5 Finger/Minute Investor Pitch

Years ago I had a great coach (Linda Chandler) help me with my 5 minute investor pitch. The first thing she said was, it doesn’t matter how good your deck, your pitch, your business plan, your team, your idea, if you don’t CONNECT. With that in mind I worked on a way to memorize a five minute pitch using my hand as my mnemonic device. It has worked for me and helped dozens of others raise hundreds of thousands of dollars (I raised millions with it, and now with a new company seeing its power and simplicity again.)

I have copied my notes on how to do it below, if it helps you, pass it on. Good luck! (Note: I learned all this and much more being involved in an entrepreneur organization called CEO Space, where a lot of the “prerequisites” I mention below can be found. I raised over $10 million dollars through that network pre-recession using the ideas, attitudes and approach I outline below, and again, I learned all this there. I am just putting it down in a more layman’s words, and hope it helps.)

When I looked at other great projects that did not move as fast or as far as mine, I wondered what missing ingredient might be there that I had, but they did not. I believe it may be some years ago I had some excellent sales training, and was able to use this. Here are some basic principles of “sales” that may help you“pre-sell” your dream.

Share, don’t “pitch”.
First of all, while we all get nervous about presenting, my antidote is to come from sharing. We all share stories about our families, jokes, insights, new restaurants, or other news with others very naturally, and this project you love and care about should ideally be a SHARE. Share your vision, starting with the end in mind.

Work on fully painting your vision within first.

If you do not believe in /see your end vision, work on your vision before going out and sharing it, certainly before asking others to invest. If you are not clear, or do not know where you are going, why should anyone follow you? Your role is to lead them and their money to the Promised Land. For that you need vision, not just for your product and company, but for them and their money. You don’t need to have all the answers, but you better have an idea, and know where to get the answers (lawyers, accountants, experts, internet, books, etc.). Ask for a vision team (people that have knowledge that will brainstorm with you) if you feel cloudy. These people will help you get some orientation, but it is your job to get clear. The clearer you are,the better you communicate, the more the universe can help. When you are clear,you can come from that future vision, and share it with people here, and they will see it because you see it, you were just there, and are telling them what is beyond the horizon.

Investors are human.

We have a theory about investors, that they are human. They want to be treated courteously, they don’t want to be stalked, they want to be invited,they don’t want to feel guilty, their money matters to them, they want it to grow without them, they want you to treat it with the care that they do, they want to understand what they are getting into, they want to trust you, they want you to be worthy of their trust, they want updates along the way, etc, etc, etc.

NOTE:The more money they have, especially when considering a large investment, the more risk they are taking, the more fear they may have, their whole identity may tied up in their money. Large investments tend to take more time. Sometimes you can raise more from smaller more decisive investors than one large investor in the same time frame. More than anything, they need to feel comfortable with you, the project, the team, and that they can afford to risk the money. Some of that you control, some you don’t. It is their decision. Financial wherewithal and psychological wherewithal are not the same. Be sure they have both. Everyone will sleep better, because remember, your project will take longer, and cost more than you think.

You are going to learn a great deal about the“Language” of capital, which is very concrete, very clear, very straightforward, but well thought out, especially from the investor’s point of view. But like any language, it will take time, practice, and the willingness to make mistakes and be coached and corrected for you to master it. Put that learning curve into your calculus of how long it will take for you to raise the money you need, but realize this is a very valuable life skill, and once you master it, you will truly be free to co-create the most amazing dreams, for the rest of your life.

First rule of sales.

Only talk to interested parties. When they indicate they are not interested, thank them, and ask them, “who do you know?”. No “pressure” sales. Do not take any rejections personally. They simply don’t “get it” or “you”. It is often much more about where they are than the worthiness of your dream or project. NOTE:Consider whether any of their objections or concerns are valid. If so, correct them! Even a plan to correct them can help overcome the objection next time. Address them in the spirit of invitation, inviting into a great project, deal or company, as if you were inviting them to the celebration fiesta when you sell the company. (Visualize that party in your mind and heart. Would you feel embarrassed or timid about inviting someone there?)

