It’s a debated practice, but did you know some groups of angel investors charge entrepreneurs a fee to pitch to them? We’ve got some guidelines to help you decide if the fee is worth it, plus a few tips about making sure your pitch gets the most bang for your buck if you go for it.
Before you pay the fee to pitch, be realistic about your expectations. Only 3% of companies who pitch to angel groups actually get funded. Who should skip pitches requiring fees? Entrepreneurs in the seed-stage with first-time founders have a very low chance of funding success with an angel group. But it could be worth it for companies with good growth and revenues.
And don’t be afraid to ask any angel group how many pitches they hear versus how many actual investments they make. As in any interview process you have the right to judge the fit from your end as well.
If you do decide that the fee is worth it, try these tips to make sure your pitch is it’s best:
- Keep it simple. Make sure your presentation is well organized and easy to understand. Use visuals if they help explain things. Stay away from a lot of big numbers and technical terms. If your pitch relies on some complex stuff, prepare a handout – but don’t swamp your investors with a flood of materials.
- Get to the customer and then listen. Who are your customers? (Remember, the more niche, the better.) How are you going to reach them? What are you distribution channels? And what did the customers you already talked to have to say? Demonstrate how you incorporated customer feedback into product development and price points.
- Make the investors money. Don’t just talk about revenue from ads or the 99 cents you’ll charge for an app. How will you make recurring revenue? How will you target customers with deep pockets? What is your exit strategy?
- Address legal issues. Assure investors that you are in control of legal concerns by identifying potential issues and explaining how you plan to deal with them.
- Analyze the competition. Be accurate in your assessment of the market. Don’t bad-mouth your competition unnecessarily. Show where they have credibility and where you have credibility.
- And don’t forget the details. Bring a prototype to show investors how your product works. Be prepared for technological glitches. (Can you deliver an effective presentation without a computer?) Sound confident, but not like you’re on a late-night infomercial. Emphasize how your product solves a problem and need. Move past mistakes, don’t get defensive and don’t evade questions you don’t have the answers to.
Risking the fee could land you top-notch investors, but it’s not smart for everyone. What is smart for everyone is pitching effectively, and these tips will get you there.
What do you think of pitch fees? Have you paid a fee to pitch? Was it worth it? Let us know in the comments!