Is your investor pitch in good shape?
Tuesday November 12, 2013,
9 min Read
Ok, so you’ve started-up and proven the business model. Now it’s time to go seek some equity funding … welcome to the hustle. Fact is that VCs see literally hundreds of business pitches in a week – the supply-demand situation is tipped against you at the startup stage. So make the first meeting count. You will have less than 15 minutes and one email to get a VCs attention and these 15 minutes set the tone of their future engagement with you. First impressions in a VC pitch are almost always the last impression. To make matters tougher, it’s a small VC community out there, constantly talking to each other, so one lousy impression can set off a pitiful domino effect.
The first and foremost is the timing of your fund raise … more on that later, this narrative is about how to grab their attention in the first meeting. Your investor pitch is your calling card and your first introduction to the VC. Considering the hundreds of emails and pitches that each VC receives, he/she will probably spend a few minutes skimming through your pitch…make these few minutes count and spend some serious effort is packaging your presentation.
First the introductory email. Keep it short and simple … preferably a few bullet points (no one has time to read long winding paragraphs). The email is your crucial first call…it decides if your attachment (pitch) is even opened or junked outright). Try to get an introductory email from a common reference; a reference email is always better than a cold call/email. Please do not promise the sun and the moon; here are some bad examples from my mailbox … ”triple your money in one year” (you are NOT marketing a ponzi investment scheme), “the best investment opportunity for you” (hello … can I decide this for myself). A better idea is to first describe your venture and then highlight your strengths in 4-5 bullet points. For e.g., the business traction you’ve built (client names/numbers help), revenue numbers, differentiators, founding team, partners, awards/endorsement, etc. Do not make this a laundry list … whatever is important to you might not be important to the reader…so put yourself in his shoes and keep it brief and informative. End with a request for a meeting or a call to discuss your plan in further detail, not just for seeking funding but also to seek business inputs for your venture (nothing like a little subtle ego massage!).
Next … the investor pitch. This is not a thesis or a detailed information memorandum on your venture – that comes later. The pitch is meant to provide a brief overview on the key highlights of your venture. It is essentially a talk through presentation to help you converse with the VC. So keep it short and make sure you stick to capturing the key highlights … as a famous pop-rock band once titled their album … ’don’t bore us get to the chorus” … aptly for their greatest hits collection. This is what your investor pitch is too!! Here goes a general outline for an investor pitch … from instances that I’ve seen to work with entrepreneurs.
- Slide 1: Cover Page – restrict this to your company name and logo. Throw in one or two relevant pictures – a picture tells a thousand stories besides making the pitch snazzy. Formatting is almost as important as the content. One fellow banker once told me that Infosys even fussed about the exact shade of blue to be used in their investor presentations. Design or production teams are a common phenomenon at large investment banks. Spend some time polishing the content.
- Slide 2: Executive Summary – lay out the key highlights of your pitch…essentially a preview to the pitch. Capture the important sales points throughout the pitch…similar to your introductory email. Finally end with the business traction you have achieved and funding plans (do highlight how much you intend to raise and broadly where you plan to spend the money). Final note here – this is a summary and not an essay…avoid crowding the slide – in fact, use this as a general guiding principle for all slides.
- Slide 3: The Opportunity – a good idea before you get into explaining your business is to outline your raison d’être. What is the problem you are trying to solve, the gap you’re trying to plug or the latent customer need that you are addressing? This sets a good context to your investor pitch and provides an important frame of reference for your audience. Also it might be good to highlight on why you personally felt the problem was so important to go and solve or what drove you to try and tackle this particular problem. It also provides you a good opportunity to exhibit your passion behind your venture’s vision and mission as and when you get a chance to discuss your pitch in person.
- Slide 4 & 5: Business Overview – spend a couple of slides describing your products or services. Detail your solution to solving the problem in the outlined in the last slide, what you do and how you do it. Provide the key secret ingredients of your business recipe including your IPs, processes, etc. Simplify the explanation…refrain from over-complicating the description….it is easy to get lost in describing your solution so try and keep it objective and to the point. At the same time throw in a couple of buzz words that are the flavor of the season, things like preventive healthcare, cloud, big data, SaaS, etc. (as long as they are relevant to your venture) as strategic attention grabbers.
