The Five Things You Have to Get Right When Raising Funds
What is raising funds?
The formative weeks, months and years of your endeavour are by far the most vital and intensive for your startup. Raising or accessing funds is an essential part of your business plan, in order to point towards growth and win the confidence of investors.
If you’re looking to raise money externally for your business, in the form of VCs or angel investors, the most important thing to have at your disposal - apart from an amazing idea - is an equally brilliant pitch deck. The best pitch decks can actively generate interest in your ideas among prospective investors and engage them in a conversation about your company.
(Image: Forbes. Figure 1)
However, despite virtually every business founder acknowledging the significance of solid business plans and pitches, countless startups fail to get off the ground each year.
Running out of cash is one of the most prominent reasons for start-ups failing. Accessing finance from investors can help to provide businesses with enough runway to facilitate the growth needed to really take off. The challenge that many owners face is building the right pitch to capture the interest of the investors, for the investment they need.
Here’s what you need to build and complement a competition-beating pitch deck to win the interest, and backing, of investors.
1. Always Show Your Workings
42% of startups fail not because of a lack of money, but due to a lack of market need. (Figure 1)
Your pitch deck could be full of exciting charts and impressive slides, but investors are going to need something more meaty than just a cool business idea. VCs and angel investors will want to see you show them a clear and unique solution that you’ve developed to a real problem.
Be sure to identify the problem and make it a central point to your pitch deck. No problem = no solution = no investment. Prospective investors are not looking for impressive-looking prototypes alone; if they do not see the reason why your solution will work, it’s not going to market.
You can refine the problem - and your solution - by conducting a strong level of market research and understanding why your product is different from your competitors. Every successful business is built on a unique selling point (USP) and the ones that aren’t will always struggle to find any meaningful momentum.
PS: One of the quickest ways to lose the attention of an investor is to tell them that you don’t have any competitors - there’s always competition and more research will help you reveal them.
2. Remember: You’re Under Scrutiny Too
Your pitch deck is important, of course. It needs to look good and you need to know it through and through. But its impact will be determined by how it's delivered and by who - you. It’s vital to spend time developing yourself.
Most VCs are on the lookout for passionate and dedicated founders. Your presentation may be well researched and your business model solid, but this means nothing if the owners of the company don’t display bursting enthusiasm for their product. Would those owners have the dedication to overcome the future challenges they’ll face?
(Image: Crunchbase. Figure 2)
Underlining the importance of your pitch deck, is the start-up curve in Figure 2. Even if your startup receives seed funding, you still face a significant challenge in future funding rounds against some hefty competition.
In a nutshell, startups are hard work. Investors will be looking at you, just as much as your slides, to get an impression of how driven you are. They need you to convert their money, and manage it effectively, throughout the highs and lows of business ownership.
3. Present Your Financials Effectively
The financial information on display is vital in all sales presentations. This section of your pitch will come under the most scrutiny from prospective investors; it’s important to strike the right balance between your visuals and the cold hard figures themselves.
You should detail your funding history, if applicable, and clearly demonstrate the level of funding that you’re looking for and how the money will be used.
Remember that you’re looking to appeal to investors, not to simply show that your business will grow with investment. You should focus on the potential ROI for VCs or angels. See our example below:
If you’re aiming to gain $200,000 in funding, explain how this money will enable you to open up a new avenue to leverage sales and display ads, by launching a mobile app within two months. With the right marketing strategy, this funding will help to leverage 12,000 app downloads with each user being worth around $5 in advertising revenue - amounting to $60,000 in passive revenue.
Don’t end your explanation there, though. Talk about how this passive revenue will be reinvested. Here, investors will want to see how committed you are to facilitating constant growth within your endeavour.
(Image: Neil Patel. Figure 3)
Although the table above (Figure 3) appears to be well thought out, remember where you are and who you’re talking to. Investors won’t want to crunch these numbers and review them on a presentation slide - they’re going to want to know that your financial plans can be effectively condensed. Try something clearer (less is more), and more engaging, such as Figure 4 below.
(Image: Flowtab. Figure 4)
Here, we can see a much more condensed effort that helps to relieve the strain on investors, while giving you plenty of room to explain the figures in greater detail yourself. Know them inside and out - don’t show.
4. Cater to Your Audience
All too many business owners forget that they’re pitching to real people, with their own attention spans and personalities.
Investors see pitches all the time and are well aware of the various templates that pitches can take. With this in mind, it’s vital to respect the time of those VCs and angels that have chosen to listen to your pitch.
Avoid making your pitch deck more than 15-20 slides long and use it to underline the points you’re making with visualisations or charts. Don’t make wordy presentations crammed with information - they’ll only run the risk of causing the investor to switch off.
Keep your formatting consistent and send your pitch to them ahead of meetings via an easily accessible format like PDF. Avoid forcing them to retrieve it through Dropbox or Google Docs.
Above all, there’s no harm in making your presentation interesting, with a memorable story attached to the product. Ultimately, it could help you to stand out amidst a sea of pitches.
5. Use Your Concluding Slide Wisely
Of your entire pitch deck, the final slide is most likely to have the highest amount of exposure time. Make it count.
Use this prime screen real estate to hammer home an underlying message or tagline. Most experienced entrepreneurs use this final flourish to their advantage by including relevant information, such as use cases, market size or company contacts, helping your pitch shine through the sea of presentations.
(Image: Mattward.io. Figure 5)
The internet is awash with how-tos and articles that profess to possess the formula for the perfect pitch deck. The perfect pitch will never exist, because investors have their own wants, needs and ambitions.
Instead, you need to look to yourself to complement your pitch deck by adapting to the different environments you’ll encounter with investors. Stay enthusiastic and remember to hold their interest.
Setting up a new business can be a rollercoaster at the best of times, so just remember to treat investors as humans rather than robots who are programmed to payout when they see a solid blend of metrics; it could pay dividends in building valuable connections. Whether you’re looking to launch a niche company, or are busy developing the next big software trend, climbing into the minds of your prospective investors is a much more rewarding pursuit when it comes to funding.
If you would like support on building a powerful pitch deck, then we’ve got you covered! Subscribe below and contact us today to create a sales or investor pitch that will work for you and your business. Alternatively if you prefer the DIY option, then we highly recommend slidebean - sign-up by clicking on this link.