Many of you tuned into Dragons’ Den last week to see Derry Green receive four offers from the Dragons for his business The Secret Glamping Garden.
Founded in 2020 the disruptive glamping brand has taken the market by storm with 18-month waiting lists for their luxury Love Island-inspired pods in West Lancashire.
I had the enormous privilege of mentoring Derry as a client to help prepare him for his pitch, being no stranger to the Den myself and having coached countless others to pitch for investment.
So, what is the key to a successful investment pitch?
Founders tend to look at the business right now but focus too little on where it might scale to – and more importantly, how.
You have to remember that an investor is looking to make substantial gains from their investment – with nine out of 10 investments in their portfolio likely to fail, they rely on that one in 10 to be their goose that lays the golden egg.
Does your plan give them the sort of return they would be expecting for their investment, within a reasonable time frame? An investor does not want to invest £100k, to maybe get £150k back in a 10 years’ time.
Nor do they want to see a business that will have quickly exhausted all its growth opportunities with nowhere else to scale to before hitting its revenue goals.
Your future valuation and turnover projections need to be based on sound logic.
If you say your business will generate £100m of sales in five years’ time, without a plausible explanation as to how those income streams would work, an experienced investor is going to chew you up and spit you back out!
Ensure that your projections are paired with a robust and credible rationale – and don’t forget to consider the costs associated with winning and delivering that business.
Especially marketing costs, which are so often overlooked, or are completely unrealistic. I once worked with an online training company who was about to go into a pitch and tell investors they would make £3m of online sales from a £3,000 marketing budget! The number had clearly been plucked from thin air and it was obvious that they didn’t really understand the cost of acquiring online sales, exposing their lack of experience.
It is important to demonstrate to investors that your growth strategy is structurally sound and doesn’t have grey areas.
Glossing over important details in the financials and growth plan, might indicate to an investor that you’re someone who does not have attention for detail, and doesn’t have the competence to be trusted to make good on their investment.
Do I trust you to scale this business? Do I trust that you have the grit, and the competence and commitment to see it through? Do I like you? Are you credible? Are you going to embarrass me?
These are just some of the questions that investors will be thinking about when they consider your pitch. Investors are often high net-worth individuals of good standing; they don’t want to be associated with a company that might humiliate them or compromise their reputation.
Nor do they want to be at loggerheads with the founder(s) who are running the business.
It’s important that you convey your capability and that the business is in a safe pair of hands – this is easier to do if your business has already demonstrated commercial success, but if you are an early stage business then the lack of objective facts to endorse your talents means the investors have to make a judgement call on the person in front of them.
Your body language, how you respond to perceived criticism, and your attitude will be key to determining whether you are someone they could work with.
Nikki Hesford is the founder and managing director of The Small Business Academy, providing funded and private business support to SME’s through training, mentoring and coaching.