Analysis Shows Why Investor Pitches Fail To Deliver

As appeared in the November 2000 -  Finance and Commerce Newspaper - Beyond the Booth

by Joan Wood Moser

 "What business did he say he's in?" the man jotting down notes next to me asked.  "He hasn't exactly said," I responded.  When the presentation ended, he picked up the agenda and crossed the speaker's name off.  I noticed the same deliberate marks across the names of the other two entrepreneurs we had heard pitch their businesses. "Interesting concepts this morning," I remarked, glancing at his agenda. "Pass," he responded, disappointed.  "No substance.  No chutzpah." 

I reviewed my notes from the first three speakers and knew he was right.  As a public speaking coach I analyze presentations to understand which elements make a pitch successful and which ones don't.  When coaching clients I've been hesitant to hammer on a few keys points because so many skills are used to create a well-orchestrated presentation.  But the more presentations I watch, the more venture capitalists I talk to, and the more clients I work with, the more I realize it comes down to three deal-making principles: Intrigue opens the deal, facts justify the deal and emotion closes the deal.

 Intrigue Opens The Deal

Your toughest job as a speaker is to break the ice and develop rapport with an audience full of distracters, doubters and disbelievers.  Those in your audience are thinking about conversations they just had with a potential client, speculating on whether you will be worth their time and questioning if you are credible and trustworthy.  The most effective way to combat the three "Ds" is with an engaging opener that intrigues them about the deal. 

 A light, humorous opener is preferable because it relaxes you and your audience while creating a friendly atmosphere.  At a June NetSuds meeting, Steve Friswold of ebody.com launched with a picture of our slightly balding host Matt Noah, suddenly transformed by e-body.com into more youthful-looking man with a thick head of hair.  Everyone roared and the point was humorously and succinctly made about the business concept and need. 

 If humor isn't appropriate, your second best opener is a story delivered in a conversational tone.  A story personalizes your talk and creates a more informal atmosphere.  My client Mark Summers used this approach when pitching his company MedMar.  He shared with the audience his own frustration a few years ago when trying to find a company willing to help him develop Internet solutions for his medical products business.  Out of that frustration grew his concept for MedMar.  His story explained the problem, the solution and indirectly included a proof of concept.

 Two other effective openers you can use are asking a question that engages the audience, or presenting an alarming fact or statistic the gets everyone's attention.  An engaging opener intrigues the audience so that they welcome you to put the deal on the table.

 Facts Justify The Deal

Investors are inherently left brain thinkers and therefore look for facts to justify your plan.  While an initial pitch is not the place to layout all the detail, it is the place to allude that you have the detail.  Investors are looking for a few juicy facts to whet their appetite and convince them you possess a real business opportunity worthy of further consideration.  

So what should you address in your pitch?  I recently surveyed Venture Capitalists about this very question, looking for the three most important elements in an investor pitch.   Though VCs have their unique styles and preferred formats for how information is relayed, there were four common themes.  In 100% of the cases they wanted to hear about the management team and its experience in the industry and with starting similar ventures.  The second most sought after information (70%) was the market opportunity as it relates to size, growth and demand.  Next, 60% wanted information about the competitive environment: the advantages, differentiators and barriers to entry.  Lastly, the most typical request (50%) was for a profitability model that showed customers willing to pay and investor returns. 

 Every investor has to justify the deal; if you provide information they are looking for, you are more than half way there.  One more suggestion: Don't overwhelm your audience with slides full of words and numbers.  Less is more.  Use graphs, pictures and charts when ever possible to illustrate your point and tell your story.

 Emotion Closes The Deal

When you pitch your business to investors you are undertaking one of the most difficult tasks known:  asking people to part with their money –a lot of money in most cases.  As most investors will tell you, they aren't investing in the business, they are investing in you.  People do business with people they like and trust. Therefore the third most important dealmaker is developing an emotional connection with your audience that communicates you are friendly, open and honest.

 The least used tool during investor presentations, and the most effective, is your smile.  Being professional doesn't mean being a grim-faced speaker.  So unless you are selling funeral services to the bereft, lighten up.  A smile projects warmth and makes you appear friendly and open.  Perhaps the best example of the importance of a friendly demeanor can be made with our two recent presidential candidates.  Bush generated millions of votes in part because people found him open and friendly while Gore fought an ongoing battle with his reputation as being too stiff and formal.  

 The other most effective method for building an emotional connection is presenting in a personal, conversational tone that says to your audience, "I'm one of you."  Bill Clinton was the master of this technique when he won over voters during town hall meetings during the 1992 and 1996 election campaigns.  He dotted his responses with lots of  "I's", "you's" and examples that put things in terms of the listener's interests.  

 Emotion closes the deal because no matter how great your concept, no one will invest if they don't trust and believe in you; this can only happen if they feel they know you.

 Substance! Chutzpah!  The man sitting next to me that morning would have gotten that, and a whole lot more, if our speakers had known that "Intrigue opens the deal, Facts justify the deal and Emotion closes the deal."  These are three relatively simple principles that any entrepreneur with a little bit of practice can incorporate into his or her investor pitch. 

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Joan Wood Moser is a public speaking coach for CEO's of new business ventures.  She has an MBA from the University of St. Thomas in New Business Ventures and has 18 years public speaking and coaching experience.  She can be reached at Spoken Impact, 952-997-6999 or info@spokenimpact.com. For more information on her services go to www.spokenimpact.com