Pitching a business idea to investors: 8 tips for success

Dustin Johnson
By Dustin Johnson

So you’ve identified an underserved need in your market, or you just know of a business you can make successful. You have a business plan and are ready to launch your business. Or, maybe you’ve already been in business for a little while. You know that to take your business to the next level, you need money in the form of investment.

If you have the next big business but need funding, then it’s time to pitch your business to investors. How do you effectively communicate your idea to potential investors so they’re willing to invest in your business?

Pitching a business idea is a nail-biting experience for any entrepreneur. It doesn’t matter how confident you are in your business or idea. Standing in front of investors who can monumentally impact your future can be terrifying. They don’t share nearly the same passion as you but stand in the way of your vision and the funding your business needs to take the next step.

If you’re nervous about pitching your business idea, use the following steps to formulate a plan and win over investors.

What makes a good pitch?

Many factors are outside your control when it comes to getting funding from an investor who agrees to sit down with you. For example, if they recently invested, the time of the year, or even their mood that specific day.

On the flip side, a lot of factors are in your control. What makes a good pitch is being aware of these factors and manipulating them to your benefit.

You’re here because you want to bring your A-game to every pitch. Just remember your goal isn’t to win over every investor. No, your goal is to find the investor or investors that say yes. If that means hearing a ton of “no”s, then so be it. The quality of your pitch is a mix of factors in your control and outside of it. Tilt the odds in your favor by applying this framework to as many investor meetings as possible.

#1 - Know who you’re pitching

Wait, we just said get in front of as many investors as possible to increase your odds of hearing a “yes.” We only said that to prep you for the amount of “no’s” you will hear. Not because the shotgun approach is best.

Instead, meet with as many investors as possible, given that you still have the time to research each one and justify why you’re meeting with them (other than they have loads of money).

Have a general knowledge of why you’re pitching a business idea to this specific investor and a general understanding of them or their organization.

Here’s a set of questions you should ask yourself:

  1. What are they looking for in a partnership with an entrepreneur?
  2. What can I learn about the types of entrepreneurs they’ve invested in previously?
  3. What kinds of companies do they invest in? What stage? What industry?
  4. How much money do they typically invest in a business? Does that match what I need?
  5. Why do they invest in companies (other than for profit)?
  6. What questions will they ask me in the meeting?
  7. What doubts will they have possibly preventing them from saying yes?

Venture capitalists don’t just invest in a company and then leave it to its own devices. Instead, they invest time and resources into the business, helping recruit critical employees, guide strategy, and even helping to raise further funding.

Doing your research will tell founders that you don’t leave any stones unturned.

#2 - Know the type of pitch

In a sentence, your goal when you pitch a business idea is to tell an investor what you have, what it’s going to be, and how their help can help it get there. Investors are busy, so how long you have will differ, but it rarely exceeds 30 minutes. You’ll sometimes have the length of an elevator ride or a walk from one meeting to the next. This variance is why you need to prepare different types of pitches, given the time constraints and resources you are allotted.

We can break down pitches into three types:

  • Elevator Pitch: At any time, you can run into someone influential who would invest or refer you to someone who will. An elevator pitch is a 30-60 second pitch that starts with a one-sentence pitch, then briefly shares a more detailed overview. Use the formula [I help X achieve Y by doing Z] for the one-sentence pitch.
  • Short-Form Pitch: After an elevator pitch, an investor may invite you for a 5-10 minute pitch. Your business pitch may be over the phone/zoom or in person. Although brief, you’ll have a bit more time to share the basics of your company, the problem you solve, your goals, and your team if you have one.
  • Long-Form Pitch: This article's six steps are for long-form pitches. Here, you have a full slate of time with an investor, so you can bring your best. Prepare a pitch deck and handouts and then run through the finer details of your business and vision.

#3 - Determine how to present yourself

A dress code? Are you serious? With all of the things you have to deal with as a startup founder, the last thing on your mind is how you dress. Founders like Mark Zuckerberg and Steve Jobs are known for wearing almost the same thing daily. So what does that have to do with how you dress for an investor pitch? They understand that their authentic selves don’t wear suits and ties. Second, they know that the fewer decisions you make in a day, the better. 

Apply this to how you prepare for an investor meeting. If you don’t usually wear suits, then don’t wear suits to the meeting. Perfect Pitch Deck has a great article on different ways to dress for an investor meeting.

