Asking for money in an investor pitch can be daunting, but it is a critical part of the fundraising process. An investor pitch is your opportunity to convince potential investors that your company is worth investing in. The way you ask for money will impact whether investors open up their checkbooks. Follow these tips to effectively request funding during your startup’s investor pitch:
Do Your Research
Before crafting your funding request, research typical investment amounts and valuation caps for startups in your industry and growth stage. This will help you determine a reasonable ask. Requesting too little or too much could turn off investors.
Some key factors that influence startup valuations and funding amounts include:
- Industry
- Traction and financials
- Stage of growth
- Competitive landscape
- Management team
- Intellectual property and proprietary tech
Study other startups in your space that have recently closed investment rounds to get a sense of current market standards. Resources like Crunchbase and PitchBook can provide data on investment details.
Be Clear and Specific
Don’t beat around the bush—explicitly state how much funding you want to raise in your pitch. Avoid vague phrases like “we’re seeking investment capital.” Name a specific dollar amount you wish to obtain.
For seed funding rounds, this is often between $500,000 to $2 million. Later stage rounds can be $5 million to $10 million or more.
Specify if you have a valuation target or cap in mind. For example: “We are seeking $1.5 million in this round at a $6 million pre-money valuation.”
Being clear, upfront, and asking for a number will prevent confusion and show you’ve done your homework.
Segment the Funding
Don’t just name the total raise amount. Break down how you plan to spend the investment capital by allocating amounts to key business activities.
For example:
– $500,000 for hiring engineers
– $250,000 for marketing activities
– $400,000 for equipment
– $150,000 for working capital
– $200,000 for sales team expansion
This level of detail gives investors confidence you have thought through how to smartly use funds to fuel growth.
Discuss ROI
Founders often focus heavily on their product, technology, or service during a pitch but fail to adequately address the investor’s main concern—return on investment.
Your pitch deck should include a slide detailing your financial projections, ROI timeline, and investor exit strategy. Common exit strategies include an IPO, acquisition, or secondary sale.
Convince investors they can get a worthwhile return in a reasonable timeframe through your future success. This shows you are setting the company up for an exit that benefits shareholders.
Consider a Round Structure
Rather than asking for one lump sum, propose a structure with multiple rounds of incremental funding tied to hitting key milestones.
For example:
– $500K seed round now for product development
– $1M Series A in 12 months upon completion of beta test
– $3M Series B in 24 months upon reaching 1K customers
Staging funding in this manner gives investors predictable opportunities to re-assess progress before infusing more capital.
Highlight traction
If your business already has customers, revenue, product downloads, or app users, highlight this traction prominently in your pitch to bolster your funding request. Traction diminishes risk and demonstrates market demand.
For example, note: “We already have 100 beta users and $50K in early revenue.” Investors want to see you have momentum.
Remain Confident
Ask unapologetically for the amount you need without timidity. Avoid saying things like “we’d be grateful for any scraps you can provide.”
Remember, you are offering investors an exciting opportunity, not begging. If you don’t seem confident in your ask amount, why would they be?
Tailoring Your Request to Different Investors
Your funding request may need adjustment for different types of investors you approach, based on factors like:
- Stage of company – Early stage vs. established
- Type of investor – VC vs. Angel vs. Crowdfunding
- Risk profile – Risk-averse vs. risk-tolerant
Here’s how you might tailor your ask for different investor types:
Venture Capital Firms
VCs typically invest at least $1 million in Series A or later rounds for startups with traction and high growth potential. They expect equity shares and seats on your board.
Adjust your pitch to VC firms by:
- Seeking at least $1M or more in capital
- Highlighting your scalable and disruptive business model
- Proposing a board seat as part of the deal
Angel Investors
Angels fill startup funding gaps by providing smaller seed round investments of hundreds of thousands in emerging companies.
For angels, adjust your pitch by:
- Seeking seed rounds in the tens to hundreds of thousands
- Emphasizing product development milestones you aim to hit
- Providing more detail about how you’ll use funds
Crowdfunding Platforms
Equity crowdfunding opens up startup investing to everyday people. But the wisdom of the crowd means you’ll need ample traction and social buzz.
Pitch crowdfunding backers by:
- Offering smaller investment increments, like $1K blocks
- Reward-based perks for backers, like free products
- Tapping into your existing audience and fanbase
Strategic Investors
Corporate venture arms and accelerators invest for strategic reasons beyond just financial returns.
Pitch strategic investors by:
- Emphasizing how you fill gaps in their product ecosystem or value chain
- Proposing mutually beneficial business integrations and partnerships
Government Funds
State, local, and federal governments offer grants, loans, and funding programs to support economic growth.
Access government funds by:
- Researching eligibility requirements for public funding programs
- Applying for relevant grants and loans
- Getting certified as woman-owned, veteran-owned, or minority-owned for preference
Words and Phrases to Avoid When Requesting Funds
Some vocabulary raises red flags for investors. Here are phrases to strike from your pitch:
- “Free money” – Their investment is not a charitable donation.
- “Easy cashout” – They want to see potential for sustainable growth, not a quick buck.
- “No risks” – Every investment has risks and they know that.
- “Lifetime deal” – Investors want flexible options to exit if needed.
- “Kickstart” – Makes your need sound desperate rather than strategic.
- “Trust me” – Don’t ask for blind trust; prove your case with data.
Stick to language conveying thoughtfulness, preparation, and partnership potential.
Questions Investors May Ask About Your Funding Request
Savvy investors will probe to assess whether your funding request is well-supported. Here are some questions they may ask and how to respond:
How did you arrive at this valuation and round size?
Reference market research and metrics used to benchmark your valuation against comparable startups. Demonstrate you set round size based on a budgeted plan for investing the capital.
How will you use the funds and who will manage them?
Provide a detailed use of funds breakdown and information on your finance team’s credentials.
What milestones will additional funding help you achieve?
Share specific strategic and financial goals funding will enable, like expanding to new markets or reaching profitability.
Why raise now vs. earlier or later?
Explain why current stage is optimal in terms of product development, market timing, traction, etc.
How have you determined your projected revenues and costs?
Share models, growth assumptions, and other financial planning details proving projections are grounded in diligent analysis.
What existing or future funding sources do you have as alternatives?
Naming backup funding options demonstrates this isn’t your only shot and reduces perceived risk.
Conclusion
Preparation and polish when requesting startup funding can make or break an investor pitch. Do your homework to determine an optimal funding amount. Confidently and transparently state how much you need while painting a clear picture of how capital will be used to scale the business. Welcome tough investor questions and respond with thoughtful, detailed answers. With a compelling funding request backed by data, you will reassure investors their dollars are poised for return.