Thursday, April 17, 2014

Making your Pitch Right: Mistakes to avoid while pitching to an Investor

~ Written by Aniket Dey

The advent of entrepreneurship in India coupled with a growing economy conducive to innovation and technology has paved a path for an entrepreneurial boom in India. One of the primary reasons a lot of people shied away from taking the road less traveled of entrepreneurship was the lack of financial resources. That isn’t the case anymore. There is a large network of venture capitalists, angel investors and independent funds ready to invest into ideas that have the ability to make money.

Lets’ see - how it all works.  You set-up a start-up, build a product and start selling to customers, only to find out you need more money. You need more human capital, costs are soaring or you’re simply running out of money. What next? ‘Exit’ at this point will hurt you and your aspirations badly. So the alternative is – arrange for funds. Where do you get the money from? Angel Investors, Venture capitalists etc. are there. But the question is – HOW? How do you pitch to them?

I've been an advisor and investor at various early stage start-ups and I've noticed a common denominator - entrepreneurs committing some common mistakes while pitching to investors. For an entrepreneur, there are various factors which point to the success of a venture- profits, growth, social media presence, partnerships etc. However, for an investor, there is only one measure of success- Return on Investment (ROI). Will they be able to recoup their investment? How long will it take? Is there an opportunity to exit?

The mistakes to avoid while pitching to an investor:-

Talking Potential
Every business has potential, but that is not a differentiating factor. You have to aim to be disruptive and to grow exponentially, which is what investors look for. Sometimes passion clouds perspective. Instead of focusing on the opportunity size, focus on developing a competitive advantage. This will give you an edge over others with similar ideas that are lost in the sea of potential.

Facts and numbers don’t sell alone, stories do.
I've noticed a large number of people who correlate statistics to success. Ever wondered why some movies and books gross billions of dollars, simply because people connect to stories. Keep presentations about realism. If you’re selling a health product for children, don’t start off by talking about what percentage of children is obese. Instead, say something like “Imagine if your loved one were to face health issues at a young age.” Always establish a sense of familiarity and trust.

Idolize your Business Plan
I've seen too many plans go wasted because the entrepreneur was not willing to change or tweak his/her idea. When I made my first pitch to an investor competing against 50 other business ideas, he didn't like what I had to say. He countered me with a changed business model which basically threw junk at my plan. But in the long run, I saw that being flexible and having an open mind to learn can make your product bring more moolah and success to you.

Lack of focus
In Bangalore, I've noticed that far too many people are starting up. That’s a good thing but also a bad thing. People are creating products and technology in search of a market instead of designing something to solve the market needs. It’s an economic fundamental – ‘demand has to meet supply’. Instead of second guessing, you should go out there and understand your potential market. Talk to customers, engage them and find out what needs have to be solved.

Optimism Glut
Being optimistic is a key trait of an entrepreneur. However, over optimism can kill your vision.  Being over optimistic about sales, adoption rates and development can leave you in shackles. This needless optimism in financial forecasts could underestimate the case required to achieve key performance milestones to help the business raise capital and surpass break-even.

Lack of Humility  
The golden rule every entrepreneur must swear by is that you aren't the smartest guy in the room.  Accept advice; be grateful for their time and gracious if they decline. Entrepreneurial circles are small in India, if you burn one bridge now, the rest of them could fall like dominoes sooner or later.

About Aniket Dey: 

Aniket Dey is a student and an Africa / Asia focused entrepreneur. He is a B.Com (Honours) student at Christ University, Bangalore. Aniket has been an advisor, investor and founding team member in various early stage start-ups. His naïve and romantic belief is to make positive social impact through business and change the world. He has been published in The Telegraph, The Economic Times and His hobbies are sports, food and networking.


Thank you for your valuable comments/ feedback.