10 COMMON MISTAKES ENTREPRENEURS MAKE WHEN PITCHING FOR BUSINESS/FUNDING
Do you know why you struggle to get funding or business from corporates? Quick answer: Your business either isn’t attractive enough or you just don’t know how to pitch it.
I have been on the receiving end of many pitches from entrepreneurs. Be it for funding, collaborations, access to business, networks, partnerships… you name it. Entrepreneurs seem to keep making the same mistakes when pitching their businesses.
If you want to know what funders and corporates are looking for and where you keep going wrong when pitching for business, then you better read this!
Mistake #1: Not explaining your big WHY?
Funders want a clear and concise overview of what the company does and why it exists? Basically, what problem does your business solve? How does it go about solving it and how important is this problem that you are trying to solve? If your business just doesn’t seem to have potential then its not even worth looking at what funds you are looking for. They need to be sold on your business.
Mistake #2: Not articulating your knowledge of the market opportunity
The mistake entrepreneurs often make is assuming that the opportunity is obvious to the funder. Paint a clear picture that the market opportunity is meaningfully large and growing. The funder wants to understand the growth potential of the business. Explain very clearly who your market is and how you plan on growing your market share. And PLEASE explain your assumptions. Tell the funder how you got to your figures. Don’t thumb suck!
Mistake #3: Making it all about you
You might have been the rock star that put this whole thing together but trust me, you won’t be what makes it excel into a solid business. For your business to grow, you need a strong management team, and that is for many investors, the most important element in deciding whether or not to invest. Entrepreneurs are always so passionate about their business which is great and very important in impressing investors. But if they don’t show humility, ability to learn, strong leadership and the ability to attract the right core members of their teams then the passion they show won’t be enough to convince an investor that this isn’t a sinking ship. Your teams are your staying power and you need to show that you have invested in a strong core team with relevant skills for the job they will be required to carry out. If you bring your team to a pitching session, make sure not to do all the talking. They are there to support you so show them off too because that shows strong leadership and that you trust your teams abilities.
Mistake #4: Overselling your products and services features instead of its relevance to your market
You love your product and that is lovely. An investor might only like what your product will do in the market, how well it will perform out there. Prove to your investor that this nice shiny product or this amazing service actually works well in the market and that the market like it. So here is where it gets tricky. What if you haven’t started selling yet? What if you don’t have a prototype? Then I am sorry to tell you this but if you only have a concept and no idea if the market wants it or how your product/service would work then your chances of getting an investor are slim. Very slim.
Here me out. You need to prove that your product is great right? Then why not invest in a demo to show how it works and conduct a pilot to see how a sample of people who aren’t your parents, or favourite grannies have to say about the product. Or start offering your service to a sample audience and test your theory of how great your product is. See if people buy it. How much they want to spend on it. You might believe you are on to something great but if nobody is buying it then maybe it’s time to adapt your product/service until it is actually appealing to an audience.
If you have a great story about your product/service, what you learned from your market, the feedback you received, how you had to adapt it, add more features to it, remove some features, and used all this learning to understand what your market wants and how your product satisfies that need, then you have something solid to present to an investor even if it is in beta mode, because they now know what they are buying into.
Mistake #5 Underestimating the competition – “we don’t have any competitors”
Chances are there is a product similar to yours or a different product that satisfies the same need to your customers. Or your product is very easy to replicate. Now these aren’t necessarily limiting factors. But what may be limited is your plan. How do you plan to compete? Will it be price, features, performance, timing? How will you stay on top of your game? Investors want to see how innovative your team is in staying on top. Spend some time on this because getting in can be a lot easier than staying on top. You need to show the investor that you have understood and analysed the competition so they can be assured that although you can’t preempt everything that is coming but your team has the entrepreneurial abilities to innovate new solutions.
Mistake #6 Not having a clear marketing and sales strategy
Yes your product or service is great but you still got to sell it! There is a misconception that if my product rocks everyone will come knocking on my door. That may have been true at some point in history but today there is just too much out there and so many similar products that you really need to have a solid marketing and sales strategy to get sales. The investors want to get a sense of how the company plans to market itself, how it plans on getting new customers and to see that you have understood what it takes to acquire and retain a customer.
Often entrepreneurs will ask for funding without factoring just how much it costs to get a customer, how long it takes to sign them up and to keep marketing to them on an ongoing basis. It is never a once off strategy. How will you finance the continuous marketing of your business? Some customers can take up to 6 months to sign up! How is the business planning on surviving whilst trying to sign up their customers?
Lastly, how innovative is the marketing strategy? Investors want to see that you have understood the marketing strategies that are relevant for your specific business. For example, just because many people are on a particular social media platform, doesn’t mean that will be the best tool to market your product to your target audience. You need to invest in your marketing strategy and don’t assume anything. Try it and burn your fingers until you get it right.
Mistake #7 Inability to prove traction
You need to prove that you have the goods, show that your business has gotten early traction in some way. The investor wants to know that your product can sell, even if it means running a pilot to show interest in your product/service and motivate what your clients were drawn to.
Mistake #8 Misunderstanding the business risks
“This business is a sure case, no risks whatsoever” Now that is highly unlikely and usually it just means you haven’t investigated the risks well enough. There inevitably are risks in any business, be it legal, regulatory, product liability risks. There are bound to be some risks and the issue is not really the risks, the investor wants to see that you have understood them and have thought of possible mitigating plans to manage those risks.
Mistake #9 Not knowing your numbers
It is not an easy task being able to project the performance of your business especially at the early stages of the business growth. However, bear in mind, you are dealing with money here, somebody elses money so they can’t make any decision unless they have a good idea that there will be a return on their investment at some point in the near future. Having an idea of how the business could potentially perform in the future would be much easier after you have managed to gain some traction and can see the response to your product, then you can do an analysis and estimate how much you would likely make. I must stress, this stage is much easier when you have understood mistakes 1 – 8. Entrepreneurs often give ambitions projections based on their opinion and haven’t been able to show their knowledge of the business potential based on sound business analysis. If an investor can’t assess when you will be profitable and how much money you will lose initially before becoming profitable, then they aren’t likely to invest.
Mistake #10 Having a clear end-game
The investor is only interested in getting a return on investment. So there must be a clear end-game. They are going to be focusing on the exit, either getting listed or selling it off for a sweet profit. They want this sooner than later so you need to show that when this business gets to a certain point, there will be interested buyers.
Written By:
Palesa Mabidilala
CEO EnziAfrica