You have a great business idea and know how to turn it into a successful startup or small business. But do you have the funds to take it forward? As a startup founder you will likely run into the challenge of how to pitch an idea to investors so that it sticks.
The art of the business pitch is a fine one, but not an impossible one to grasp. Let’s look at how to pitch your business idea and present your business plan to investors, not selling yourself short along the way.
Read on below for a comprehensive guide on what your startup pitch deck should feature and what to offer investors so that the idea lands investor buy-in.
What to include into the pitch
Never ignore the power of the company deck. It is both a startup pitching tool and an instrument to secure potential clients after you launch. Consider the following points carefuly:
Tell a compelling startup story
Nothing leaves a more lasting impression than a story. That is why a well-crafted narrative can really translate how your company came to be and why it matters. This one is a double edged sword, though, as an overly glorified narrative can cast a shadow on your startup pitch.
The flipside of crafting a company story is that if you do not have a story to tell, it is probably worth not making one up. If you and your co-founders feel there is nothing extraordinary about the company’s origins, don’t invent them. Lay out the details of how your company and idea came to be briefly and move on to the real start of the show – your product or service.
Introduce your team
On a side note, if you do feel like making a statement about the uncanny talent behind the business pitch, do so. Dwell more on the experience and skills of individual team members and founders. Remember that investors invest in people.
Your business idea might be secondary to the experience of your team after all. Their past failures and successes can speak directly towards the revenue your startup might generate. The points you make can really drive home the message that your business pitch is worth its mettle.
The problem and the product
From your perspective, you are here to pitch an idea for a product or service. From the investor’s perspective, your business pitch is really about a solution. The solution answers to a real-life problem that you have observed, unearthed or researched. The problem description will set the stage for why your product or service should exist.
Here you should go into detail about user pain points in scenarios you have researched. List why these challenges are detrimental to their productivity and how users could benefit from overcoming them. Only after you have outlined the problem, should you pitch a solution.
Present your solution
At this stage make your product shine. Present arguments as to why this solution will work and emphasize why you think it will be adopted by users. Pitch an idea in a way that cements its reason to exist and solve user problems.
No product can truly be made for all users. If you have defined your audience as a broad segment, you probably have not done your homework. Having an ideal customer profile or a list of personas from the onset is crucial.
Show investors you have done the math – stick to the TAM, SAM, SOM market size metrics to outline your target market. The acronyms stand for Total Available Market, Serviceable Addressable Market, and Serviceable Obtainable Market.
Total Available Market (TAM) – the overall potential market that the business can work with. Helps make a rough estimate of the maximum potential profit. Using either the top-down approach or the bottom-up approach, you can conduct research either by narrowing in on a market segment or calculating the sum of customers and their annual revenue in a market respectively.
Serviceable Addressable Market (SAM) – a metric based on sales volume of all competitors in a specific geographic area. In other words, this will be the market you can actually sell to.
Serviceable Obtainable Market (SOM) – a realistic segment of SAM that you can win over as you start out. During the investor pitch, these numbers will be most interesting. Serviceable Obtainable Market (SOM)
Market research for your business pitch will have likely led you to your competitors, if nothing else. Be honest about who they are and what market share they occupy when presenting your business plan to investors.
Remember, these companies have been around longer than you have and will probably have a better understanding of the market. Respect what your competition has done, but show how you could do what they do, but better.
Your business model
When you pitch an idea, show that you have given thought to more than just the idea itself. Your business model should speak to the problem your product solves.
The essence of a business model should be:
- how your product or service will be delivered?
- how will you charge for it?
- how will you differentiate the product from competitors?
Your sales and marketing strategy
Identifying your target market and selling to it are two different things.
Investors will normally want to hear more about your key marketing channels and your arguments for why you think they might work to sell for a specific demographic.
And even though you will not be expected to provide a detailed marketing strategy and sales forecast, you should be able to speak at length on how you are going to tackle the two aspects.
Your funding needs
If you are raising capital, be sure to know exactly what you want to walk away with from an investor pitch. Do you want a convertible loan or initial capital sum to be returned with interest?
Do not go into a business pitch thinking you will be able to browse through the best option there and then. Investors will want to hear what capitalization model you want to adopt and why you think it works best in your scenario.
