3 Things You Must Know Before Pitching Investors Consider these tips before you seek funding for your startup, whether from angel investors or VCs.

By Catherine Clifford

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

Three Things You Must Know Before You Pitch Investors

First impressions are always important in business, especially when you're approaching investors to secure funding for your startup.

Angel investors and venture capitalists have specific expectations surrounding "the pitch," that charged moment when you try to sell an investor on you and your company. If you're heading into this culture for the first time, you'll need to do more to prepare than just catch a few episodes of "Shark Tank."

As part of women's entrepreneurial network Ladies Who Launch, business owners learned "Investor Math 101" at law firm Chadbourne & Parke in New York on Thursday. The presentation focused on the essentials of pitching investors, including these three tips for startups to consider before making their case.

1. Don't offer too much equity, too soon. Beware of parting with more than one third of your company in the first funding round (called Series A), warns Lori Hoberman, the head of Chadbourne & Parke's emerging companies and venture-capital practice. While you may be tempted to give investors a higher percentage of your company in exchange for more cash, she says don't do it. As your company grows, you may need to raise additional rounds and give away more of your company down the road, so remember to think ahead.

Related: 4 Mistakes to Avoid When Applying for a Bank Loan

2. Know your numbers. You are going to have to impress the investors with your backwards-and-forwards knowledge of your financial projections. If you are intimidated by the math, bring an expert in to help you prepare. But when it's time to present to investors, you -- the entrepreneur -- are going to have to talk with confidence about how your company is going to make money, when you will break even, and what your market looks like.

Determining exactly what your company is worth and what your revenues will be in coming years is as imprecise a science as throwing darts, says Hoberman. "All it has to do is pass the straight-face test," she says, referring to the need for thought-out projections, well-cited research, and reasonable expectations. And at that point, it's about making the sale: "You've got to own those numbers," she says.

Related: Barbara Corcoran's Angel Investor Checklist (Video)

3. Pay yourself. When you are calculating expenses, be sure to include a salary for yourself, says Hoberman. "Investors expect it," she says. There may be months you can't actually take a salary due to other expenses, but keep track of that and put yourself back on the payroll as soon as you can. If you don't respect yourself enough to pay yourself, neither will your investors, says Hoberman.

Readers, what is your biggest concern in pitching investors? Leave a comment below.

Related: Venture Capital: Fewer Deals, Fewer Dollars

Catherine Clifford

Senior Entrepreneurship Writer at CNBC

Catherine Clifford is senior entrepreneurship writer at CNBC. She was formerly a senior writer at Entrepreneur.com, the small business reporter at CNNMoney and an assistant in the New York bureau for CNN. Clifford attended Columbia University where she earned a bachelor's degree. She lives in Brooklyn, N.Y. You can follow her on Twitter at @CatClifford.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Related Topics

Business News

Here's How Much Amazon's Typical Customer Makes, Plus How Much They Spend on the Platform Per Year

A retail snapshot from data company Numerator paints a picture of who shops at Amazon and where they usually spend their money.

Business News

The Infamous Diner Booth from 'The Sopranos' Finale Is Up for Auction — And Some Fans Are Livid: 'Let Future Generations Enjoy'

The booth is still in the restaurant and ice cream shop in New Jersey where the finale was filmed.

Growing a Business

The Truth About Achieving Exponential Growth in Business, Exposed

What's preventing your business from scaling exponentially? Learn about the factors, and see how you can achieve your desired results.

Marketing

The Rules of SEO Are Changing — Here Are 5 Powerful Strategies to Help You Rank in 2024

Do you need help to rank well on Google due to new algorithm updates? Discover five SEO strategies that work in 2024.

Business News

Are You at Risk for Burnout? This Psychologist-Created Quiz Lets You Know in 5 Minutes

The burnout assessment tool was tested in seven countries using more than 10,000 survey responses.