How to improve your pitch and increase your chances to get investment from Private Equity
Starting up a business is never an easy task: in 2019, the failure rate of startups was around 90%. Research shows 21.5% of startups fail in the first year, 30% in the second year, 50% in the fifth year, and 70% in their 10th year. According to business owners, one of the main reasons for failure is the money running out. This means that before starting up a business people should be really mindful of how they are going to fund their activity.
Private equity represents a valuable option to solve this issue, but getting investments is never an easy task. The business world is extremely competitive: recent research found that between 2018-2019 627,890 startups were funded in the UK alone. That's 1,720 per day. Keeping this in mind, it goes without saying that in order to survive, your business will really need to stand out amongst the competition. However, this task will not only be fulfilled by the nature of the products or services your company is offering, but also by the way they are presented to the public. For this purpose, mastering your sales techniques before starting up your business might turn out to be your key to success or failure.
Good sales techniques cannot be mastered overnight. On the contrary, only continuous practice will help you acquire the confidence needed to become a successful salesperson. However, there are a few key elements that everyone can use to build a successful sales pitch:
Elevator Pitch: an article published by TIME magazine in 2015 quoted research from Microsoft implying that humans now have an attention span of just 8 seconds – which is allegedly less than that of a goldfish. This by itself should demonstrate the importance of having a catchy elevator pitch. By definition, an elevator pitch is a very quick summary that communicates the most important aspects of your business and services within a short amount of time. An effective elevator pitch should stimulate interest, transition that interest and share a vision. Whilst the first step can be achieved by demonstrating energy and excitement for your idea, the second element will be achieved by presenting actual data that might support your initial excitement. Finally, a shared vision means stating the benefits that your service or product might bring to the person you are pitching so as to provide a reason why they should consider your offer.
Ask questions: not everyone is the same, so you cannot expect to pitch everyone in the same way! Nobody wants to be taken through a presentation, but most people are going to be willing to engage in a conversation. Asking questions is the best way to begin as it allows you to find out more about the person you are talking to, their interests and personality. Once you have a better understanding of the person in front of you, it will be much easier to tailor your pitch for that particular person. In the case of investors, the more you help them understand how to fulfil their investment mandate, the more successful you will be.
Tell stories: tailoring your pitch depending on the person you are talking to will not only allow a more personal conversation but also a memorable one. This is another key element you might want to leverage, to ensure your conversation will leave a mark on the person you are speaking to. Telling stories is the best way to do so, stories appeal directly to the brain and can be very memorable. You could tell a story about the origins of your company or a story about your first funding round was so successful (or not). While concrete data is what will ultimately swing the decision in your favour, opening with a story is a much more engaging and compelling way to draw their attention.
Acknowledge your competitors: acknowledging your competitors isn’t a weakness for a business, it’s a sign of strength. When it comes to presenting a pitch you should recognise the competition and speak about it honestly. You should have a thorough understanding of your competitors’ strengths and weaknesses, so as to be able to position your company against them. A good strategy to use is to try and identify at least four of your biggest competitors and how you could work to be better than them. This not only demonstrates that you understand there are others out there, but also that you have strong goals for the future that involve growing beyond your competitors, no matter how you think you compare now.
Be passionate: most of us must have heard of the phrase ‘people don’t buy from companies, they buy from people’ and this applies to investors too. People who are passionate about what they do and believe that they could really make a difference are more likely to pass on that passion to others. Unfortunately, being passionate about what you do is not a learnable skill but it should be something to take into account at the beginning of your professional path. For those who are lucky enough to be passionate about their job, not being afraid to show that passion to the person they are pitching could really be the element that will eventually make a difference during investors’ decision making process.
Finishing with next steps: The end of your pitch is as important as the start. Psychologists talk about ‘recency’ – the last thing that is left in your mind when you part. Make sure that you leave on a positive note and you are all clear what happens next. When you finish your pitch, you should figure out when the client is going to make a decision. If that date passes and you don’t receive an update, be sure to check in to ask if the client needs any other information.
Sorting your deck: what to avoid
Once aware of the best practices when pitching and trying to get investments from Private Equity, it is equally important to know what should be avoided.
Making your pitch all about the money is one common and clumsy mistake: whilst one might think that talking about money might be the best and quickest way to cut to the chase and get your point out, this approach might come across as a little desperate. Discussing the financial aspect of your business without presenting a well-structured long term strategy won’t demonstrate to investors how committed you are to your business plan. Therefore, this approach won’t provide investors the sense of security they need to invest in your idea.
Trying to get your point across without paying attention to what your investors are interested in will result in an equally disappointing outcome. Especially for those who spend a lot of time rehearsing their pitch, it is a common mistake to feel the urge to complete the whole speech when pitching investors. In reality, even the best pitch will turn out to be useless if it does not meet the interests of the person being pitched. The number one priority when pitching should be to listen first.
Before starting up any business, it is important to be familiar with the most effective sales techniques. This will help you and your company in making your way through the competition and avoid critical issues such as lack of funding. Today we’ve learnt the essentials of pitching, as well as what practices should be avoided.
To summarise, we could say that the key things to bear in mind when pitching someone are to: show passion in what you do, demonstrate to be genuinely interested in what the other person has to say and be clear and determined when talking about your strategy and projects for the future. Lack of passion or disregard for other people's thoughts about your company might negatively affect your sales pitch.
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