Recently, I was on a conference call with experienced investors where our objective was to decide if a startup is fit for further evaluation. The startups get 10 minutes to pitch to us and then there's a Q&A session before
Recently, I was on a conference call with experienced investors where our objective was to decide if a startup is fit for further evaluation. The startups get 10 minutes to pitch to us and then there’s a Q&A session before the board decides whether a Startup is fit for further evaluation.
Sitting through 8-10 pitches one could decipher which Startups’ founders were better prepared. In fact, it was quite easy – the pitchers that could confidently & directly answer questions were easily the better ones.
One prime example of a weak pitcher was a founder that kept dodging around a simple question regarding the quality assurance process in his Startup. Instead of directly informing us that there was no process, he wasted precious minutes using every available tactic in the book to wriggle out of a net of his own creation. Honestly, if the founder had just owned up to the fact that they didn’t have enough money to assure quality at this point, or they didn’t have the expertise to do the same, I would have let him off the hook.
However, that didn’t happen, I caught the founder in a lie and he had to own up to what he could have done upfront – do you think we decided to allow further investment?
I find it imperative to jot down my advice on how to engage with investors when pitching your Startup to them. The idea behind this write up is to cover the following critical issues:
- How to prepare for questions
- How to answer a question
- What not to do when you have to answer questions
- The importance of answering questions with confidence (and how that confidence is built)
When it comes to the kind of investor, it’s quite clear that you want your investor to be smart, savvy and intelligent. If he is not either of those things, you have picked an investor that you will have to carry and not one that will carry you.
Contrary to popular belief, raising money is not as tough as raising money from a smart and savvy investor. To get smart investors on board, you have to make yourself acceptable to those investors. This means that you have to invest your time in doing the preparation work for your demo/presentation in front of investors.
One of the ways to do that, is to present to your friends and family and ask them to grill you with questions that come to their mind during the presentation.
If your captive audience is asking the same questions you can either, make changes to your presentation to answer those questions in advance i.e. before the investor asks it or, you can prepare an answer for those questions that rolls off your tongue like your own name and get back into the presentation.
Later, when you are presenting to investors you should try to video or voice record your presentation so that the investor questions and your responses to them can be reviewed by you and core team for improvements to the presentation, or to better prepare an answer to that question.
Time and again, you will have questions that completely stumps you. It is absolutely acceptable that you accept that you don’t know the answer right away but, (very important) that you will get back to that investor or investment group with the answer in a week or so.
However, don’t do two of these most often used tactics that were employed by the Startup we rejected
- Make up an answer using fancy terms
- Beat around the bush expecting the investor to lose momentum and get out of a tricky situation
In both situations, you will get caught by smart and savvy investors. They will either demolish your fancy answer in front of all investors, or demolish your prospect to other investors when you have left the room.
The tactics above never have, nor will end well for any pitching for investment (or even for businesses in general)
In terms of gaining confidence, it is an often used term that “Practice makes perfect” and one can keep practising the same presentation and answers again and again to gain confidence.
However, that approach (though better than doing nothing at all) is only good for winning half your battles because it is-
“Perfect practice that makes perfect”.
After each pitch review the recordings, make the necessary edits to answer questions and get comfortable answering questions. In fact, get comfortable telling investors you don’t know the answer and through planning, practice and performing you will get better.
My mentor during my sales career days made me memorise these 7 P’s for these situations and that you too can use as a mantra for your own success.
“Proper Prior Planning Prevents Piss Poor Performance”