#4 - Start with the basics

When you begin an investor meeting, your potential investors should know where you’re going with your pitch within 30 seconds. Start with your elevator pitch using the formula we shared earlier to tell investors what you do in a sentence.

| Perfect One Sentence Pitch = [We help X get Y by doing Z]

After that, you have a few paragraphs to explain how you do what you do. During this time, you can share one sentence about your x,y, and z, for example:

  • The specific problem (X) has paired with a statistic backing it up
  • What the market is for the solution or (Y)
  • The mechanism, product, or service you use to solve the problem or (Z)

Many founders need to avoid diving into the weeds too early. Just hold on a second. Next, we’ll get into your story, vision, and the nitty-gritty statistics.

#5 - Tell a story

Approach any founder and ask them to tell their story, and they’ll rattle it off without a 2nd thought. That’s because their burning passion and knowledge of their startup make it easy to create a compelling story. Keep this stage brief, in the 3-5 minute range. 

Start your story with how you encountered the problem or when you noticed it for others. Segway into how you came up with your solution. Then tie the bow by sharing the emotional value of solving this issue for others. Maybe a personal story of one of your early customers.

This should take no more than a few minutes. Any savvy investor will know that a business with a compelling story can win the hearts and minds of customers. This truth doesn’t mean they want that to be the majority of your pitch.

#6 - Show a roadmap

Ok, now you’re about 5-10 minutes into your 20-30 minute investor meeting. It’s time to start showing hard data. Before you can tell investors where you’re going, they need to know where you came from and your business plan. This differs from your story, where you share abstract details filled with emotion. Here, you’re only sharing financial statistics and data like the size of your team.

Fill The Gap

Filling the gap means telling investors what you have, then telling them what you need to get to your desired destination. By prefacing your current state, you immediately include investors in your business. While you’re talking, they can drift away into daydreams of their money and influence, putting a CMO in place that triples your business in a year. That anecdote sounds silly, but many investors decide by the elevator pitch. Everything else they hear just justifies their decision.

  • Bad: “We’ll take what we can get” ❌
  • Good: “We need $500,000 to reach our goal” 👍
  • Great: “Based on where we are, we need $500,000 to invest into bolstering our team, a new office, and marketing” ✅

On the other end of the gap, Investors need to know the how, what, when, and where of their investment.

  • How much funding are you seeking
  • What are you going to use the funding for
  • When do you expect the funding to run out
  • Where will your business be when the money runs out

Be concrete in your statements by removing all subjective and self-interested statements. For example, instead of saying, “We have the best email marketing tool.”, say something like, “our tool has 5x more subscribers than our comparable competitor through just organic marketing.”

#7 - Discuss risks

It doesn’t matter how big your blue ocean is. Every business comes with risk. By communicating external risks, you can show you have the right mix of realism and optimism. Ideally, you’re not just sharing the risks you’re taking but the risks the investors are taking. Believe us when we say that not sharing the risks doesn’t mean the investors won’t consider it later. Better to share them while you’re in the room and can defend any position.

Here are examples of risks to include in your pitches:

  • Market risk
  • Technological risk
  • Regulatory risk
  • Legal risk
  • Financial risk
  • Employment risk
  • Liability risk

#8 - Follow up (With a thank you note)

Writing a thank you note is a great way to establish a personal connection with investors regardless of their response. Send a customized note thanking them for their time and share what you got from the interaction.

Worry less with ComplYant

You are one successful pitch away from transforming your future. Using this eight-step process, you can feel confident when pitching a business idea to investors. Earlier, we discussed the importance of discussing risk with investors. One risk almost trumps all other risks or benefits when investing. Will your business stay in good financial standing, or will bad financial management put their investment at risk?

We created a tool that helps new businesses stay on top of their tax deadlines and take the guesswork out of tax budgeting. We’ve helped companies save over $5.5 million in tax penalties and interest. Imagine over $5 million of investor dollars going up in flames. Our mission at ComplYant is to help business owners save money and time so they can focus on growing their businesses.

Dustin Johnson
By Dustin Johnson
Dustin Johnson is a Senior Tax Research Specialist at ComplYant. Prior to joining ComplYant, he spent over eleven years performing tax research at the world’s largest tax preparation company. Dustin holds a Bachelor of Business Administration and a Juris Doctor. Outside of work, Dustin enjoys biking and spending time with his family.

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