Second rule of sales, qualify/disqualify.
Ask yourself, do they

A) Have the wherewithal? (Financial,psychological?) “The minimum is $25,000, can you handle that?”

Disqualify people who cannot handle the risk,psychologically or financially.

“This is high risk, high return. You can lose some or all of your money. We promise to do all we can to mitigate risks and produce positive results, but we all need to be grown ups about this. No one can guarantee results, and if you cannot handle that risk to your capital then this is not your cup of tea so to speak, and we cannot accept you as an investor. We prefer clarity up front to unnecessary stress along the way, as there certainly will be bumps on the road, and we want our capital team to be comfortable with the venture from the outset.”

If you smell fear in the conversation, go directly at it.” Fears discussed in the open can be handled and addressed, and decisions are then made based on all the facts, good, bad and ugly. Leave fear in the shadows and you have two possible bad scenarios, they don’t invest because of their fears, or they invest in spite of their fears, and later freak out. You have nothing to lose by addressing their fears openly, except bad future partners or missed opportunities for clarity.

B) Do they have the authority to decide? “Is there anyone else you need to consult to make a decision? Should we get them on the phone?” Spouses matter, as do other partners they may have. Get them enrolled or at least understanding the proposition directly from you, do not count on your investor candidate to be able to fairly or fully portray your opportunity.

C) Do they need what you have? (NOTE: Very wealthy people do not “need” money, though they may want it, so your “investment” may not have any appeal!) They may be and often are motivated by other desires, i.e., legacy, giving back, solving a problem for others that they experienced, enjoying creating new things, etc. What to know what their “other” motivations might be?Ask them!

D) Do they have time to listen/pay attention? Do they understand what you are talking about? People that won’t or can’t pay attention will not or should not invest. We have had people come to us based on the recommendation of a friend and wanting to “just invest”, we always insisted they read the docs and discuss the venture with us, or they can’t participate. Often they would end up investing more, but we were ready to lose the investment rather than have them complain later that they didn’t understand or cite claims their “friend” had told them that were never real about our deal.

E) Do they have the huevos/courage/guts/cojones to make decisions?

Any entrepreneur will tell you that an indecisive person is the worst investor candidate, they waste time at every stage. If you sense the person cannot make a decision, then either address their hidden objections (“What is really holding you back?”) or make the decision for them, i.e., “I can see this is not your cup of tea, who do you know that might be interested in a high risk high return investment like this?” If they insist they are still interested, insist they make a decision. You are not looking for “any” investors, you are looking for the right investors, the right match, and if it is not them, that is fine,“who do you know?” is the right way to let them go. Your role is NOT to get them to say yes, your role is to invite them to listen,inform them, then invite them to make a decision. THEIR role is to decide. If they cannot make decisions, disqualify them in your mind, and move on.

NOTE: If you know other sales “techniques” like tie downs, closes, etc, my advice is to avoid them. You don’t want an investor to feel like you “talked them into it”. You want the opposite, that they feel like you fully appraised them of the risks, and tried to make sure that they were financially and psychologically able to do this without undue fear or nervousness, that you almost challenged them not to invest if they could not handle the possibility of losing some or all of their money. You are going to be together for a long time,so you want to be clear and cozy from the beginning. True investors will feel like they can trust you more for telling them WHAT THEY ALREADY KNOW, i.e, its high risk to invest in startups. They will not be afraid if you qualify them hard up front. This will help you move forward without babysitting, or undue anxiety on their part over time, simply by maturely accepting those risks up front.

5 Finger Investor Pitch Structure

Each digit is one minute, and break each minute down even further into bullet points while you are practicing. Think of this presentation as the Chapter Titles of your venture, NOT the book. You are giving them a quick thorough overview of the particular highlights of your startup. YOU are the book, and hopefully they will want to ask questions in more depth, but this presentation should be powerful, succinct and yet thorough.

The most important thing is that you can do this with no props or notes, while looking them in the eye, and CONNECTING. Nothing matters if you fail to connect with your investor candidates. So, to review:

A) THUMB

What is your project/product/service? (Paint a picture, use a metaphor, make it powerful, clear and concise, so they can share it easily.)