How to pitch your idea to investors
With your business pitch deck ready, you are now just a few shots away from presenting to investors. But first, here are just a few minor details you absolutely need to take care of if you want your startup pitch to be even remotely successful.
Make a presentation deck
Almost every startup business pitch has a presentation of some kind. Youtube, Airbnb, Uber – all the greats had one. Try not to neglect making a presentation for your business pitch too.
It’s worth noting that reading from the presentation is a bad practice when pitching. The best slides have a few bullet points and the rest is reserved for the speaker. Remember, the presentation is merely a visual guide, but an important one at that. So try not to go all out with your business plan on a few slides, just note key details in as few words as possible.
Practice your business pitch
When speaking in front of a crowd, public speakers are rarely saying their speech for the first time. Practice makes perfect, and the more attention you can give to what you are going to say before you are going to say it, the more convincing you will sound when presenting your idea.
At this stage you can take turns with your co-founders or friends to give notes and feedback on the quality of your oral presentation. With more ears listening to you early on, you will feel more comfortable speaking in front of investors.
Oh, and be prepared to be interrupted. Investors will want to both hear your story and hear your numbers. Be ready to answer impromptu questions and back them up with arguments and figures from your business plan.
Remember that you will be on the clock. Time your speech to run within the time frame voiced prior to the business pitch. If the duration of the presentation has not been set, don’t go on a tangent.
Pack in the most important details first and convey them in a brief and digestible format. If you feel like there is much to say, but too little time, use the secondary information you want to relay during the Q&A that will naturally follow the investor pitch.
Dress up for the occasion
This one is a no-brainer, really. Even the most casual of industries such as the tech industry has its boundaries. You will want to show investors that you can adapt to the occasion even if a suit and tie are not your everyday garb. Adding a personal touch is always welcomed though, provided it is reasonable.
Don’t overcomplicate your presentation
When we attend a tech conference, or find ourselves watching one, what strikes out is the tech jargon. And even if that makes sense then and there, your startup presentation should probably take up a simpler tone.
Investors will not always be the kind of people who want to get into the finer technical details. Instead focus on the value of your product and the problem it solves. The simpler your language in this case, the more relatable will be your pitch.
Emphasize the product’s unique value
Speaking of the product’s value, as part of the business pitch you will have to convince the investors that your product is different. This will especially be true if you are entering a high competition market. Prove that your product is not a rip-off of an existing solution.
Make sure to note down your product’s strong points and back them up with examples. Again, showing that you have done your competitor research and analysis during the investor presentation is a good way to build credibility in your business idea.
Be passionate, but stay focused
Investors love a team that is motivated to grow and is passionate about its product. If you are that kind of founder, do not be afraid to show it. But there is a catch: your pride cannot undermine your presentation and overwhelm investors. It’s always a good idea to stay on track and keep emotions under check at all times.
Let investors interact with your product
You can leave a lasting impression on the investor, just like on a regular user, if you let them try out your product after a brief foreword. Let the product do the figural speaking for you, while you provide supporting arguments in its favor.
Provided your product, its prototype or MVP can be tested with real users, do not shy away from letting the investor become the user first and investor second.
Make a clear conclusion
Not to add extra pressure, but not sticking the landing of your investor pitch leaves your efforts for naught. How you sign off your presentation will often drive the tone of the subsequent discussion. Winding into a conclusion in the middle of your presentation might leave a bad impression and motivate an onslaught of questions.
The rule of thumb is this: a good conclusion resonates with what you said in the introduction and summarizes the points you delivered over the course of the presentation. You are free to customize how you wind down your oral presentation depending on the result you want to achieve. Though, conventional does seem to work best, unless you want to be daring.
Business pitch example
If you are still having trouble with your business pitch deck after checking off the points above, seeking a little help is fine. You can get inspired by looking at the pitch decks examples of today’s top companies or making a list of businesses you look up to and discovering how they started out.
There really is no secret formula for the perfect pitch deck. It takes time and experimentation. Take notes from an improvised focus group or run the presentation by trusted partners, advisers or mentors. Perhaps one day young entrepreneurs will want to do the same and will look up your pitch deck.
Remember to refine
Your business pitch deck and business plan might not come together on the first try. Like with many things in IT and Tech, finding the best option is often an iterative process. It is crucial to refine, reiterate, and even reimagine some aspects of your business pitch in order to make it work to your end.
Best of luck pitching your idea!
12 October 2020