Lunch & Launch recap: What Not to Say in an Investor Pitch

Written by Innovate New Albany@InnovateNA10 years ago

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You’ve got an idea, and you’ve done your research. You’ve written your
business plan and you’ve secured your partners.

Your next step is to convince a group of investors to believe in your product and support you financially. How do you present your case? What should you say during your investor pitch?

During his presentation at Innovate New Albany on February 20, Paul Proffitt of SunDown RunDown advised a group of entrepreneurs of what not to say to investors. The presentation was part of SunDown RunDown’s monthly Lunch and Learn Series.

Paul explained that his presentation was compiled from his own experience, mistakes made by judges themselves when they first started out, and observations from watching other new business owners’ venture plan presentations. Much has been written about how to pitch your idea to investors, but there is not a lot of advice about what to avoid.

Successful pitches are led by entrepreneurs who can think like an investor. Investors are looking for enterprise, positive cash flow, and want their money back in as quickly as 18 months.

And while the financial aspect is of concern, investors are not banks. They are experienced professionals who want to buy in to a team, provide supervision, and help you to succeed. The investor will be taking a risk, and will be evaluating if the expected reward will justify their investment. They will evaluate whether or not your idea is “worth it.”

Paul provided several phrases new business owners have said that make investors determine the risk is “not worth it.” Here are just a few examples:

1. “But we answered all the questions in the business plan template.” The business plan template is just a guide. Completing it should be a comprehensive effort by your entire team that outlines your plans, how they will be executed, and addresses all the risks.
2. “The idea alone is worth millions.” You may have a good idea, but it takes a lot of time and work to grow it. What is built around the idea and how it’s executed make it worth millions.
3. “Our patents are rock solid.” Patents are difficult and expensive to enforce, especially for new businesses.
4. “Our projections are conservative.” Investors want to see realistic projections; not too optimistic or pessimistic.
5. “Several other venture capitalists are interested” or “We’re not sure we want a venture capitalist.” Both of these statements are disrespectful to the investors’ time and intention. Instead, state that you are looking for numerous ways to gain support, or explain why you like that particular investor and what they can bring to you.

Paul said one of the biggest mistakes new business owners make is talking a lot about the product. Investors are interested in knowing not just about the product, but also your plan and how you will execute it. He offered the following tips:

• Avoid buzz words, irrational exuberance and comparing your business to bigger companies that investors might not like, such as Facebook.

• Keep your communication, graphics and charts simple. Be sure they are clear and you can explain what they mean.

• Don’t ask for a big chunk of money up front. Instead, ask for money for the next milestone. Explain what you will do to get to the next step, and if you succeed, how much more money you will need at that time.

• Know your industry and solve a problem that it has. Educate yourself on how business and finance work. You don’t have to be an expert to understand how money flows in and out.

If you understand what investors need to know, and you have a team, a written plan, and a goal to make money, you will increase your chances of securing an investor for your product. And you will finally make your dream project become a reality.

Innovate New Albany, the city’s incubator for technology startups, entrepreneurs and small businesses, features 16,000 square feet of space within the New Albany Business Park’s Signature Office Building, 8000 Walton Parkway.