If you manage to realise your big idea, and get a startup off the ground then you’ll likely need to pitch for investment to grow and reach new customers. James Oakes as seen each side of this coin, as an entrepreneur and co-founder of Geonomics, which raised £20 million in funds, and now as an investor at ZEAL Investments. This makes him ideally placed to point out the pitfalls to avoid, and routes to success when pitching for practical and financial support. RSNG spoke to him to find out the ‘do’s’ and ‘don’ts’ for a successful pitch…
DO Articulate Your Vision
One of the first things a prospective investor will want to know about your business, is: how risky is it? For Oakes, this is why illuminating your vision is vital. ‘A new business needs a distinctive, compelling vision that you can communicate to prospective investors. It doesn’t need to be particularly complicated or elaborate, but it does need to demonstrate that you have something different to offer the market that can generate consistent returns. Every investment is a risk, and your job at this point is to justify and mitigate that risk.’
He points to Pick My Postcode – the former Free Postcode Lottery – as an example of a company that did just that. ‘By using an advertising-based (rather than pay-to-play) revenue model, it provides an innovative spin on conventional games, and handily circumnavigates the extensive regulations associated with the sector. It was a bold, clear and irresistible pitch, and one ZEAL couldn’t wait to convert into a real investment.’
DO Put The User First
It can be easy to get carried away with your product and let the user fade from the picture. So, always ask yourself: ‘Who are you doing all this for? If you aren’t going into your pitch with some idea about your target audience and its pain points, then you’re not adequately prepared,’ warns Oakes.
‘Your innovation must be geared to the specific desires and requirements of your eventual end-users. What can you offer that your competitors can’t? What is your contribution adding to the range of offerings that are already out there? Is the potential audience large enough to sustain your business model? If you don’t have good answers to these questions, you don’t have any users, any revenue, or, in the end, any business.’
Oakes’s own startup, Geonomics, taught him this lesson the hard way. ‘We sold our product to businesses, who used it with their customers, but found that while they fell in love with our product, our end-users weren’t so keen on it – and without them on board, we were never going to succeed.’
DO Be Tenacious But Also Flexible
You can’t be a defeatist entrepreneur – your ideas would never get past the ‘manifesto’ stage – but you can’t afford to be impractical either. It’s a balancing act, says Oakes: ‘Entrepreneurship can be a contradictory experience, and you may find yourself having to balance relentless positivity with dour pragmatism. These can obviously be quite hard to reconcile.’
‘So, you need to give your ideas the time and resources to come to fruition: iterating on them where necessary and innovating on them where doing so is possible and valuable. Don’t give up easily, by any means, but try to understand when it’s time to let unworkable concepts go. Time and money are limited, and no entrepreneur can afford to overcommit to a dead end.’
‘During a pitch you need to include everyone who’ll contribute towards meeting your objectives’
DO Your Homework
A lot of the work ahead of a pitch tends to focus on everything that will convince the investor, but you need to do your homework on both the investors you’re going to, and the market you want to grow into. ‘This is what you need to consider during the pitching process: what kind of company you run, what kind of company you want to run, and how much of it you’re willing to give up in return for your investment? Do your research, test the product and the market, crunch the numbers, and practice before you pitch.’
DON’T Go It Alone
Coming up with a big idea or having a lightbulb moment is often a solitary experience. But the next steps really aren’t all about you. ‘No entrepreneur is an island. You or your co-founders may have had the big idea, but realising it requires collaboration, delegation, and accountability,’ says Oakes.
‘At Geonomics, for example, we impressed investors by dividing labour clearly: as CEO, I would focus on strategy, whereas my co-founder Henry was the sales-focused face of the business. This combination worked effectively, because it showed investors that we had a winning team that could work together smoothly.’
This dynamic is just as important when you come to pitch for investment. ‘You need to include everyone who’ll contribute towards meeting your company’s objectives – without a full roster, investors may speculate that you don’t have the personnel to achieve your goals.’
‘Investors must believe that you know how to marshal your forces and handle your most urgent problems’
DON’T Lose Focus
The excitement and speed of working in a new startup can lead to staff or founders getting distracted and going off on tangents where opportunity seems to lie. You need to rein that in, says Oakes, in order to impress investors.
‘Start-ups must be disciplined about where they allocate their time, money, and efforts: your resources and those on your team must be laser-focused on your top priorities. Investors must believe that you know how to marshal your forces and handle your most urgent problems and considerations. If they don’t, well, they’re unlikely to invest in your business.
DON’T Choose An Investor Based On Money Alone
‘It’s easy to assume that the investor with the most money is the best option, but this isn’t necessarily the case. Loose purse strings can come with restrictive expectations,’ warns Oakes. ‘Your investor should provide you with the resources you need to succeed, but they should also be a good cultural fit: someone who you can turn to for advice and insight. They need to have your success in mind, not just the expectation of eventually receiving a return on their investment.’
This interest in your success can be demonstrated by more than money, as ZEAL’s deal with Pick My Postcode has shown. ‘We had established a good rapport with the founder, and chose to acquire a 10% stake. But, we also signed up to provide strategic data and general management support above and beyond our financial commitment. That was something very important to Pick My Postcode – an investor that would help them grow while maintaining their distinctive identity. Above all, work to find the right investors for your business – not just the one with the most money.’