In the previous post, we decoded an investor’s thought process to understand what questions investors have, and the parameters that drive investment decisions. In this post, we will build on that learning to craft proof points that convince investors to fund your startup.
The trick to crafting a compelling funding pitch is two fold:
• First, decode the thought process that determines investment decisions
• Second, craft a convincing pitch
In the previous post we decoded an investor’s thought process to understand what questions investors have, and the parameters that drive investment decisions. In this post, we will build on that learning to craft proof points that convince investors to fund your startup.
When you pitch, provide clear answers and proof points to allay the investors’ concerns. Writing a persuasive pitch is not easy, especially if you are a first timer. To help you, I have listed out some tips and examples that you can use to model your own pitch.
Can you articulate the essence of your business in a single sentence? The answer to this should always be yes.
Open your pitch with a single-sentence tagline that clearly captures your value proposition. This tagline is about the problem that your product solves, and how it alleviates the customer’s pain.
Example: Airbnb, already a legend in its own times, has highlighted its core proposition very simply, right from the beginning. They are about helping you experience a city like a local, and that is what the first slide of their pitch highlighted, even when they were still calling themselves AirBed&Breakfast. Their initial tagline – Book rooms with locals, rather than hotels – has evolved over time, and continues to be on-point.
This tagline is crucial because it tells the investors that you understand the micro-trends shaping your market and will be able to focus on delivering what the customers need, in the manner they need it. If you are able to offer an analogy (like Uber for X), the investors will find it easier to grasp your business and relate to it.
Example: In a momentous Shark Tank feat, xCraft Drones had all the Sharks scrambling to invest in their technology. The founders - JD Claridge & Charles Manning – instantly impressed the investors when they described their business as “The Tesla Motors of Drones”. Of course, they were careful to back this assertion by showcasing their disruptive technology and aspirational product.
To feel truly invested, your investors need to understand and feel your customers’ pain. You can help them make this connection by telling a compelling story about why and how you decided on your idea / product / solution. Tell them if you yourself faced a problem or saw someone else struggle with it, and how it sparked your initial thoughts.
Example: During her Shark Tank pitch Rachel Nilsson, mom-preneur and founder of Rags to Raches, talked about how much trouble she had getting her children dressed. In an effort to make her own life easier, Nilsson designed rompers that slide on and off the shoulders, making them quick and easy to get into. She started a small gig selling clothes on Instagram and grew it into a $1 million business in less than two years.
If you have documented real customer stories, go ahead and include those early in your pitch.
Example: Tinder’s pitch deck (from when it was still Matchbox) did a credible job of portraying the customer’s needs. The deck began with a story about Matt, who was interested in a girl; but didn’t know how to approach. This set up the use case with a personal (likely not real, but definitely relatable) story and segued into how Matchbox could solve the problem.
Show your product/solution in action. Bring a prototype to the meeting, display screenshots. If you have not yet built anything; even an artist sketch is better than arriving empty-handed.
Example: The app is the star of Foursquare’s pitch deck from 2009 (for seed funding). Screenshots of the app in action adorn almost all the slides. Each claim / feature has been illustrated with a functioning screenshot, making it instantly credible.
If you have done a pilot or market test, talk about it. Tell the investors what features got customers excited, and the refinements you are incorporating based on their feedback.
Never forget – to ignite interest, you must highlight the customer experience and perspective, not just what you think is great about your product.
Example: CreaClip, a self-cutting tool for hair bagged a $200,000 investment from Lori Greiner on Shark Tank. Mai Lieu, the founder demonstrated the product on-air, cutting her own hair in front of the seated sharks. The demonstration, backed by her passion and belief in herself and the product, tipped the scales in CreaClip’s favor.
Are you familiar with internal combustion engines? When you want a car to move, you turn a key and the engine kicks off a series of small explosions that release a tremendous amount of energy. The engine generates hundreds of explosions every minute and the energy propels the car forward, making it go all the places you want to reach.
Early success is the internal combustion engine of your start-up. When your product / solution starts sparking customer interest, your business gets the initial momentum it needs. Show the investors how you have harnessed this power and how far it will propel your business.
Example: Leo Widrich, co-founder of Buffer has been quite vocal about how they raised $500,000 primarily on the strength of their early traction. Being first time entrepreneurs, neither Widrich nor co- founder Joel Gascoigne had a success record to bolster credibility. But Buffer did have 800 paying users and a 97% margin that made them $150,000. They decided that showcasing this success was the best way to generate faith in the product.
Investors fear losing their shirt on an investment. But, they fear the thought of losing out on lucrative investments infinitely more. If you want to reel in your investors, stoke their fear of missing out (FOMO). Do this by letting your numbers speak to them.
Example: Airbnb’s 2009 pitch is an excellent example of using numbers to validate your concept. In two simple and easy to understand slides, they spelt out the demand for temporary housing, total market and their share of market. This pitch is believed to be one of the most successful pitches by a start-up.
Call out your market share, talk about your business / revenue model, show your income streams and link this to how (much) your business will grow.
Example: BuzzFeed, which has have raised in excess of $200,000, has taken a very data driven approach to their pitch. The deck opens with a statement of its traction and then outlines the possibilities of the model.
Can you recount how many ex-Googlers have taken the plunge into entrepreneurship and bagged some hefty investments? Right. This is, in part, due to their personal brands (as Google employees they are perceived to be top talent and capable of shaking things up).
Example: Pendo, a product that enables capturing of all user behavior, opened its Series B pitch with the employer validation approach. The very first line of their pitch reads “Founded by product leaders from Google, Rally Software, Cisco and Red Hat”.
Employer validation is one form of personal branding. There are other forms like building social proof and crafting an expert brand for yourself. Invest time and effort in building your personal brand and leverage it to capture investor attention and fund-share.
Example: 26 year old, Shaan Patel went on Shark Tank to pitch his start-up 2400 Expert (later renamed Prep Expert). His business’ raison d'être is to help students prepare for and ace SAT tests. To convince the Sharks he knew what he was doing, Patel told the investors up-front that he himself had a perfect SAT score. This established his credibility as an expert and role model for students. Patel left the Tank with a $250,000 investment.