The Dos and Don'ts of Investors Pitchesby James Hottensen • 7 min readpublished January 27, 2021 • updated January 12, 2023
How to Pitch Your Idea to Investors
Pitching your idea can be one of the most nerve-wracking things you can do as a founder. Even founders who have experience in public speaking get nervous, and for a good reason: it’s like a job interview on steroids. Not only is your idea being judged critically, but you are also being judged as an individual.
In this article, we draw from current investors and founders to show what not to do and provide constructive tips to optimize your pitch.
Mistakes to Avoid When Pitching Investors
- Worrying too much about styling and not about communicating the idea carefully enough.
While your deck needs to look professional, you should not feel pressure to win over investors based on the deck alone. There are great tools out there like Pitch.com, which takes care of the styling for you. The most important thing is that your idea is clearly communicated and your team is well represented. Henry McNamara, a Partner at Great Oaks Venture Capital, says, “I think people over-emphasize the need to have a beautifully designed deck. Many of the best companies we've backed at seed had primitive decks that clearly and concisely laid out the vision. I am sometimes skeptical when too many resources have gone into a deck to be beautiful. A great team and concept don't need much window dressing.”
- Relying on a script
You need to be able to improvise. VC’s like to hear themselves talk, so you can almost guarantee that they will interrupt you at some point with a question. Your pitch should be practiced enough so that you can improvise and get back on track. When you can improvise and act naturally, you appear more confident as a leader. We cover how to get more comfortable with your pitch later in the article.
- Overestimating or mischaracterizing the TAM (total addressable market)
One of the least persuasive points to make is, “The size of our market is X; if we get Y%, we will do Z in sales.
- Dreamit Ventures adds:
“The biggest mistake we see with regard to TAM is when founders present a “top-down” estimate of market size. A top-down estimate is when a founder uses outside data to find the market size and then, usually somewhat arbitrarily, predicts that the startup will achieve a piece of that invariably massive pie. “
To be blunt, most TAM estimates are wrong. They are done by large consulting firms/research firms and have a historically bad track record at estimating market sizes.
Top-down TAM calculations also don’t allow for growth or nuance: your startup could, and should, expand the TAM or create a new category.
As Matt Pruess of Visible.VC writes, “Uber estimated their market size at $4B by using a top-down approach. By using existing market data, Uber dramatically undersized what the “cab and car services” market looked like, and what it would look like in the future. Using a bottom-up approach, Uber could have used their data set from their first market, San Francisco, which would have shown that the overall market was expanding, as current users were taking more rides in Ubers than they ever had in cabs.”
- Underestimate competition
A cringe-worthy line that is sure to raise the eyebrows of investors goes something like, “But that’s the thing, no one is doing this!”
This is an unsophisticated view of your market and product: maybe someone isn’t doing what you are doing now, but someone *could* do it probably easily. Even if that’s the case, your execution is what matters. So to summarize:
You will have competition, so don’t pretend like you won’t
Execution is everything, so convince people that you have a unique advantage in executing an idea rather than convincing people you are the only ones doing it
- Fake Stories and Name Dropping
Don’t lie—it’s that simple. Your startup’s origin story should be genuine and heartfelt. Small details can be changed to enhance the cohesion of the narrative, but there should never be an outright fabrication.
This is especially true when it comes to mentioning other investors or people to give your startup legitimacy. Unless you are 100% confident that the person you are mentioning would be comfortable with you using their name, it’s bad form to drop names to give yourself more credibility. The product and team that you are building should stand on its own.
Essential Skills For Investor Pitching
Develop a strong narrative that is flexible.
This narrative should have three versions: 1 minute, 10 minute, and full story / free-form (30+ minutes). Think of it as an elevator pitch, a dinner pitch, and a walking pitch. One you can tell in the elevator, the other you could tell over dinner but not want to spend the whole time talking about it, and the final one where you have a one on one conversation for an extended period of time.
In all of these, the pitch should answer these three questions:
- How has your problem personally affected you? (origin story)
- Who else deals with this problem? (customer story)
- What comes out of this problem being solved? (go to market --> vision story)
Be comfortable with uncertainty and not knowing all of the answers:
It’s much better to admit that you can’t answer the question or that you need more time to think than answering with a rushed, poor response. Responding with bad information or a poorly thought out rationale backs you as the founder into a corner and creates more questions than answers.
Be concise and don’t ramble.
You will always have less time than you think for two reasons:
- People have short attention spans
- People don’t have that much time.
It’s important that you create a pitch that is tight and condensed with quality material. Think of it like a story in a play or a movie: in every great movie or book there is a beginning, middle, and end. The structure of that narrative changes: some people lead with the conclusion then frame the story around that conclusion, while others stick to a linear sequence of events. Whatever you decide to do, the crux of your idea should come out sooner rather than later. Oren Jacob, CEO of Toy Talk and former CTO of Pixar, says, “ “You need to take the whole room on a journey together,” says Jacob. “This means there has to be a narrative arc with a beginning, middle, and end. When you’re in command of your material, creating this structure is in your control.”
In terms of the actual deck, it is advisable to create two decks: one that is a short preview and one that contains more details. Stuart O’Keefe, a Principal at Great Oaks VC, recommends this as well:
Every founder should have at least two pitch decks. The first should be a "teaser" deck that acts much like an elevator pitch and can be forwarded around during initial introductions or cold outreach. In a few slides, show the problem being tackled, the startup's solution to the problem, the team, and maybe one slide on the goals of the current fundraise and the future vision. The purpose of the teaser deck should be to get the investor's attention and intrigue them enough that they want to learn more. The second should be the "full" deck which can include things like financials, customer metrics, fundraising information, and so on. This deck should be shared with investors during or after the first meeting.
Practice Makes Perfect
As mentioned before, the best way to get better at pitching is to practice. Greg Miaskiewicz, a former competitive debater and the CEO at Capbase, encourages people to record themselves as much as possible:
Founders should record themselves both with audio and video to see how they look and sound from an outsider’s perspective. You never know what kinds of nervous ticks you may have or how many ‘ummms’ and ‘likes’ you do until you see or hear yourself. I encourage people to write down what they want to say verbatim, record it, and then observe how it sounds. You will probably find that there are more efficient ways to say what you are saying after observing yourself.
One great resource is FWD, which holds regular pitch practice meetups. You can sign up here. This community allows for founders to hone their pitches in a low stakes environment while acquiring high-quality feedback.
- Your pitch is more important than your deck, so practice!
- Efficiency is the name of the game: don’t ramble
- Don’t underestimate your competition, explain why you are better
- Be flexible and able to adjust on the fly
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Written by James Hottensen
James joined Capbase after working at Great Oaks Venture Capital in New York where he worked on various fin-tech and consumer investments as an Associate, including Capbase and Golden. He previously worked at Tentrr, a Series A startup in New York, leading Strategy and Partnerships.
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