver it? What about advisers or non-executives on your board – who are they, and how does the board function?

If you are the founder, are you ready to step aside and appoint a new CEO for the next phase of growth? This may be the hardest question to answer, but may be one of the key questions, so make sure you’re prepared.

6. The business model

Explain how your business has operated to date, and how it has been funded. What business model have you chosen to produce the company’s revenue?

It's also vital to disclose any plans to change the structure of the company, and any significant risks that may impact upon investors.

If your products or services aren’t ready to sell, then what do you have to do to reach that point? Reveal any licence deals which might be necessary, and how much they cost.

Let the potential investors know the most important or difficult challenges you face, and how you plan to overcome them. Investors look for openness and honesty – after all, they’re not only investing in your company, but also in a relationship that may last several years.

7. Back up your key forecasts

How much profit do you realistically expect to make? What is the annual revenue for the next five years? What amount of money is required to take the company to the next level of valuation, and when do you expect the next investment round to take place?

It is vital to explain the key assumptions behind your statements and forecasts, without forgetting that these have to relate to market forecasts. There is no point in forecasting R100m in a market worth R5m. Crucially, tell the investor when and how they will get their money back.

8. Valuation and investment required

Potential investors need to know how you have valued your company, and what you are looking for in terms of funding. Be clear about how much money the founders have put into the business as ‘cash and sweat equity' – your hard mental and physical efforts.

Have the directors and advisers invested? Explain how you reached the figures for the valuation for this round of funding, and what you are using to calculate the valuation for the proposed initial public offering (IPO) or exit.

Investors need to have an understanding of the cash requirement, and need to be aware of what happens if conditions change – for example, if the product is late, or market adoption is slower than you predicted.

It is worth noting that you will be at a disadvantage at this point, as most investors know more about this stuff than you do – therefore, it's important to get some help so that you go in prepared.

Also, have a point beyond which you won’t go, and be ready to walk away if the deal is not right. Good investors – angels less so than venture capitalists – expect to deploy reasonable levels of cash, so you need to reach a position where you have enough funds to give you a real chance of success.

9. Key milestones (and how to hit them)

Outline your key milestones. Can you demonstrate your track record for hitting them when working on similar projects? Will you have to hire people to reach these targets?

Be prepared to answer the question: “How will you succeed where others have failed?” Be positive, and explain how you will handle any emergencies that may arise.

10. The business exit strategy

Investors are only in it for the return, so you need to have a credible route for them to get their cash back – and more.

Use this slide to explain why competitors cannot just step in and take the market. Let potential investors know why this is the most exciting business opportunity they are going to see for a long time.

It is important to target the right investors – those who will be most interested and create a buzz. Remember: investors talk to each other.

Obtaining investment is also driven by supply and demand – the fewer opportunities around, the more likely you are to be successful. Timing can be key.

And finally… remember that these are just guidelines. A good pitch does not always need to have all this detail, but you can use these steps as a way of organising the flow. Pertinent imagery or bullet points may be sufficient with the right presenter and supporting materials.

Adapt the pitch to your company’s needs, and take into account your development cycle and the type of money you are seeking. Whatever you do, always put the strongest points first, and expect to be challenged by potential investors – if it were your money, you would do the same!

How NOT to pitch your business

And what should you not do during a funding pitch?:

I’ve heard my fair share of pitches made by capable individuals looking to raise funds for their startups. Unfortunately, the majority of fundraising pitches are a mix between a short-story fantasy and a bad school project.

Why is it that would-be entrepreneurs throw a few slides together, and somehow think they’re ready to start asking for money? It’s unfortunate that the structure used in pitches by late-stage companies raising funds from venture capitalists somehow got stretched beyond reasonable justification, to be used by pre-seed startups with no revenue, no product, and no market validation.

It’s fairly easy to come up with an idea based on a perceived consumer need, but what isn’t so simple or obvious is spending time creating the compelling metrics and fact-base around why or how a startup has a chance of success. Determining the following answers is of pinnacle importance, yet often neglected from most pitches:

1. 1. How much will it cost to get a customer?
2. 2. How much will a product be sold for?
3. 3. When will the startup be profitable?
4. 4. What competitors are currently already serving the market?

The sad truth is, there is more guesswork and fortune-telling in most pitch decks than any investor could ever want to see in a lifetime. This ‘entertainment’ most commonly comes in the form of ridiculous financial models with exponential growth curves, sparse competitive landscape research, and imagined revenue streams that are a perversion of business reality.

What’s the pitch panacea? Good old fashioned honesty compensates for a lack of evidence, and questionable or biased basic research. From hearing hundreds of pitches over the years, here is a list of principles to abide by to ensure you pitch more like a person, and less like a pompous pre-seed know-it-all.

