The Disconnect Between Investors and Entrepreneurs
If you’ve ever watched Dragons’ Den, or been to ‘real life’ investment events that follow a similar model of pitching to a panel or a roomful of investors, you’ll know there is often a great chasm between what an entrepreneur thinks an investor wants to see or hear in a pitch, and the information that an investor is actually looking for.
Why is there a disconnect between investors and entrepreneurs? As a pitch consultant for the last 5 years, I’ve become obsessive about why this is. Of course the pitch is only one part of the investment process, but it is so critical and often you literally have one chance to get it right. In the words of the US VC Guy Kawasaki, founder of Garage Ventures “if you experience great difficulty in raising money, it’s not because VCs are idiots and cannot comprehend your curve-jumping, paradigm shifting, revolutionary product.
It’s because you either have a piece of crap or you are not effectively communicating what you have. Both are your fault”.
So why do entrepreneurs struggle? There are many reasons, but here are three to get us started.
Unprepared Pitch
The first is that many entrepreneurs are time-pressured and leave the pitch prep to the last minute, essentially ‘winging’ it. An investor can smell an unprepared pitch, or a thoughtless exec summary or business plan, a mile off, and from my observations rather seem to enjoy going in for the kill.
The savvy entrepreneur takes a bit of time out to prepare, not just to rehearse the pitch but to understand the investor’s history, portfolio and what they want or don’t want. Garage Ventures give some clear advice worth heeding here.
Unable to deliver the commercial information that investors
The second fact though, is that even with preparation, many entrepreneurs fail to deliver the commercial information that investors are seeking. Most pitches I have seen spend about 60%-80% of the time talking about the product/technology/idea. Yes, this information is vital, but it’s only part of the story. An investor wants to know about the business surrounding the idea, i.e. how are they going to make money from it? This is often the proverbial elephant in the room.
For now though, the final point is something about the mindset of an entrepreneur. It’s about having the right balance of self belief/confidence and humility/openness. If you’re too cocky, the investors are likely to try to beat you on the ego stakes. If you’re too desperate, they’ll run a mile as we all would. There is a fine art to treading a road somewhere between the two. Who you are, and how you handle the pitch, could well be the telling factor for whether you will get investment into your business or not, because, ultimately, if they can’t work with you, the door will slam firmly in your face.
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