Pitching to potential investors is one of the most critical points in a startup’s life. Financing is the fuel your new business needs to start growing. As a serial entrepreneur and founder of the Ottawa-based Hosted PBX provider Versature, now in our 12th year of business and ranked 5th largest Canadian service provider by revenue and subscriber count, I’ve had my fair share of experience pitching to investors.
Listed below are a few of the key questions I’ve been asked in the past, and, on the flipside, things that I would look for if I were considering investing in a private company.
- Market Opportunity. What is the market opportunity? How big is the market that this product/service will be addressing?
- Current burn rate. How fast is your startup spending money? What do these projections look like for the short and long term?
- How long will this money last? Based on your burn rate figures, how far do you expect this round of financing to take you?
- Will more money be needed? More financing is almost always an asset to a company. Even in our 12th year of business, we recently completed an additional funding round, picking up $675,000 to accelerate our growth. When do you anticipate your next round of financing to be held? What will you have accomplished by then? Do you have a firm understanding of your costs and capital requirements? How much more money are you going need at that time?
- What will the money be used for? As an investor, I’m going to want to know which needs specifically you are looking to address with my investment. Where is the money going and when? What are your customer acquisition costs? Do you need to make new hires? What is your proposed marketing budget? The list goes on.
- What return will I get? This one is pretty self-explanatory. If it’s a debt investment, what is my rate of return? If it’s an equity deal, what percentage of the company do I receive in return for my investment? What protections do I have that my investment will not get diluted in the future?
- Do I have faith in the management team? Not necessarily a numerical answer (unless you want to go binary on this), but having faith in the management team as a whole will absolutely be a deal-maker or breaker. According to Forbes, bringing your team to a pitch meeting, but only having the CEO is a common mistake startups make when pitching to investors. Highlight your team’s experience and credentials to present a strong leadership group as a whole.
In addition to having your facts straight, equally important when pitching to a potential investor is making a favourable first impression. If you fail to do this, your first impression may be your last impression! When I was seeking capital investors for Versature in the early years of the company, I contracted the help of a PR agency to pull a little publicity stunt to raise awareness about myself and my company. I’m not saying you need to ride a segway from Ottawa to Toronto like I did, but setting yourself apart from the competition and making waves in the industry prior to a pitch is important.
Lastly, practice your pitch with friends and advisors before going to the live event. Know your numbers, anticipate certain questions, and present a strong and confident team!
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