Being an online entrepreneur is one of the most popular activities nowadays. Millions of tech savvy individuals are migrating their knowledge about and services for specific niches into the internet, reaching an infinite market that they were not able to reach previously.
Internet startups lifetime can be described in 3 main stages:
- Inception: Test the idea
- Creation: Commercialize the idea and get traction in the market
- Growth: Grow the business in the identified market
During each stage, different activities are carried out. But is during the Growth stage where the investment required is high, mainly in Marketing. Generally, online startups reach for external financing in order to fund this stage and grow the business. Traditional Financing sources are difficult to reach by startups. High-risk financing sources (Investors or VC’s) are the sources available.
Entrepreneurs need to pitch their startups several times (sometimes even tenths of times) before they reach an interested investor ready to risk their money. It is really important that the pitch is adjusted to the audience. It needs to highlight the correct information in order to reduce the investors anxiety, increases its interest and sets a clear call to action.
In this article, we are providing a quick list of topics your startup pitch needs to cover. We will describe the sections of a traditional Investors Pitch PowerPoint Template so the reader can structure its message in a presentation deck.
Sections for a great Investors Pitch
Tell a Story
Begin your pitch with a compelling story. The purpose of your Investor Pitch is not to answer all possible questions. It is to open investors minds to your vision and get them excited to know more. The story you craft in your pitch gets them engaged to start filling in the blanks for themselves. Try to relate the story to your audience and mention the problem you solve.
You must create a quick one-liner summary that combines your vision/product and the mission of your company. Design it to be short and memorable. You can use an analogy with another popular disruption in order to generate an impactful effect, ie: “We are the Starbucks for Frozen Yogurt”.
The Problem and Current Solution
Describe which need you will fill. Every need is born from an unsatisfied “pain” of an individual or group of individuals. Explain how do they relieve this pain today. Problems have workarounds, describe precisely the conclusions of the current situation.
Share what is unique about your product/service and how it will relieve the previously described pains. Keep it short, concise and easy to understand for the average joe. Avoid buzzwords unless your audience is really involved in your industry.
Your actual key numbers are a must when introducing your product/service to investors. Show them your current achievements, growth, visitors, adopters, mentions, and recognitions. You can describe some customer stories and feedback. Show them you are testing different options and mix in order to understand the customers.
Define your market as precisely as possible. Show the investors you know in what business space you are immersed. The first metric you should show, and explain, is the Total Market Size. Make sure you explain your assumptions; they are key in the investor’s understanding. Based on your traction and your momentum, explain who your customers are; show you know who you serve. The description should be simple, but convincing. Before this step, make sure you created your buyer persona and you know the what motivates and inspires your customers. Markets are dynamic; during this section make sure you explain the macro trends and insights around the market, this will give the investors the confidence you know where the world is moving around this business.
Based on your market, explain who your primary customer is and how to you make money with them. Show the investors the pricing model applied (or different pricing models if you already iterated over options). Pricing is not a simple concept, but depending on the business, entrepreneurs tend to over explain it. Investors are used to analyze pricing models; try to match your pricing explanation to a standard model or combination of standard models. Once you set up your pricing, show the earned revenue to date, and the number of customers acquired. At this point investor, will start reasoning about the basic math or revenues and conversion rate. Be prepared, do the math previously, calculate your cost of acquisition and conversion rate. Finally, investors will ask for the Customer Lifetime Value; this concept might look difficult, but you can average some of your numbers and calculate a ballpark of a number of months and number of dollars customers spend.
Investors are interested in a return for their investment. That is the whole purpose and only interest of investors. Return to investors may come in two different ways, in dividends from the company earnings or in value from the company valuation increase. Make sure you explain both returns and how you might implement them.
Marketing and Growth Strategy
Startups growth is a cost intensive activity. You need a clear strategy and tactics structured around it in order to make it work. You have already tested and pivoted your startup; the marketing and growth strategy needs to be consistent with your previous test results and be able to exploit the strengths identified. The following key areas need to be addressed:
- Where are your customers “shopping” or “looking for help today”. Describe to the investors their current buying activities or habits for the need to want to tackle.
- Explain where and how will you get in front of your possible customers. Your exposure channels and marketing techniques are key indicators for investors. Make a top 3 list of channels.
- Based on your marketing efforts through the described channels, answer the question “how will you achieve your target growth?”
- Which is your differentiation? The competition will react to your marketing efforts through the different channels. Explain how will you manage this.
Investors not only invest in an idea or promise of growth, they also invest in the people behind a startup. Your team is a key asset of the startup; they need to build a reputation of making things happen. The founders and key managers need to be presented in order to build confidence. Demonstrate their relevant experience and domain of expertise. Explain which roles they play and why they will reach success in those key areas.
Financial projections are a must in any investors pitch. Even though every entrepreneur, VC and startup owner will tell you that any financial projection will never be true, it is very important to do the exercise of planning and projecting to the future in a long term vision. Investors know the numbers are not real, and that the probability of accuracy is almost none, but if you show your assumptions and the steps you carried out to build it, that will help investors understand the deep knowledge you have of your startup financials. Include a 3 to 5 years financial projection mentioning your key critical assumptions in the expenses model, customer conversion, and market penetration. Highlight each of these metrics yearly:
- Total customers
- Total Revenue
- Total Expenses
In today’s crowded markets, unless your startup is a really disruptive idea, you will have competition. Show the investors you have done your homework and explain the competition. Make sure to highlight your competitive advantage towards them and how you differentiate.
Towards the end of your pitch, and before moving forward towards asking for the money, show a review of your business model. Present a Business Model Canvas with your business model and highlight the key areas of your value proposition.
You are pitching to an investor for only a reason, you need Money to grow your startup. At this point, you already have the full attention of your audience. State clearly how much capital you are raising and with what general terms. Explain your capital timings, and in which period you pretend to receive the investment. Investors entering to a new startup, need to know the current constitution of the company. If other investors exist, make sure you inform it now. You will need to describe how you plan to use this capital; traditional categories are:
- Sales & Marketing
- New hires
- Capital Expenses.
Pitching a startup in front of investors is not an easy task, but entrepreneurs get better and better with practice. We hope that our list will help you structure your next pitch.