Why, when and who should a startup pitch to? How can you win an investor? Angel Investor Sanjay Mehta lets you in on the trade secrets
Step 1. Come up with an innovative startup idea
Step 2. Check market viability
Step 3. Build a product
Step 4. Get funding to make your dream a reality
Is it as simple as that? Far from it!
Considering you have succeeded in the first three steps, how should you go about getting the monies? What is the correct way to make a pitch? How should you sell your story that an investor approaches you, rather than you running behind them?
Mehta was speaking to a group of budding entrepreneurs at PitchHack, a workshop on ‘Mastering the art of pitching to investors’, organised by NASSCOM 10,000 Startups, in association with Zone Startups India.
Mehta shared a very interesting take on what startups are doing wrong and where their actual focus should be. Here are my key takeaways from his address…
The first mistake startups make is that they assume successful businesses can only be built with the help of investors. Instead, they need to ask themselves a few questions. Is my business fundable? Does it require growth capital? How can I bootstrap it? Once you have answered these, does the question of looking for an investor arise, shared Mehta.
Finding Mr Right
Entrepreneurs are always busy thinking if the investor will select them. Rather they need to think whether the investor is right for the business. Getting financing for your startup is rarely easy, but if you approach the wrong investor, you can make it harder than it has to be.
“Investor is the biggest threat to a startup. Managing expectations and
relationships will be utmost important, besides the business. Competitors
punch you in the jaw, but investors can have you by the b***s,” remarked Mehta.
Who is this angel?
An angel investor is supposedly a rich person. He is a high net worth individual, with enough fortunes to live his life of leisure without doing any work if he chooses not to. WRONG. Surprisingly, this is what entrepreneurs think.
Angels are not in a money lending or financing business. They invest money for several reasons, but the first and foremost is that they believe in an idea, project or team passion that will deliver RoI. Startups need to appeal to that.
Right price to write payout
“A majority of startup deals fail on valuation issues. Psychologically, seed stages entrepreneurs tend to ask for very high valuations. Startup valuations are difficult as there is no specific rationale. It is like measuring the intangible probable. What is the worth of a startup? Valuations at seed stage is an educated guess,” he shared.
Entrepreneurs go on a self ego ride that stops them from lowering their expectations on valuations and working with investors. The seed investment cardinal rule for a startup is based on its capital needs for the idea to reach its first milestone to ensure next round of funding, added Mehta.
Speed or bleed
Aligning to momentum keeps an investor alive and kicking. Startups that offer prospects a quick trial, pilot and testing will seize the opportunity to grab investor attention.
“Fundraising is a two-way street, so speed of engagement from investor indicates the interest level in the deal. It’s a mutual exchange in which, if things go well, it’s a win-win for both parties,” he stated.
Make sure to demonstrate a right sense of urgency, advised Mehta.
Tell your story
It is not just about your great technology product, but everything that makes the startup valuable. A pitch, when painted with clarity, gets the deserving attention.
Articulating vision about the possible future is essential for raising funds.
“Many times, the biggest mistake an entrepreneur makes is take his own capacity for granted, as infinite. Your greatest asset can be expressing, exposing your own vulnerabilities while doing the storytelling,” he said.
Mindless networking is done by entrepreneurs by merely collecting a bunch of business cards. Have defined networking goals when connecting with investors.
One-on-one meeting is only the beginning. Invest in people and build a long-term relationship.
Pitch bright, grab the spotlight
Funding pitch is a strategic decision that needs to have a well laid-out plan, with right goals in mind. Every funding meet’s underlying purpose is to build investment velocity in the market for your startup.
He explained that to get to that reputation of a maverick, entrepreneurs need to learn how to go beyond product and talk about the benefits, impact, experience the product has on customers. Investment will come if the pitch articulates the value proposition appropriately. Give enough exciting ammunition to investors while pitching.
“You may be treated to a rough quizzing, forced to repeat details over and over. And often get rejected. Keep calm, smile, and finally, tell a great story,” concluded Mehta, on an invaluable note.