Who cares? (Markets, how big)

B) FOREFINGER

Exit strategy (How they get their money out? IPO? Merger/Acquisition? List sample buyouts in your markets and potential acquisition candidates who would gain by buying someone like your future flourishing company, for its database, data, IP, brand, etc.)

ROI (Return on investment) Speak of targets, not promises, maybe cite parallel companies/examples in related fields)

NOTE: For non-profits, the“Return on investment” often means impact, i.e., as a result of their funding “x number” at risk teenagers will be helped, etc.

(The next 3 are hidden doubt or objections investors often have. Address them up front before they can think it . . )

C) MIDDLE FINGER

Can you make or produce this? (Team, experience, prototype?)

D) RING FINGER

Can you market and sell this? (Strategies that make sense.)(NOTE: This is where investors decide to marry you or not)

E) LITTLE FINGERa. Can you manage and protect this? (Growth, IP, Management?)

F) PALM

a. “What is your interest level?

If vague, follow up with

b. On a scale of 1-10?

If high, ask,

c.What will it take to get you to a Yes?

If yes, or highly interested ask

d. How much are you thinking of investing?

If they answer, then ask

e. What is your timeline to get the documents in?

Again,you are looking for people who can make a decision. Get to a decision; do not be attached to any particular person investing.

If they say no, ask two questions.

A) Is this a permanent no, or would you like to be kept in the loop?

B) Who do you know who might like and want to get involved in something like this?” (The question “Who do you know?” raised half the $11 million for Piano Wizard.)

If they commit and then later hesitate or delay, ask, “Were you serious about investing?” Everyone wants to be taken seriously. People mean to do what they say, but sometimes vacillate. Ask them point blank if they were serious. Again, do not be attached to them investing or not, even after they commit. Real investors invest. In your project. In real time. Anyone who does not is not truly an investor of yours, are they? Don’t play games, if they do, disqualify them.

The most powerful word in the universe is NEXT. Because it frees up a billion possibilities in your mind, instead of being attached to a dead end process. That being said, we try to move on without animosity or resentment. It is nobody’s “fault” if they don’t invest. Life is long, and investors may change their minds, or it may simply be that this is not right for them, or YOU. There is a great saying, “Friends come and go, but enemies accumulate.” And “Resentment is like taking poison and expecting the other person to die.” We say, “I love you, good-bye!” and we move on in peace.

“Bridge”, or “Seed”, or “Compliance” Capital Conversations.

You need to learn about different kinds of capital offerings and legal constraints/obligations of each. Generally, if you are offering ownership or equity, you need to fulfill certain regulations before you can legally raise money. In order to get“compliant” you may need to raise bridge capital in the form of personal loans. If you are raising compliance/bridge capital, the process is slightly different from the above process, especially because you need to understand what kind of investment this is to them, i.e., This topic is for those who are getting their compliance capital together, in other words, promissory notes,usually unsecured. This kind of money is tough to get, as there are lots of HIGH risk, HIGH reward opportunities in further stages of development. Compliance capital, being a loan, and subject to usury laws, and often unsecured by collateral, are HIGH risk, LOW return. Because you can only pay them back interest no matter how well you do, but they could still lose all their money. This is why friends and family are generally the most likely source of this money, and it is unlikely (not impossible) to be found outside that circle, as there are many HIGH risk HIGH return options here, and people just don’t know you enough yet to make an unsecured loan out of the blue. Does that make sense?

Risk Reducers

Your Integrity/Their trust in you (often comes with time together)

Your Commitment/ their perception of that (over time, if you come back often)

Knowledge

Networks

Collateral

So, when asking for compliance capital, you still go through the FIVE MINUTE OVERVIEW, but after you finish, you take it away from them at this point and say

“But you are NOT investing in my company at this time. I do not have the legal documentation in place yet to make you an offering. This is a bridge loan. (Say, 1% per month, 6 month renewable) First investors in, you are out. At a later time, once I have a professional package completed, with a business plan, a PPM, legal offering documents etc., I will let you consider converting your note into investing in my company. That will be your choice, based on an informed decision with legal documentation and disclosure, but for now this is a straight loan. I am doing this, no matter what..”

