After sending a slew of emails and networking with local contacts, the opportunity to make a formal pitch of your startup business plan has finally arrived.
You’re excited, sure, but fear is beginning to set in. Even after all the research and time spent validating your business plan with potential customers, are you really ready to pitch to potential investors?
Start with these guidelines:
The preparation for the perfect investor pitch begins long before the opportunity happens. An effective investor presentation is the result of months of hard work on your business as well as your plan.
This startup pitch development guide will help you organize all that effort and create a thoughtful and well-rehearsed pitch that gains interest from investors.
A startup pitch—also called an investor presentation or business plan pitch—is a more in-depth and expanded version of your elevator pitch.
The startup business pitch typically takes about 17 to 20 minutes before an audience of investors who have likely seen hundreds of presentations before.
They want you to answer five key questions about your business plan:
- What makes your product unique?
- Why is the value to potential customers? (Having real data here is key.)
- How will you create a profitable business model?
- Do you have a team (or the ability to attract a team) that can execute on your plan?
- Is your business model one that is fundable?
Follow this plan that tells investors what they want and need to know to consider investing in your company.
The Product – What Problem Does Your Product Solve?
Clearly communicating the “problem” that your product solves sets the foundation for your entire startup presentation.
1. Make a statement with a story
There’s no better way to grab investors’ attention—and you need to do that within the first 60 seconds of speaking—than by painting a clear picture that puts your audience into the shoes of one of your customers, a person who will benefit from your new product or service idea.
Give your customers a face. Make them real to your audience; quantify the pain they experience from the problems that your product will solve. Base your story on your personal, first-hand experience with customers and companies in the industry and markets you intend to serve.
Applying what you’ve learned from talking directly to customers will show your audience that you understand what the market needs. Then take it to the next level by describing how your product solves the problem.
Emphasize how your product or technology combats the market problem in its own original way. What is unique about your solution? Why would customers pay for it? How is your product different from your competitors? Provide two examples that will relate to an “unfair” advantage that your unique solution has.
Don’t get too involved in the nitty gritty details of the technology—just the essence of how your startup is different and the benefits to the customer. But do spend a bit of time explaining how your prototype will be enough fit the market need—even if you have plans and vision for iterating to a more robust solution as the company grows.
The Market – Why Will Your Serviceable Market Buy Your Solution?
Investors don’t want to know how big the total market is—they want to hear you describe and size the portion of the that universe that your company can sign on as customers. They want to know the “why” behind your assumptions—and that want to know how much revenue you can create.
Sharing the knowledge that you’ve gained from surveys, interviews, and industry conferences adds credibility to your business plan. What did you learn from competitive analysis? If your solution is B2B, name the companies on your prospect list.
As you proceed with your presentation, continue to sprinkle in touches of the personal insight you’ve gained from customers. Weaving in just the right touch of what you’ve learned will demonstrate your knowledge of the market needs and how your solution delivers benefits to customers.
Include those prospective customers, along with early adopters, related market segments and potential sales revenues. Characterize the key attributes of target customers, as well. This is another good opportunity to share your own first-hand experience and explain the reason for market growth over the next three to five years.
How do you plan to reach initial customers? Are you selling direct? Can you create partnerships with existing distributors, marketing channels, or with corporations that are market or industry leaders?
Quantify the return on investment (ROI) that you offer customers. What is their payback? What will they have to change to do business with you? How long it will take them to recoup their investment they make in your services?
The Business Model – Hook VCs with a Unique Value Proposition
After showing investors who your future customers are, you need to explain how your new product or service will generate revenue. Does your startup follow the software as a service (SaaS) model? Perhaps you charge licensing fees. Are you selling a product or service for purchase?
Is yours a business that will scale? Can you produce the product and gain customers with limited investment in infrastructure? What is the company’s capability to bootstrap, with revenue or off-balance sheet sources of capital, to help pay for the path to profitability?
The more straightforward the business model, the better. This is one of the most crucial parts of your startup pitch because investors don’t invest without seeing how they will get a return on their own investment.
2. Demonstrate Startup Growth Opportunity
After the initial launch of your startup, how will your company grow beyond just a good idea? Here’s where you need to explain to investors what must happen to produce positive cash flow. This part of your startup pitch should include company milestones and tie those milestones to sources and uses of capital, at least for the next two-three years.
3. Showcase Your Management Team
Execution is everything, especially to investors. If you have a great startup idea, but fail to execute your plans (whether from lack of initiative or experience), you will ultimately get nowhere.
Investors will give funds to an “A” management team and a “B” product rather than the other way around. Show what your team has accomplished as individuals and how that experience relates to the milestones of your startup.
- CEO: Prior entrepreneurial experience and/or years in a similar business market.
- CTO or CMO: Track record in core product or technology area; knowledge of target markets and relationship with the industry
- CFO: Prior experience including acquisitions and other exit events.
Highlight the strategic value of your startup advisory board and relationships with key startup mentors. Be concise and use bullet points to describe each person’s experience, clearly indicating who works with you full-time, part-time, and as advisors.
Capital – Provide Realistic Profitability and Financial Projections
The objective of this portion of the presentation is to help investors understand why and how your business is fundable.
State the amount of startup capital you need to reach the breakeven point and profitability. Be realistic in your projections and to be prepared to answer these questions:
- What do short-term market adoption and penetration look like
- Explain be any extended periods of negative cash flow.
- Explain any points of dramatic or hockey stick growth
Showing upside and the challenges of the business plan demonstrates that you and your founding team are enthusiastic realists who have done your homework. This builds trust with potential investors.
4. Include a Cap Table and Milestone Charts
Prepare a capitalization table representing who owns what percentage of your startup. If your only investors have been friends or family members, you will include that, reporting dollars and percentages of ownership by investor.
Allocate your forecasted capital needs by appropriate funding rounds, matching the key milestones to be achieved to the capital required. Share the risks (using one or two sentences) associated with each milestone. Be realistic as well as optimistic. Be honest. Tell investors what keeps you up into the wee hours of the morning. Is it raw material costs? Is it generating leads? Is it the adoption rate? Perhaps it is cash flows. Whatever it is, speak up now.
VCs want see exactly how you plan to use the money they invest to mitigate the risks of your business plan. Identify the major sources and timing of funding rounds. Funds for your startup should be focused on market development, sales, and important technical and product development milestones.
Provide a startup milestone chart that summarizes completed and future key business and financial accomplishments. These milestones will tie everything together.
Key startup milestones to include:
- Company formation
- Technology or product achievements
- Past and future rounds of capital
- Positive cash flow
- Breakeven point
- Exit Strategy, including potential acquirers
Investors are looking for an exit and return in three to five years. Demonstrate your understanding by expressing the value proposition for investors in the most likely exit scenario.
Your Startup’s Moment to Shine
How you deliver your startup pitch is as important as what you say.
Every element of a successful startup business plan pitch is created:
- to hook, educate and sell to your audience on why they should invest in you, your team, and company instead of someone else, and
- to showcase your knowledge and passion for what you do.
These guides will help you prepare for your make-or-break moment, so utilize them! Then practice in front of anyone and everyone, take their feedback, and practice some more. Check out our Investor Pitch Template for ideas on structure at various stages of growth.