VCs, private equity firms and business angels/family offices are far from a homogeneous breed. But there are some key success factors that will attract interest from a potential backer, whether you’re a start-up or an established business ready to take it to the next level.
How to approach your pitch
One of the hardest things for an entrepreneur to do, and one of the most important, is to take a step back from the business you’re immersed in day to day and identify the most important points to highlight in your sales pitch or deck.
Before you decide what you’re putting in front of a potential investor however, consider how you say it. Your pitch needs to be persuasive, to the point and on mission. The language should be clear and jargon-free, bearing in mind your listener won’t necessarily have a technical background. Try to be as transparent as possible (no smoke and mirrors) and proactively bring up any areas you think are possible deal breakers.
What this pitch is not, is a brain dump. Don’t drown your investor in too much detail. Don’t oversell. Now is the time to start building the relationship and the trust. There will be plenty of time to provide supporting data and information further down the track.
So what are investors looking for?
Pitching is selling, but instead of selling a product you’re selling an investment. Remember that an investor needs to get a return from selling your business in a few years’ time. This may require some research into the fund you’re talking to. What investments have they made in the past and why? What is their focus? What do they specialise in – e.g., businesses in early or later-stage commercialisation? Businesses of a particular size, industry or location? The more you can align to these criteria, the better received your points will be.
As part of this process, you’ll also see whether your potential VC partner is the right one – whether they have access to the skills and resources you might need to expand, beyond just cash. This skill matching/gap analysis is part of what Qodeo offers to entrepreneurs via its data-driven platform.
You won’t tick every box for every VC or PE firm/investor but you will get off on the right foot if you can demonstrate these key elements. Note that the kind of information your investor will be looking for will depend on the stage they target – whether early or later stage.
- Team skill and capability. Qodeo research shows that investors look closely at teams for earlier stage decisions. Team is number one for most investors. A cohesive, ethical and diverse team is what drives success long-term, headed by a strong management team with the knowledge and experience to enable all parties to achieve their goals. Investors are looking for competent, open entrepreneurs who can adapt their business models according to changing markets. Some investors will look specifically for team members who have been VC backed before; others won’t care. Qodeo will automatically ensure that you are put in front of the right potential investors.
- Unique products and services. This is another big one for (early-stage) investors. Can you demonstrate a strong brand with products and services that are superior to others in your market, along with the technology that enables these benefits? Do you have defensible intellectual property (IP), from your copyright to hard IP like patents? Has your business won awards? This kind of information can be entered on your Qodeo profile to be reviewed by investors – and it’s a good discipline for writing your deck or pitch.
- A scaleable business model. How does your business expand to the next level/s and how will it use investor funds to do that? Investors may help you, but also set ambitious milestones. It’s sometimes difficult to gauge whether your fund raise matches a given VC; the Qodeo Concierge service can help show entrepreneurs whether your aspirations or raises are too small or just right.
- A clear picture of the competition. However unique your product or service, you have competitors. You need to clearly identify their key characteristics and show how you can position your company against them. Competition per se is not bad – it can indicate you’re into something, that there is a market there! And maybe you see the market differently, or are faster to move than a lumbering corporate, which can turn slowly like a tanker. It’s also useful to point out ‘complementors’, those possible partners or ‘competition’ who you can turn into your ally/channel partner.
- A solid understanding of your customer. Show who will be buying your products, their preferences, what they will pay, why they love your products and services specifically. Demonstrate how your teams ‘get’ your served market, and have empathy for their problems. Many entrepreneurs start businesses to solve problems they found at work – how Qodeo started – or in home lives.
- Ability to deliver a credible, high return on investment. VCs are taking a risk when they invest in your business. Demonstrate how you’re worthy of investment through a proven track record, access to markets and networks, strong financials, highlighting the parts of your business which will make you even more profitable in future.
Investors don’t generally target ‘lifestyle’/low-growth businesses. They’re on the lookout for fast, aggressive growth, so your business can be sold at a multiple in a few years, though this criterion varies across geographics, sectors and stages. Many entrepreneurs think that VC/PE firms are looking for a three times return. But, in fact, that is their average, so they’re often seeking much greater returns.
By using the Qodeo platform, you can upload decks and videos that demonstrate the key points above.
Opening up your network
Traditionally businesses have been limited to the networks of their key people, putting increased pressure on directors to personally expand the pool of potential investors. Which often isn’t realistic – especially if they’re from diverse or remote communities. The role of fundraiser is time-consuming too – at a time when an entrepreneur should really be focused on customer needs, operational efficiency and the growth of the business.
A simpler way to expand your network is to subscribe to the Qodeo platform, which matches best-fit entrepreneurs and investors automatically. For a modest investment of 9.95 per month (in most currencies), Qodeo opens up access to more than 5,000 leading VC/PE investors globally, giving you an understanding of investors through their profiles, with smart investor matches focusing your efforts – as long as you remain a subscriber. You’ll be presented to VCs as part of curated lists of entrepreneurs, graded from most to least suitable; investors can then accept connections from and view selected profiles.
75% of entrepreneurs who have used Qodeo say they have saved between 200 and 500 hours searching for the right investor. Take just five minutes to onboard by signing up and setting up a profile, and you get instant gratification without drowning in the data you find on old-style websites. Qodeo can put you in front of the right investors, who are pre-vetted and ready to hear about your business.