Advisory Checklist: Make Sure Your Companies Avoid These 25 Mistakes When Pitching to Investors

Adapted from an article originally published by the author in Inc. Magazine.

Angel Investing Pitching Mistakes
Image by Terrance Heath
 

If you have put time and effort into advising a company it breaks your heart to see them fail with investors. Some teams and ideas are just not fundable, and there is not much you can do there, but many fundable teams make absolutely silly mistakes when dealing with investors. Armed with this three section checklist, you can help them avoid these blunders.

Managing Their Audience

There is some basic legwork required before they show up to pitch. It is not hard, it is just work to complete before they walk into the room:

  • Make sure they have a copy of the presentation guidelines, preferences and investor customs of the group they are pitching. Make sure they respect and follow them.

  • Have them do some research and networking to make sure there is at least one, if not several, fans or "champions" in the room. Champions can lend the company their credibility and bail the founders out during the post-pitch discussions.

  • Have them review the preferences and portfolios of the investors and target their pitch accordingly. If there is no fit at all, spare them the bother.

  • Make sure they don't ask investors to sign a Non-Disclosure Agreement (NDA)--no matter what their young and inexperienced lawyer may say, investors don't sign NDAs. For truly sensitive patentable information, have them file a provisional patent application before raising money.

Subscribe. Get Seraf Compass articles weekly »

Managing Their Material

Unsuspecting entrepreneurs often make rookie mistakes with their material. Preparation and polish is all that is required.

  • Make sure they never stand up to pitch an investor if they cannot crisply explain what their company does in less than 25 words and state their value proposition in less than 50 (Here are some tips on packing that value prop into a moving elevator pitch).

  • Build a tight, clean deck -- make sure they don't use more than a handful of words on any one slide, don't use small font sizes, forget to label their axes, or use huge tables of microscopic numbers.

  • Advise them to avoid elaborate slide builds or animations that make it impossible to go backwards or ad-lib. Though they are tempting, complicated slideshow features can be buggy and introduce embarrassing glitches that throw presenters off balance.

  • Coach them not to jump right into the middle--they should set some ground work to engage the listener with their story.

  • They should not rely on a complicated demo or video as part of their pitch--in most pitch forums a simple demo or screenshot will be all they have time for.

  • Teach them that if they don't know the answer to a question, they shouldn’t just guess, unless they say they are guessing, and they explain the basis for their guess.

  • They should resist the temptation to over-promise or make super-human claims. Investors have heard it all before. They should focus on what they are pretty sure they can do, not what they think they maybe possibly can do.

  • Coach them not to bring a massive, overly long slide deck--they should boil it down like maple syrup, to the 10-15 key slides and throw the rest into an appendix.

  • They should not present numbers that they have not sanity-checked with both a bottoms-up and a top-down analysis. Benchmarks are their friend--they should use them. As much as you hate to break it to them, they need to know they are unlikely to have revenue of $10M per employee.

  • Remind them to avoid presenting numbers they cannot account for or explain how they arrived at. Even if the presenter is not the numbers person on his/her team, s/he needs to understand them all.

Managing Themselves

Often the person doing the pitch is her own worst enemy. Even if her deck is great, and the underlying story is compelling, it is easy to mess up the delivery.

  • Coach them and practice with them so they internalize that even if they are worried about time, they should not nervously rush through their early slides. It is essential to build their story on a foundation and let people acclimate to them and the idea. If they lose their audience early on, they will never get them back.

  • Don't let them go in unpracticed, rely on notes or index cards, or simply read their slides. Failing to practice is not a perception they want to create.

  • Make sure they don’t run over their allotted time (nor should they blow it on their team choreography).

  • They should listen carefully to the full question before answering, and answer what is actually being asked. They should repeat it if necessary to ensure they got it right.

  • A sense of humor is great, but they want to avoid being flip, cocky or glib in their presentation. Sorry, but these people don't know them well enough to get their sense of humor.

  • They should never preface an answer with the reminder that "they are not a business person."

  • Coach them not to mumble, whisper or equivocate; it is essential to project their voice powerfully and to be strong and confident (or at least they should practice until they appear strong and confident).

  • Body language matters: remind them to smile and show some passion for what they are doing.

  • In particular, they shouldn't forget to smile while a question is being asked and consider adopting the habit of saying "that's a good question" prior to answering the tough ones.

  • Help them develop a thick skin mindset - they shouldn't be offended or take a persistent line of questions personally. It is their fault if investors don't understand what the presenter is trying to say.

  • Counsel them not to rebut or argue with questions. The point is not to prove investors wrong, it is to educate investors on the opportunity. They win by educating investors to their view.

Pitching is hard to master and hard to teach. It requires some practice. But if the person you are advising is motivated and willing to take the time to do some prep work by mastering the list above, they can avoid including basic mistakes into the mix.

About the Author

Seraf Co-Founder Christopher Mirabile is the Chair of the Angel Capital Association and also Co-Managing Director of Launchpad Venture Group. He has personally invested in over 50 start-up companies and is a limited partner in four specialized angel funds.

Christopher is a frequent panelist and speaker on entrepreneurship and angel-related topics and serves as an adjunct lecturer in Entrepreneurship in the MBA program at Babson. Due to his combination of roles as investor, advisor and angel group leader, Christopher was named among Xconomy's "Top Angel Investors in New England."