Question

Choose any business that you might like to start as an entrepreneur. How would you make a compelling pitch to private equity investors to encourage them to invest in your company?

Answer 1

Answer

Some basic tips on how would you make a complelling pitch to private equity investors to encourage them to invest in your company are-

a) Know your investor inside out

Before you even think about pitching to a potential investor, spend as much time as you can browsing their website. Learn as much as possible about them and their portfolio; you wouldn’t want to approach them if they are involved with a competitor, for example. Get to know their team, read their news or blogs, and read their backstory, as all of this will help you to tailor your pitch.

b) Don’t forget your competitors

Acknowledging your competitors isn’t a weakness for a business, it’s a sign of strength, and when it comes to presenting a pitch you should recognise them and speak about them honestly. Study and research them inside and out and, as part of your presentation, show how you would position yourselves against them.

c) Understand your financial model inside out

Make sure that you know your financial model inside out; make sure you have everything in order from your revenue projections, sales models, support for all your key assumptions and enough space for the numbers to change slightly.

d) Tell a story

When it comes to the actual pitch, a simple PowerPoint presentation filled with graphs and data just isn’t going to cut it. Your backstory should be your business’ secret weapon. Stories are powerful and emotional yet often go unreferenced during presentations. While concrete data is what will ultimately swing the decision in your favour as investors will want to know that it is a viable option, opening with a story is a much more engaging and compelling way to draw their attention.

e) Get visual

It’s a fact that people react better to pictures than they do words. Not only are images far more memorable, but our brains actually process images 60,000 times faster than text. Of course, investors will want to see hard-hitting evidence of your business plan (charts, graphs, numbers, etc.) but pictures help to enhance the emotion behind your story and bring the presentation to life. Putting a bland screenshot of an Excel document on your screen will impress nobody. Visualise that data!

f) Keep things simple – especially if you operate in a niche industry

When pitching to investors, one can usually assume that those present will understand a business model with some ease. However, if your industry is particularly niche then be wary of making things too complex. Whereas you will understand everything inside out, chances are your investors probably won’t.

You don’t want to patronise anybody, but there’s a balance to be struck. Avoid jargon as much as possible unless absolutely necessary (in which case, explain your terminology), and keep everything from your presentation to responses to questions as simple as possible. Sometimes it pays to imagine you are pitching to a parent or friend with no prior understanding of your sector, or a stranger in a lift.

g) Don’t forget the fine details

This particular tip can be split into two sections: something for you to action, and something to bear in mind for the future. The first refers to the inevitable legal steps that will have to be taken before you sign on the dotted line if you are successful. Having lawyers ready to prepare contracts will ensure that everything runs smoothly, and don’t shy away from clauses and amendments as they may come in handy in the future.

Keep an eye on the projections you state in your presentation or any promises that you find yourself making, as you will be held accountable for them in the future. Stay realistic and keep to the facts, that way you can stick to your goals with the opportunity for over-delivery in the future. It’s tempting in the heat of the moment to say things that investors want to hear just to ensure that you get the deal over the line, but this will inevitably end in disaster in years to come.

g) Keep it concise

Keeping things simple also applies to the length of time your pitch takes. You have to plan to include your presentation and time for a Q&A at the end, so be sure to schedule additional time. For example, if your meeting is booked to last two hours, aim for the whole thing to last for one and a half instead, as it is almost guaranteed that you will run over. You will no doubt want to expand on your points in the presentation or get caught up explaining something in a little more detail as ad-hoc questions will come up. Investors are busy people, and will much prefer something short and sweet than being put to sleep by an overly long presentation.

h) Show off your team

Investors aren’t necessarily interested in seeing a one-man band. Whilst they will want to hear from the owner, founder or the managing director, bear in mind that this is only a small (albeit important) part of what a business is made up of.