Congratulations, you have come up with a great idea for a business! Unfortunately, like most things in this world, you need money to move it forward. Now the question is: where do you start?
This is an important question for many entrepreneurs. Whether you are a startup trying to get an idea off the ground, or a growing business looking to move to the next level, access to capital is crucial.
There can be many ways to secure financing; however, it almost always includes a “pitch”. Although the pitch can take on a variety of forms, it ultimately must include the information necessary to convince the investor to make an investment in your business.
Some of the important questions your pitch needs to answer are:
Entrepreneurs can usually talk for hours on the first point, as it is usually the topic they are most passionate and knowledgeable about. While passion and knowledge are key components to getting your pitch funded, the challenge is to concisely summarize your ideas so the investor understands what they are investing in. You need to describe what the business/technology does, why there is a demand for it and how it fits into the marketplace. Investors are unlikely to invest if they are not excited about your vision for the business, which means you need to get them as excited as you are – this is where passion comes in handy!
As an entrepreneur, especially in the early stages, you often are the business. You are the one with the vision and are the one controlling the strategy. Investors are investing in the management team (you in most cases) as much as they are investing in the business. Therefore, your pitch needs to highlight why you and your team can successfully execute the business plan you have laid out. There are many examples of great business ideas or technologies that have failed because the team could not execute, so you need to convince the investor that you have what it takes to pull it off.
The other pitch points focus on the financial analysis. Investors need to know what their investment will be used for, and what they will get in return. To effectively answer these questions, it is important to prepare financial forecasts that can stand up to investor scrutiny.
The key to an effective pitch is minimizing the investor’s perception of risk. To do so, the investor must be confident that the forecasts are reliable and accurate. This is often the area that is the most poorly done, as an insufficient amount of homework is performed when creating the forecasts. One of the best ways to create credible forecasts is to invest in the resources to thoroughly research the assumptions that go into your forecasts. While the pitch itself may only include the financial highlights, it is important for the detailed forecasts to be available once due diligence begins.
If your pitch involves presentation slides, often referred to as a “pitch deck”, it is important to design the pitch deck with the specific investor in mind. Most investors receive a large volume of potential investments, so keep your pitch concise and only focus on the most important issues. In general, pitch decks contain 10-20 slides and should support your in-person pitch, not be a substitute for it.
CPA, CA, CBV
Partner - Advisory Services
Mike has over 25 years of experience providing accounting and business advisory services, with a focus on the Canadian insurance industry.
CPA, CA, CBV
Alex Wong is a partner at Smythe Advisory and is focused on being a trusted business advisor to his clients.
CPA, CA, CBV
Director of Valuation Services
Paul Woodhouse focuses on providing financial advisory and litigation support services to clients.
CPA, CA, CBV
William Tam is a manager at Smythe Advisory, and is focused on providing valuation and financial advisory services to his clients.