Fundraising for Your Business: Dos and Don'ts of Pitching to 'Your' Investor

FUNDRAISING FOR YOUR BUSINESS:
Dos and Don'ts of Pitching
to Your Investor
Aaron Rose
Founder and Managing Director,
Global Tactics, LLC
Updated on September 3, 2022

Global Tactics, LLC www.globaltactics.net
So, you want to become an
entrepreneur?
2

ARE YOU CRAZY?
3

3 2 Reasons to Become an
Entrepreneur
1.Be your own boss
2.Be in creative control
3.Make a lot of money $$$$$$
4

Barriers of People Considering
Entrepreneurship
➢ I DON’T THINK I COULD RAISE ENOUGH MONEY – 48%
➢ I DON’T HAVE AN IDEA – 40%
➢ I’M DISCOURAGED BY THE HIGH FAILURE RATE OF BUSINESSES
– 22%
➢ I DON’T HAVE THE RIGHT SKILLS – 21%
➢ I WORRY ABOUT BALANCING BUSINESS AND FAMILY LIFE –
18%
➢ I’M WORRIED ABOUT TAXES AND REGULATIONS – 17%
➢ THE COMPETITIVE BARRIERS ARE TOO HIGH – 13%
➢ I DON’T THINK I COULD HIRE PEOPLE WITH THE SKILLS I NEED
– 7%
5
Source: Inc. Magazine, April 2015 http://ow.ly/Lbe7F

High Rate of Startup Failure
➢Out of 10 start-ups, 3 or 4 fail completely
(investors loose all their money; company
liquidates all assets);
➢Another 3 or 4 return money to the original
investment;
➢1 or 2 produce substantial returns.
➢WSJ article: “If failure is defined as failing to see
the projected return on investment—say, a
specific revenue growth rate or date to break
even on cash flow—then more than 95% of start-
ups fail… .”
6

Work-Life Balance of an Entrepreneur:
Your work is your life
Your life is your work
Passion is NOT enough
Obsession & Sacrifice, Obsession & Sacrifice,
Obsession & Sacrifice, Obsession & Sacrifice,
Obsession & Sacrifice, Obsession & Sacrifice…
MUST BE OBSESSED WITH SOLVING YOUR
CUSTOMER’S PROBLEM
7

Is your idea a hobby or a business?
(Be passionate about your hobby, but obsessed about your business)
1. Why you (your idea) and why now?
2. Who are your customers?
3. Are you obsessed with solving their problem?
4. How will people know about you?
5. How will you make money?
6. How will you retain customers, while at the
same time, grow your business?
7. How will you achieve and sustain
profitability?
8. In five years, your business is a leader of what
and to whom are you serving?
8

Ideas Are Crap Without Execution and
Follow-Through
1. Ooze confidence
2. Accept risk
3. Define your
purpose
4. Create a plan
5. Assemble a like-
minded team
6. Constantly build
momentum
7. Anticipate obstacles
8. Build stronger
relationships, not a
larger network
9. Set micro-goals
10.Be patient
9

7 Qualities Every Entrepreneur Should
Look for in a Co-Founder
1. Cooperative, not passive;
2. Pedigree of success;
3. Complementary skillset;
4. Strong networker (relationship-builder);
5. Plenty of time;
6. Passion for your idea; and
7. Honesty and trustworthiness.
10
Source: www.entrepreneur.com/article/254171

Getting Naked with Your
Business Partners Early
➢Founders must have a shared vision for
their (1) product and (2) company
• Are the founders obsessed with solving their
customer’s problem?
➢Define roles for you and your business
partners early -- including equity ownership
➢Business structure: C-Corp, S-Corp, LLC?
➢What happens to the business when a
partner (or key employee) leaves?
11

The Meeting with Your Investor
➢ The first 10 minutes are the most crucial in a one-hour
meeting. Important to articulate:
• “WOW Factor #1” – Why is a customer willing to pay for
your product or service? How are you driving value for
your customer?
• “WOW Factor #2” – What is your plan to increase value in
your company and generate a ROI for your investors?
➢ No PowerPoint for the first meeting;*
➢ Personalize the pitch/conversation (i.e., develop a connection
with the investor)
➢ Get to the point quickly (financials)
➢ Clearly articulate your “Path to Success”
➢ Address the risks to your business
➢ Present a definitive offer (i.e., Term Sheet)
12
*Brad Feld presents a good argument for not using PowerPoint in the first meeting: http://ow.ly/LjRd304WPKh