- Slide 6: Sales Strategy/Client value Proposition – ok, so you’ve built your product or figured out your services…how are you going to sell it? More often than not I’s seen entrepreneurs skip this entire point (sadly techies in most cases)…the simple assumption being, ‘if I’ve built it, it will sell automatically’…BIG MISTAKE. ‘No sales’ mean ‘no revenues’, so it is important that you spend some time talking about how you propose to build sales. Elaborating the customer buying value proposition (by segment if you’re catering to multiple segments) is another way to show that you understand your clients.
- Slide 7: Business Traction – nothing sells in the Indian VC context as business traction does. In fact you may even get tired of hearing from VCs…“we love your business but we need to see more traction before we can invest”. Typically VCs in India shy away from unproven business models so the best way to convince them is to demonstrate the business traction you’ve built. If you’re a consumer facing venture then talk about the consumer addition numbers (monthly/weekly/daily trend charts are a good way to depict this). In case of an enterprise business, list out the marquee clients you have added.
- Slide 8: Competitive Differentiators – let’s admit it…no one is without competition, no matter the innovation. Admitting competition (or substitutes) does not make you lose steam, in fact it only goes to show that you understand your potential threats well. One entrepreneur that I worked with kept harping in his investor pitch that he was without competition which more often than not left the VCs is disbelief (and doubt); one VC even snapped back and narrated a list of a dozen competing businesses. It is important to acknowledge competition (in fact this shows a big market opportunity). What is even more important is to very clearly articulate how you differentiate from competition. A matrix is a good way to bring about the differences comparing things such as target segment, technology differentiators, execution strategy, client/vertical focus, pricing, delivery models, etc.
- Slide 9: Market Size – a single slide summarizing the market opportunity and the space you operate in will suffice. In all probability the VC has prior knowledge of the sector, so it is unadvisable to get into a generic discourse or thesis on the sector. Instead what is pertinent to the VC is the total addressable market available for your business. This gives a proxy on the scalability of your venture and is perhaps one of the most important analyses in a VC’s investment decision.
- Slide 10: The People – after the market opportunity, this is probably the second most important part of your investor pitch. The VC is not just funding your venture…he/she is essentially funding you and taking a bet on your ability to execute and deliver. Detail the founding and senior management team here and highlight their relevant experiences. Highlight what is relevant to the current venture – be it the sector or domain experience, the ability to scale businesses, manage growth and teams, business development, etc. Also take some time to mention and acknowledge your advisors or board of directors with relevant stature or experience. A company is only as good (or bas) as its people are.
- Slide 11: Financials/ Operational Metrics – At this stage, this is an ‘optional’ section. In case you are comfortable sharing your historical financials/ monthly revenue run rate, share them as they provide a good indicator of your business traction. If not the financials, at least do consider sharing operational metrics that you track – this indicates the parameters that you closely monitor as you grow the business and provide an important benchmark for the VC. Highlight important indicators like revenue growth, operational metrics, gross margins, customer retention, etc, as relevant to your business. Probably best to keep financial projections out of this pitch, unless you have a well thought out and detailed financial model. No point sharing random hockey-stick projections with investors – everyone shows a rosy forecast, but without a solid basis for the projections you will risk losing credibility.
- Slide 12: A thank you slide providing your contact details…just in case your presentation gets forwarded without contact details or the chain mail…believe it or not, some people still use good old fashioned print-outs (yeah – the environmentalists will probably not like this very much).
Broadly, the above points provide a general contour to a good investor pitch. Feel free to fine-tune based on your own venture, key strengths and audience. If you see it stretching to beyond 15 slides, take out a pair of scissors … or your audience will probably not need a sleeping pill. All the best … or as the locals say, crack maadi!!