Recipe for Fund-raising Success: Do’s and Don’ts for Your Investor Pitch

In my last column, I wrote about four essential ingredients of a successful capital plan, one of which is choosing the right financial partner to support both your financial and strategic objectives. It’s also important to remember that partner has to choose you, too. Here are seven do’s and don’ts for your next pitch that will make investors take note of your business and help put you in a position to choose between multiple interested parties.

1. DO have a passionate vision for your company. Partnership-oriented private equity firms don’t want to create a vision for you — they want to buy into your vision and into the energy and passion you put behind it. The most successful entrepreneurs have a clear vision for the future and are 100% committed to getting there. Appeal to your potential financial partners with a narrative that demonstrates how your vision has evolved and the reasons you will succeed.
2. DO articulate the growth opportunity. At the highest level, investors are looking to partner with companies that possess high potential for growth and sustainability. Consider the basic questions your financial partner will want answered and address them proactively: (1) How big is the market opportunity? (2) Who are your customers and what are they looking for? (3) Who else is trying to address the same market and why are you different? (4) How does the company make money? What is the revenue and profit model? (5) How will you and your investors make money? What is the path to a liquidity event?
3. DO keep it simple. Detailed discussions about the nuances of your company will come later. This initial meeting is the time to focus on the basics. Make it easy for your audience to understand your key points without bogging them down in details that are not critical to appreciating the overall vision and opportunity. Often the individuals you’re talking to will have to articulate the investment opportunity to their colleagues when they get back to the office, so focus your pitch on the most essential points you want them to recall.
4. DO encourage (and expect) an interactive discussion. While you will be the one giving the presentation, the goal of the pitch is to make sure that your potential investors walk away with the information they deem most important. Remain flexible if they want to bounce around your slides and listen carefully to the questions they ask. These questions will not only reveal the areas to focus on but also provide insight into the value-add you can expect from them as strategic partners. The firm you’re pitching has probably reviewed dozens of similar business models before and can give you constructive ideas that you may not have considered.
5. DON’T overstate or exaggerate. While you should not hesitate to shine a positive light on your company, don’t stretch the truth to make things sound better than they really are. These investors have been partnering with middle-market companies for years and have sat through hundreds of pitches. They will immediately discount things that are “too good to be true.” You risk coming across as naïve or, even worse, dishonest if you make claims that cannot be validated during a detailed diligence process.
6. DON’T be afraid to discuss the obstacles in your way. In addition to being honest about the merits of your company, be equally open about the challenges you’re up against. If your vision is as compelling as you think, chances are that others will be (or already are) going after the same opportunity. Investors appreciate entrepreneurs who have the foresight to identify and plan for obstacles. Being transparent about them also gives your potential investors a chance to explain how they can help you, which will be critical for you to consider when the time comes to select your partner. As discussed in my prior column, your financial partner should be able to help you grow by advising on your business strategy, introducing you to helpful contacts and talent, and more. But they can’t demonstrate their ability to do so unless you guide them on where they can add value.
7. DON’T forget to prepare. When you interview other people, those who do their homework stand out from the crowd, right? Research the investors in your industry to make sure you’re meeting with the right people and that you can speak to their strengths/experiences as much as your own. To instill confidence in your leadership capabilities, you must know your business cold — especially all the basics described above. Whether you’ve pitched investors before or not, each conversation will be different, so seek out a few trustworthy sources (e.g., an advisor, a mentor, an executive friend who has done this before) to help you practice. Make them ask you both easy and hard questions so that you’re well prepared to wow a potential financial partner with your vision and the exciting opportunity to grow your company together.

There is tough competition out there right now for private equity capital. Investors will make the most concrete decisions once you get into the diligence stage, but a good first impression is critical to set you apart from the pack and kick off a new partnership on the right foot.

Todd Morrissey is a partner at LLR Partners, a middle-market private equity firm. Todd makes minority and majority investments in growth companies and advises management teams on how to grow their businesses. Contact [email protected] or visit www.llrpartners.com.