Introduction
Anatomy of the 12 Minute Pitch
The Problem
The Solution
Sales Strategy
Partners
Competition
Traction
Advisory Board
Management
Revenue Model
(00:30 seconds)
(04:00 minutes)
(10:00 minutes)
(12:00 minutes)
Financials
The Offer
Market Size
Customers
Financials
While most pitches place financials near
the end, as a prospective investor, I
prefer to hear projected financials and
goals early in the presentation
Use this time to review your company’s
projected financials and strategic goals
13
www.globaltactics.net
Risks
80% of startups fail because of a variety
of risks. Identify the top three risks that
may prevent your business from
achieving profitability
Articulate how your product or service is
driving value for your customer
Provide a detailed profile of your ideal
customer.
Appendix
Include supplemental information as a
reference during the Q&A or for the
investor to review later
Impact
What is your company’s ESG strategy?
Which of the UN’s SDGs will your
company address?

PATH TO SUCCESS
14
IDEA DEMO REVENUE
PROFIT-
ABILITY
SUSTAINED
PROFITABILITY
SUCCESS

High Rate of Startup Failure
0 10
8
4
Underperforming
Failure
Complete
Failure
Successful
Ventures
8 out of 10 startups fail
How will you take your business from the
80% of the failure side to the limited
20% success side?
IDEA DEMO REVENUE
PROFIT-
ABILITY
SUSTAINED
PROFITABILITY
15

What is your growth strategy to
capture your Mainstream customers?
16

Investing in Your Business is About
OPPORTUNITY RISK
1. Technology Risk;
2. Product Risk;
3. Market Risk;
4. Management
Risk;
5. Scale Risk;
6. Climate Risk;
7. Capital Risk; and
8. Exit Risk.
17
See “Preparing Your Business for Internal and External Risks”

Financial Strategy
“If you don’t know your numbers,
you don’t know your business”
1. Projected Profit and Loss (P&L) Statement
2. Projected Cash Flow
3. Projected Balance Sheet
18

“If you don’t know your numbers,
you don’t know your business”
1. What are your annual sales based on a trailing
12 months, not the calendar?
2. What are your gross profit margins?
3. What are your expenses as a percentage of your
gross profit? (Not a percentage of sales. You pay
your bills with gross profit – not with revenue.)
4. What are your operating expenses segmented
by (1) sales and marketing, (2) general and
administrative, and (3) research and
development?
5. What is the percentage of each segment as a
percentage of gross profit? In other words, what
percentage of gross profit will be spent on sales
and marketing, G&A, and R&D?
6. What is your cost of revenue (sales)?
7. What is the company's timeline for operational
and financial milestones including break-even
point and plans for sustained profitability?
19
Year ending Dec. 31, 2020 2021 2022
Sales and
Marketing $175,000 $ - $ -
General and
Administrative $150,000 $ - $ -
Research and
Development $175,000 $ - $ -
Total Operating
Expenses $500,000 $ - $ -
Year ending Dec. 31, 2020 2021 2022
Revenue $200,000 $ - $ -
Operating Expenses $500,000 $ - $ -
Net Income (Loss) ($300,000) $ - $ -
Financial Highlights
Operating Expenses

“Know Your Numbers”
“When I go in to meet these new
companies, I can tell within three minutes
if they have any idea what they’re doing
when it comes to the economics of their
business.
“So the first thing, more than anything,
know your numbers.”
--Tilman J. Fertitta, Chairman, CEO, and owner
of Fertitta Entertainment
www.cnbc.com/2016/04/05/billionaire-to-entrepreneurs-know-your-numbers.html
20

Do I Need a Business Plan?
➢A Business Plan allows you to list your goals
and plan to achieve them (i.e., a map to
present your “Path to Success”);
➢A Business Plan allows your team members
to understand the company’s mission, vision,
goals, and financial targets; and
➢Each team member should be using the
same road map.
21
See “Your Business Plan Is Your Business's Roadmap”

Entrepreneurship: Have a Plan
1. Executive Summary
A. Company and Technology: Background, Goals and Strategic Direction
B. General Market Opportunity
C. Business and Revenue Model
D. Management Team
E. Investment Summary
2. Company Description
A. Mission
B. Vision
C. Goals – every company’s goals should include:
i. Understand your customer and provide exceptional customer
service;
ii. Build a product or service of the highest quality; and
iii. Build shareholder value.
22

