With hesitant investors and tight funding opportunities, today’s founders are certainly feeling the pressure to land the backing they need to fund their companies. When marketing your company to potential investors has become more of an art form with an air of authenticity, analyzing every word, inflection, and pause you plan to use in your pitch before your pitch has become paramount—and your company’s future may very well depend on it.
Preparing your pitch for potential investors requires knowledge beyond you, your company, and your goals. Founders today need to possess a strong “situational awareness” of the challenges and concerns that today’s investors face, including the harsh realities of ongoing market conditions since the pandemic.
When the tech industry benefited greatly from record-low interest rates, reaping the rewards for over a decade after the 2008 financial crash, money was cheap. The conditions of this time period led many investors to focus less on concerns about paths to profitability or potential risks that their portfolio companies would, at some point, become reliant on them to survive.
Investors’ willingness to back companies in industries they were not entirely established in or were riskier can be seen in 2018 and 2019 data, where venture-backed companies managed to generate over $100 billion each year, with Fintech startups, like crypto, claiming $34 billion of 2019’s global venture funding. But these “cheap” money days are over, and it is unlikely that they will be seen again anytime soon.
As central banks raise interest rates to stem inflation, money has become expensive again—resulting in a decrease in VC funding that is still on a downward spiral today. While it could be some time to see a return to the pre-pandemic VC heyday, there are some rays of hope poking out from the clouds that shine light of a recovery to come. Cash flow is likely to be unevenly distributed while the world recovers, but investors are not solely looking for companies with high growth potential alone.
Potential investors also need businesses that show their ability to scale, and with IPO and M&A activity down and less funding to go around, more and more investors are now playing a long game. With these needs in mind, it is now crucial for investors to educate and reflect on their understanding of the complexity of the landscape they are in, emphasizing to potential investors how acquiring customers without burning through capital will be achieved, presenting a realistic pathway to breaking even, and lastly, how to generate profit.
With decreased funds and more focus on risk, today’s VC landscape now requires that founders set themselves apart from their competition and necessitates founders to project an image of stability that shows potential investors they possess a path to profitability, a deep understanding of their market, and a product that meets the needs of a real addressable market.
Communication skills are essential for today’s founders to be heard by potential investors, who often run in the same circles. Yet, while you want to zone in on the bread and butter of your pitch, making sure the key points are hit, at the end of the day, investors invest in people; they invest in founders who they believe are the right people to execute that idea. So, while you spend hours in your bathroom mirror practicing your facial expressions or practicing in front of friends and family, don’t forget the most important component: you.
