Investor's Decision-Making Process

Investor’s Decision-Making Process and Pitching Your Idea Accordingly

The prospect of meeting an investor makes a startup founder nervous. During a short conversation, you can secure the future of your project or lose prospects – it all depends on the ability to present your idea. This article will explain how to communicate with investors and what to focus on in a pitch.

 How an investor makes a decision: from interest to a deal

Communicating with investors, reviewing a business plan, and, as a result, making a positive or negative investment decision follows approximately the same path. Conventionally, this process can be divided into 4 key stages, the understanding of which can greatly facilitate the entrepreneur’s approach to the cherished investment:

  • Business area and investment amount

These are the first two factors that an investor looks at. If he is not interested in the requested amount, the further conversation is unlikely to lead to success. And if, with the option when the amount is too large, you can still try to agree on joint investment with other partners. If the business area is completely unfamiliar to an investor, the likelihood that he will invest is not very high.

  • Business idea and final key indicators of the project

The investor will look at the resume and key indicators if the first decision-making stage is passed successfully. At this stage, the most important thing is to arouse maximum interest in your project, starting with a business idea and ending with financial performance.

  • Detailed analysis of the business plan

To successfully pass this stage and for a real assessment of the planned business as a whole, the entrepreneur must delve into all the steps of creating a business plan as critically and in detail as possible, regardless of whether he makes it or orders it to professionals.

  • Risk assessment

The final step in reviewing a business plan is usually a project risk assessment. This stage is part of a detailed analysis, but it is so important that it makes sense to separate it. Because an investor may like everything – an idea, its implementation, planned indicators, but if the entrepreneur does not show what actions he intends to take in case of various risks and how this will affect the project, he most likely will not receive investments.

How to present a pitch for investors: common rules

The main objective of a pitch is to present a project or business idea profitably and help attract the necessary resources, whether it be investments, partners, or employees. Creating a successful pitch starts with a thorough business plan. After that, you must determine what makes your business valuable and worthy of investment. You might have 5 pages of proven financial history and a deep analysis of how you’re doing against competitors in various industries, but you can’t tell it all. Because when you first approach investors and venture capitalists, you will most likely only have about 10 minutes to give your presentation. There is no single recipe for how to prepare a sales presentation, but there are important principles that will help make it effective.

  • Try to interest the investor and show him the prospect. The goal of a short pitch is to make contact.
  • Focus on how much you can earn and how you determined it. 
  • Describe the solution briefly without going into technical details and complex terms.
  • Support all statements and hypotheses with numbers.
  • Prepare as many details as possible, but state only the main ones.