Don’t boast

Having a concept that is developed but untested is not a competitive advantage. However, founders may think that they alone are the ones anointed to turn a business idea into reality.

It is also mildly perplexing to hear founders place more of their fervour behind the opportunity they’ve stumbled across than their actual concept.

Any billion dollar market is exciting, but trying to credit and justify investment for an unproven and unbuilt concept, by association with the market size or opportunity, shows a lack of experience.

One should avoid sugar coating assumptions and facts – few as they may be. The more assumptions used during a pitch, the less investible one becomes, as any sensible investor will quickly call the founder’s bluff.

For example, startup projections for growth should not exhibit exponential growth characteristics unless they are based on real metrics, unless one wishes to risk looking like an idiot by counting chickens before they hatch – with no eggs and no chickens.

Don’t debate

Pitches can get heated, and pride always creeps onto the stakes table when it doesn’t need to. Those who get defensive during their pitch are likely to have less entrepreneurial experience, and/or have developed few – if any – other concepts in the past.

A more practical and experienced individual would admit the flaws in their pitch, yet offer solutions. This gives the investor confidence that whatever the issue, it will be resolved before the cheque is cut.

If a concept sucks, it won’t sound any better if you crack under the stress of questioning. It would be helpful for a person pitching to take the stance that the concept is not theirs, and to not get themselves married to the outcome of the pitch.

State the facts, embellish accomplishments with excitement, and elaborate on problems with the same excitement (or at least in monotone).

Don’t ask for more finance than you need

Many founders don’t know how much it will cost to test a product, market, or business model. It shows poor planning if you don’t know whether you need R25,000 or R250,000, but would be happy with anything in between.

Being oversubscribed may seem like a benefit, but having extra cash for a rainy day is hardly a good way of keeping lean and avoiding dilution. Marketing and personnel/tech costs will likely amount to the lion's share of expenses, but these are fairly predictable, thus making it unnecessary to try and raise as much as possible without knowing what you’re going to spend it on.

Most MVP (minimum viable product) web and mobile-based startups can be bootstrapped with R10,000 to R25,000, with founders taking a R0 salary. This amount should cover a majority, if not all, of the website or mobile app build, as well as leave plenty in the bank for marketing.

Furthermore, taking less investment will also allow founders to avoid dilution. For example, raising R25,000 on a R250,000 valuation (founders giving up 10% equity) is more realistic, achievable, and perhaps favourable than raising R150,000 on a R600,000 valuation (founders giving up 25% equity).

This will also make it faster and easier to raise, as well as increase, the startup’s valuation for the next funding round – which again, can be more precise given a smaller initial seed investment.

Don’t make promises

One of the most difficult statements for investors to swallow when hearing a pitch is “we will do…”, or “we are planning to…”

While amateurs pitch on promise, more experienced entrepreneurs (the ones that are more investible) will state the facts, with some personal interjections that support their justifications for obtaining investment.

Putting off concept validation, or quitting a full-time job until after fundraising, are both selfish promises – the founder is hoping the investor will bet on him/her before they take on any risk, which means this would-be entrepreneur is most likely not a genuine entrepreneur, and not worth investing in.

Don’t be a caricature of yourself

Often when entrepreneurs pitch, they have the tendency to morph into someone else and use a different tone of voice, mannerisms, and personality. They say what they think investors want to hear, and what they think will get them funding, to try and make others believe they are deserving of investment.

Often, after the pitch, the armour comes off and many revert back to their ‘normal’ selves. This contrast can appear disingenuous, and can put investors off. When you pitch to investors, you should act naturally, as you would during a casual conversation. Pitch as though you are pitching to friends and family, not individuals who you are trying to impress.

The ability to raise money is meaningless, but often ego takes over. When someone pitches poorly, raising money becomes all about the individual – i.e. the founder – and not so much about raising money to build a viable business. Fundraising should be about ultimately providing value to investors by paying back a profit, and not just a “thank you” or a “we tried”.

Many entrepreneurs in this day and age put more passion into validating themselves than they do a business model or concept. The ‘pitch’ has thus, unfortunately, become more of an exercise in self-validation than displaying proof of business model validation.

Please do yourself and any other investors a favour, and follow the tips above when you pitch – you may just get funded.

What are the next steps?

From reading this guide, you’ve learned more about the key information to include in a funding pitch – including the order to structure to it in – as well as the details about your company, your product, and your investment requirements that you’ll likely need to provide. 

Next, visit our angel finance, private equity and venture capital channels for more information about raising finance. Good luck!