I recently talked about the need to thoroughly understand your company before ever setting foot in front of an investor. If you don’t know the specifics of your own company, you’ll never get investors interested enough to undertake that next step. But as important as it is to know yourself, investment pitches really need to answer one simple question above all others: Will your company succeed in the current market? If your pitch can’t give a good answer to that, than it doesn’t matter how well you know your own company.
In order to understand your business’ chances for survival, investors need to know that you address a very real problem. Before getting anywhere near an investor group you need to sit down and make every effort to understand the space that your company will exist in. What problems does it answer? What competition does it have? How are you different from them?
Why would anyone invest if you can’t answer those questions?
In order to really prepare for an investment presentation, you need to know the business models of the industry inside and out. You’ll need to understand exactly how the competition operates in order to explain to investors that there is a definite place for you.
Always remember though, discussing your competitive edge in an investment pitch can be a dangerous line. If you bad mouth the competition you may come across as naïve (after all, they already have a toehold in the industry and you don’t). However, leaving out the competition seems as though you haven’t considered the environment, not a smart way to go. The best way to discuss the competitive landscape you plan on entering is to talk about the trade-offs that every company must make. It’s these compromises that can set you apart from potential competition and highlight your strengths. Don’t say that a larger company that already exists can’t do what you will, the investors won’t believe you and you’ll just end up looking idealistic. Stress that they have simply chosen to focus on A and B while you are more focused on X and Y. Investors will know that you understand your space and you’re realistic about what you’re up against.
And if you can’t answer these questions then you need to buckle down and get researching. Take a cold, hard look at your company, because if you don’t know the industry, don’t know the competition or don’t know your own advantages, there’s a good chance there’s a larger issue with your strategy.