Pitching Your Business Idea to Angels & Venture Capitalists
By Julie King | September 30, 2010
When you reach the point where you need equity capital to finance the implementation of a business idea, opportunity or growth plan, it is important to perfect your pitch. Getting it right increases your chances of securing money as well as equitable terms in a deal.
So what are angel and venture capital (VC) investors looking for? To find out we spoke with Scott MacCannell. An angel investor himself, Scott is also the president of the York Angel Investors Inc., a group of angel investors based in York Region, just north of the Toronto city limits in Ontario www.yorkangels.com.
Scott has been working with, and investing in early stage companies for twenty years through Troy, a company he co-founded in 1989. Here are his top 11 questions investors will expect you to answer in your pitch.
Have an exit plan
When preparing your pitch, you need to have defined answers to these questions about an exit plan:
How and when will I be able to exit this investment and at what return on my investment?
Who are the likely aquisitors and why are they likely to purchase this company? (If your exit strategy is based on a buy-out of the company.)
If the founders are amenable to a financial exit, what are their time horizons?
What are management's and particularly the founder's ambitions regarding an exit? Are they likely to drive towards this goal or likely to run the business as a lifestyle business with little interest in selling the company?
Know your competition
Investors rarely look for a static business with an ordinary product. They are looking for a return on their investment, which means signficiant growth opportunities and a sizable market. You should include answers to these questions about the market and your competition in your pitch:
Why is the product or service provided by the pitching company superior to those of its competitors?
Does their product or service truly provide a solution to a customer problem or pain or is it a solution or service looking for a need?
Accentuate your edge
Not every great idea can be protected with patents, but, where possible, having a competitive barrier is a strong advantage. Be ready to answer these questions about what sets you apart and gives you an edge over your competition:
Is there a truly sustainable competitive advantage that this company has?
What are the barriers to entry for other "would be" competitors coming into the market? For example, how difficult would it be for their technology or process to be replicated?
Is their technology or process, or other IP, covered or able to be covered by patents and/or copyrights?
A Winning Team
Ideas, it is often said, are a dime a dozen. The ability to execute and inspire others to follow is what separates those who shine from the ordinary. An investor will expect you to outline your HR advantages and answer these questions:
How good is the management? How motivated is the management? Is the CEO of the company passionate about growing the company successfully and is that company culture represented throughout the employee body?
Are the company's officers and employees under Non Competition and Proprietary Rights Agreements?