by Daniela Baker
With the ongoing credit crunch, especially for small businesses, angel investors may well be your best hope of getting your startup off the ground. According to the Angel Capital Association, in 2008, angel investor groups put, on average, $1.77 million into 6.3 investments.
But when you ask investors for money, you have to pitch to them directly, and you have to do it right. Angel investors want to make wise investments in new, viable companies. To avoid a big stumble in winning them over, review this list of six things not to say during your pitch.
1. “We don’t really need your money.”
Experienced investors can spot over-confidence from a mile away, so this isn’t the time to appear cocky. If you didn’t need your potential investors’ money, you wouldn’t be pitching them in the first place! Instead of trying to act like you’ll get by without their help, let investors know that you’ll be able to scale your business model based on their initial and ongoing investments.
If you’re lucky enough to be offered $2 million and you don’t need that much, for example, you should definitely have a plan for how you’d use it.
2. “This is a rough draft of our business plan.”
Never, ever go in to a meeting with an investor without a completed business plan. It doesn’t need to be pages and pages long, but it does need to include plenty of detail. You need to figure out your target market, how you’re going to run your business, how you’ll market your products and services — and put all into words your potential investors can understand. Now, we’ve already said that it’s okay to modify the original scale of your business based on an investment, so you might want to think about this in your business plan. Does your plan account for the capital that’s offered on the table, which may be lower than you originally wanted?
3. “We have no competition.”
If you think there’s no competition in your niche, you haven’t done your research. They may have a weak presence or lack a plan yet, but they exist. There are always people out there who can do what you’re doing – or will soon figure how to do it, and you need to have a plan for dealing with that. Before your first pitch, take time to investigate the competition. And then, detail to your investors exactly what sets you apart from those who are nipping at your heels.
4. “The market is unlimited.”
Telling potential investors that anyone and everyone will love your product or service just makes you look like an amateur. Instead, make sure your business plan includes a detailed section on the demographics of your target audience – your ideal customers. And then be sure to talk about how you’ll reach that target audience through marketing and how you may be able to go beyond that target group, within reason.
5. “These are conservative projections.”
If your projections were really conservative, they’d predict your failure. After all, at least half of small businesses fail within their first few years of operation. Instead of acting like your projects are really conservative, show a variety of projections – maybe three – to explain how your business would deal with both immediate success and trials.
6. Anything that sounds vague or overly hopeful.
Instead of making up a vague answer when investors ask a tough question, be truthful, and say, “I don’t know. I’ll find out and get back to you tomorrow.” They’ll appreciate the honesty, and you’ll show them that you’ll be a responsive partner and that you’re willing to put in the work to find out answers to important questions. Otherwise, they be able to see through your generalizations and be too wary to write you a check.
Pitching to an investor can be scary, especially if you’ve never done it before. But if you go into your meeting well-prepared, act confident but also humble, and avoid making up answers, you’ll do just fine.
Daniela Baker is a small business blogger and social media advocate at CreditDonkey.com, a website where small business owners can compare business credit card deals.