3. Products and Services
A. Include the company’s intellectual property strategy:
(1) patents, (2) trademarks, and (3) copyrights
4. Market Analysis (including Competitive Analysis)
5. Marketing, Sales, and Distribution
6. Management and Organization
A. Management
B. Executive Team
C. Advisory Board
23

7. Risk Factors
A. What are the risks to your company?
B. What are the risks to your business sector?
C. What are the risks to doing business in a
particular geographic area (e.g., China)?
8. Financial Plan
A. Projected P&L Statement
B. Projected Cash Flow
C. Projected Balance Sheet
24

Entrepreneurship
HAVE A PLAN
HAVE A PLAN
HAVE A PLAN
HAVE A PLAN
HAVE A PLAN!!!
25

Global Tactics, LLC www.globaltactics.net 26
You are here
The Path to Success Is Not Always Straight Up

You Cannot Do It Alone
1. It takes a
team
2. Surround
yourself
with people
smarter
than you
Your Team’s Intelligence
You Your Team
27

Expectations for Team Members
➢Understand and support the company's
mission, vision, goals, and business model;
➢Be willing to learn new ideas and concepts;
➢Be willing to teach new ideas and concepts;
➢Be willing to express your opinion and support
it; and
➢Be willing to make mistakes and learn from
each mistake.
28

Leadership
1. COMMUNICATION
2. Coachable
3. Lead by example
4. Know your strengths and
weaknesses
5. Always improve your skills
29

Leadership
6. Take responsibility for your actions
7. Do not micromanage: Trust your
colleagues
8. Give credit where credit is due
9. Avoid criticizing, condemning, or
complaining
10. EXPECT RESULTS!!
30
Blog posts on “leadership” may be viewed at https://roi3.blogspot.com/search/label/leadership

Due Diligence Checklist
for Investing in a Business (1 of 6)
1. General Corporate Compliance/Organizational Information
A. Review the articles of incorporation and bylaws of the company, and any/all
amendments;
B. Review the minute book of the company;
C. Verify that the company is duly incorporated and in good standing in the
state of its incorporation;
D. Verify that the company is qualified to do business in all states in which it
transacts business;
E. Review all stock certificates and determine the number and type of the
authorized and issued shares of stock of the company and the registered
owners of the issued and outstanding shares;
F. Determine whether there are options, warrants, or other rights to acquire
shares outstanding;
G. Review stock transfer records of the company;
H. Review all agreements between the company and its shareholders; and
I. Review securities law filings under state and federal securities laws.
31

2. Financial and Tax Information
A. Review the financial statements, balance sheets and income statements of the company, including all
profit and loss statements for the current year and the past five years;
B. Review all budgets, business plans, projections and management reports prepared by the company within
the past five years;
C. Review the company’s accounts payable, including their quality, aging and composition, and determine if
there are any disputed accounts;
D. Secure credit reports;
E. Review any forecasted income statements and balance sheets, if available, for both the current and
following fiscal years, or for such periods as forecasts have been prepared, and the assumptions upon
which the forecasts are based;
F. Review company’s pricing policies and compliance;
G. Review company’s inventory valuation, turnover and obsolescence review;
H. Determine whether the company has any secured financing, including accounts receivable or inventory
financing, and review all documents associated with that financing;
I. Review and create a list of names and locations of all banks utilized by the company including full
information on the types of accounts and the names of persons authorized to draw thereon;
J. Review all bank loan agreements;
K. Review all federal, state, and local income tax returns of the company for the past five years;
L. Obtain copies of property tax assessments for the past five years;
M. Communications between the company and the IRS, including, without limitation, audit and revenue
agent’s reports (federal, state and local); settlement and consent documents and correspondence; and
agreements waiving statute of limitations or extending time; and
N. Copies of documents relating to IRS or state tax proceedings, deficiencies assessed, or audits commenced.
32

