Investors share dos and don’ts when seeking funding for projects
TORONTO―Of all the nightmare pitches that investor Dan Mothersill has heard, there’s one that still makes him cringe to this day.
“I don’t want any advice. I just want money.”
It came from a group of young entrepreneurs, who had a good idea, but very little business experience and no interest in learning.
“Needless to say, they didn’t get funded,” Mothersill says.
He calls their attitude “founderitis.” It’s common in founders of new companies―and just one of many traits that can send investors running in the opposite direction, according to Mothersill.
Mothersill is an angel investor, entrepreneur, and founding member of the National Angel Capital Organization, an industry association representing investors in Canada.
He presented at today’s Pitch+ event, a workshop at the Innovation Synergy Centre in Markham, for companies trying to seek funding for their projects.
Standing in front of a group of investors and asking for money can be nerve-wracking for anyone, but Mothersill says a little anxiety can be useful.
“You don’t have to be a professional presenter. All investors want to see is that you’re knowledgeable about your product and its place in the market,” he says.
That means acknowledging the 800-pound gorilla.
“One mistake young companies make is being over confident. Tell me who your competitors are, both locally and internationally. This is particularly important in manufacturing,” he adds.
Small companies especially should be aware of industry titans that could squash them and have a strategy outlining how their product or service could potentially meet the titan’s needs and be acquired.
But no matter how much ground a company has to cover, a pitch should never run longer than 20 minutes.
“Anything longer than that and investors’ eyes start to glaze over,” he says.
The same goes for any visual material, according to Gaétan Morin, executive vice-president at Fonds de solidarité (FTQ), a private equity and venture capital firm.
Morin says companies should follow the 10-20-30 PowerPoint presentation rule: no more than 10 slides presented in less than 20 minutes and in at least 30-point font size.
Running on for too long not only risks boring the investor, but eating up time for questions after, which can be crucial, he says.
Written material, such as business plans, should also be concise.
Morin says it’s not necessary to get everything across in the pitch.
“Leave some information for the second meeting,” he says, adding companies usually have a 50-50 shot of receiving an investment if they make it that far.
Morin also advises going over sales projections without rose-coloured glasses.
“If you expect to sell 50 million next year, tell me also what your strategy is if you only sell 40 million. Investors like to see optimistic entrepreneurs but they should have a plan ‘B’.”
Research the product, competition and marketplace, as well as the investor.
“You want to make sure your philosophies are connected. Will they help you with M&As, will they still be on board during a recession, what type of partner do you want?”
Mothersill agrees a connection with your investor is important, but says there are other options if you can’t find one.
“Establish a good relationship with your banker. They don’t make investments, but they do provide loans, especially to young companies,” he says.
Failing that, companies can always turn to what Mothersill calls, “the three’s Fs—family, friends and other fools.”