(If that makes you queasy, if you are not that committed, reexamine your vision until you are ready to go for it 100%. People will sense that courage and commitment or lack thereof in their bones.) “I will pay you back, no matter what.” (Look them in the eyes, and mean it.) “Will you help me?” What you will find is that far from being dismissed, most people will really encourage you, and admire you. They may not give you money, (but they may lend you capital). (Capital turns into more money). If they say no, remember to say, “I understand this is not your cup of tea, that is perfectly OK, it is high risk type of investment,and not for everyone. Who do you know that might be more suitable?” No pressure, no begging, no attachment to that particular person investing. You are looking for the RIGHT investors. If it is not “right” for them, or they do not “get it”, or are afraid, they are NOT the right investors! They may invest later, once you are at another stage, or you may bring them another project, (not yours) and they invest in that. Relationships are what matters, and endure, and there is no reason to make people feel guilty or bad in any way. No attachment makes them more likely to refer someone and remember you favorably. Life is round, don’t make it hard for the person listening to be honest about their DECISIONS. It is their job to decide, not yours. Your job is to invite, and ask for a clear decision. If they cannot decide, that is a NO. Be decisive for them, not excluding or punishing, just moving on gracefully understanding that you as a CEO do not have time for the indecisive and uninterested.

Remember always to ask, “Who do you know?” It may end up being someone you know and forgot.

Ask to practice your five minute overview, in front of people, AFTER you have practiced in the mirror and would buy from that person.

CONNECT.

Nothing you say, or do, or have matters if you do not connect, person to person, with your investor candidates. My first five minute overview took 17 minutes. It took me nine months to feel like I mastered it. I always have my hand (5 minute overview) with me, no matter where I am. I have raised a great deal of money at meal meetings, with those five minutes. When they time you and you finish in 4:59 seconds, they are impressed. Even though this is just an overview, you have just addressed all their major concerns, and then they can ask questions,and now you can invite them to look at your documents. Make sure they are of the same quality, so they do not find a large discrepancy between how impressive you and your vision are, and your written plan. If they say yes, ask, “Who do you know?”. If they say no, ask “Who do you know?”

And remember, it is NOT about survival. You will survive. You live in the richest country in the history of the world, and if you have family and health, you are already a billionaire and unbelievably lucky and blessed in the eyes of the world. Keep your integrity and your dreams, and you are on holy ground already. Getting your project launched is icing on the cake of your life. First rule of the hitchhiker’s guide to the universe is “Don’t Panic”. Fear is never attractive, but you need to be truly at peace. Paint your picture from the future looking back,and come from the spirit of invitation to abundance, not fear of scarcity. And remember you are just learning to speak “capital”. Be easy on yourself, but relentless in your efforts to improve and articulate your vision better and better every day. It is a life skill, and one that can and will change your ability to realize any dream or vision. And it starts with integrity, and common sense.You can’t lose, if you are coach-able, and you leave no stone unturned. Your dream is perfect. With work and practice, your plan and your language soon will Be patient, but persistent, and open like a child to learning this cooperative sailing technique. Like taming the wind, it is subtle, but it can take you anywhere you want to go. Poor sailors blame the wind, novice sailors watch and study the masters. By using this without attachment, your problem will be abundance, not scarcity. You will need to organize all the resources you found, and get them in the proper sequence. You will not regret that you tried, but that you did not try ten years ago.

Finally, my motto has been, “What one fool can do, so can another.”

I am that “fool”.  If I can, I truly believe you can too. Learn, earn and return. My only request of you, is that you share this information with anyone else that it may help, and share your resources, ideas, and knowledge with others, so our network of dreamers and doers can grow richer with your presence.

God Bless you and your dreams.

Chris Salter

PS As much as this approach is simple, it is not easy. This should/will take you months to master just for a solid presentation, and years as a 360 degree business planning approach. The process of clarifying, perfecting and executing your vision is supremely challenging, but good mentorship can help make that considerably  less painful, and more importantly, much faster, and therefore cheaper.

If you like what I have shared, and want more custom, individual help filling out those “prerequisites to capital”,  contact me and set up a free session.

Chris@BusinessMindSight.com