3. Employment and Labor Matters
A. Obtain a list of the company’s employees, their job classifications, compensation, and length of
employment;
B. Review all employment agreements;
C. Review all indemnification contracts or similar arrangements for officers and directors of the
Company;
D. Review all of the company’s employee benefit plans, including retirement plans, pension plans,
profit-sharing plans, deferred compensation plans, health insurance, and other employee health
and welfare plans;
E. Review all documents relating to employee stock option plans, incentive stock option plans,
employee stock purchase plans, stock bonus plans, salary bonus plans and any other benefit plans
or arrangements;
F. Review the company’s personnel manual and all documents furnished to employees in connection
with their employment;
G. Review the current and proposed organizational structure of the company;
H. Determine whether there are any claims by employees or government agencies, or investigations,
pending against the company arising out to employment matters, including discrimination claims,
grievances, arbitration cases, workers’ compensation cases, OSHA cases, labor disputes and similar
matters;
I. Review the company’s relationship with independent sales agents and other independent
contractors with whom the company deals on a regular basis;
J. Review all collective bargaining and union agreements to which the company is a party; and
K. Review any copies or schedules of contracts, plans, or arrangements regarding election or
termination of directors and officers.
33

4. Business Contracts and Commitments
A. Obtain a list of the company’s major suppliers, the goods or services supplied, and annual
dollar volume of business with the company;
B. Review copies of all agreements between the company and its major suppliers;
C. Obtain a list of the company’s major customers, the goods or services supplied, and annual
dollar volume of business with the company;
D. Determine whether there are currently, or have in the past been material disputes between
the company and its suppliers or customers;
E. Review all agreements pertaining to the marketing and distribution of the company’s
products or services, including all agreements with independent sales representatives,
distributors, marketing companies and franchisees;
F. Review all material agreements with customers, including warranties provided to
customers;
G. Review all installment sales agreements;
H. Review all forms of sales invoice, purchase order, receipt, agreements, and other sales
documents used by the company;
I. Review documents describing the company’s products or services such as promotional
literature, brochures, and newsletters;
J. Review copies of any license or royalty agreements;
K. Review any sale-leaseback arrangements; and
L. Note any membership agreements or other relations with trade associations.
34

5. Intellectual Property
A. Review all material license agreements relating to intellectual or intangible property
running to and from the company;
B. Create a list of all patents, trademarks and copyrights held by or licensed to the
company;
C. Review all documents relating to patents and trademarks including filings with U.S.
Patent and Trademark Office;
D. Note any policies and procedures relating to identification and protection of trade
secrets and other confidential information developed by the company and/or
disclosed to the company under a covenant of nondisclosure;
E. Review the technological infrastructure of the company, including: proprietary
hardware, software systems, and networks; all leased, purchased, or shared hardware,
software systems, and networks; all interconnecting hardware, software systems, and
networks’; environmental systems, including vaults, alarm systems, elevators, and
telephones; and
F. Review sales contracts for hardware and software systems, including warranty
provisions, licensing agreements, operating agreements, maintenance and service
contracts, consulting agreements and other strategic business relationships pertaining
to data processing and information technology.
35

6. Equipment and Personal Property
A. Obtain a list of all machinery, equipment, furniture, and fixtures
owned or leased by the company and depreciation schedules and
leases;
B. Review any installment purchase agreements;
C. Review service contracts on tangible personal property of the
company;
D. Obtain an inventory list, including category and aging information;
E. Review the company’s accounts receivable records, including age,
composition and write-off history;
F. Review information about the company’s trade secrets and evaluate
the company’s trade secret protection program; and
G. Obtain a search of appropriate state and local records for U.C.C.
financing statements and other evidence of liens or encumbrances.
36

Entrepreneurs Need to Stop…
1. Building companies with no revenue
2. Following shiny objects (opportunistic)
3. Lying to yourself or others about your
traction
4. Focusing on too many things at once
5. Using the word “I”
6. Asking investors to sign non-disclosure
agreements
7. Thinking that you are the only company
in your space
8. Calculating the future value of their stock
37

Entrepreneurs Need to…
1. Fix a problem
2. Tell a story that people will understand
3. Hire for ambition
4. Get to know your customers
5. Make informed decisions
6. Understand time has the same value as
money (and manage both wisely)
7. Become a shameless self-promoter
(without becoming obnoxious)
38

Entrepreneurs Need to…
8. Project a positive image
9. Be accessible
10. Master the art of negotiations
11. Get and stay organized
12. Follow-up constantly
13. Have a business plan
14. Focus
39

How Can I Help?
Aaron Rose
+1 (206) 650-8004
aaron.rose@globaltactics.net
Additional information about entrepreneurship may be found at
https://www.gtperspectives.com/search/label/Entrepreneurship
40

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