TIPS FOR STARTUPS
At ARIE Capital we’ve heard hundreds of pitches. It’s always great to have founders of exciting and innovative startups meet with us and explain their ideas as they look for funding.
Some first meetings go well, others not so much… We want to share some of the advice we’ve put together over the years to help YOU have a great first investor meeting:
An investor needs to pitch your idea to their colleagues or funders so make it easy for them – they’re probably not as familiar with the underlying technology as you are so explain everything really clearly
Make It Easy For Investors
You are competing for an investor’s time so learn how to explain your company or product in the most succinct but exciting manner possible to make the investor sit up and notice
Show that you’ve thought about everything inside and out before you pitch to an investor – that way, you shouldn’t get caught out by questions you don’t know the answer to
Know your business and be confident in it but also be honest and know where there are flaws, gaps in your skillset or areas where you need help – an investor might see this as a good opportunity to add value!
If your company already has revenues, partnerships/contracts with great brands or an established customer base, we want to hear about it!
Start Out Strong
Don’t wait until late in the meeting or pitch to play what could be your strongest card
Even if you don’t have any revenues yet, investors want to see that you’ve established some kind of traction in the market
How can you show the progress you have made so far and what have you done to prove that people really will want and need your product?
If an investor asks you something that you don’t know, it’s usually preferable to say “I don’t quite have that figured out yet”, “I need help with that” or “we are still working on that” than to try to fumble your way through it – it’s not ideal but it can be understandable
It looks much worse if you didn’t disclose something upfront and the investor discovers it much further down the line during due diligence – this creates an immediate lack of trust
Many startups only focus on the overall market in which they are working – this might sound impressive (“this is a multi-billion dollar market!”) but most investors know that this only tells part of the story
Total Addressable Market
More important is the Total Addressable Market (“TAM”) – this will obviously be lower than the overall market (maybe much lower) but is usually more helpful and shows that you have done the correct research and honed in on your target market, however niche that may be
Look up grants and other sources of organizational funding such as contests and institutions – these are often non-dilutive sources of funds, which benefits investors and startups alike
Knowledgeable investors will know about many of the funds that might be available to you – they will want to see that you are aware of them and have applied to them
Grants And Institutional Funding
Don’t start an initial pitch (either in person or via e-mail) by requesting that the investor sign an NDA – investors likely won’t go for this as their risk is too high given the quantity of companies out there that might be in a similar field to yours
Figure out how to share the basic information in a non-confidential way and then, if you get a follow-up request for more details, an NDA might be appropriate
Great tech is always impressive but most investors want to know its market applications before they can get really interesting in investing – what is the real-world problem that your company solving?
Focus On The Commercial
Don’t get so caught up in the technological aspects of your product that you forget to address how you’re actually going to sell it and bring in revenues
We want to see that you’re excited about your ideas but if you’re asking for investment you need to be able to justify that and show how an investor will likely make money on the deal – what is your potential exit strategy?
Know Your Own Business
We might not request cap tables and yearly projections in the initial meeting but you need to be ready with those numbers for the follow-up
Don’t forget to show your grit – this is a tough business and you’ll face a lot of rejection but investors want to see that you can make it through the tough times and lead them to success
Grit And Commitment
Even if you have to draw on your past failures, show that you have staying power, that you’ll work nights and weekends if you have to, and that you’re fully committed to making this business a success, whatever the challenges