The Cheat Sheet: For Best Fundraising Pitch
The term “storytelling” may seem cliché. That’s something the marketing team or fiction authors should take care of, right? Actually, no. According to content specialist Steph Patterson, storytelling is one of the most crucial things you can do as a startup. The?startup pitch?is one of the most apparent places to start from. So, how do you inspire the people around you?
Running your own business is difficult. No matter how original your idea, it’s unlikely to succeed without adequate funding. Finding the necessary funding to launch and run a firm is like biting a bullet.
An essential ingredient for a thriving business is access to?capital?at the right time. Many business entrepreneurs seek money from investors to achieve rapid, scalable growth. There are many ambiguities around the choice to include one (or more) stakeholders, who may or may not attempt to provide feedback on your business’s activities in exchange (or should).
Tick Tock: The Pitch Duration
A business pitch might last anywhere from 20 seconds to an hour, which is surely not enough to persuade someone to invest in your company. Therefore, you must maximize every second by providing all of the relevant details.
The amount of time you have to pitch to investors will greatly influence how and what you want to say and do. For say, a 5-minute presentation followed by a Q&A will be approached in a much different way than that of a 1-minute presentation!
So, what should business owners ask themselves when creating a?5-minute pitch? In order to make the right decision possible at the right time, business executives should consider the following key questions:
Riding for the brand: What is your business all about?
30 Seconds
The name of your business and what it does should come first. It’s not necessary to introduce the problem; you can just get right to the point. Too much time and effort are put into trying to make a concept sound impressive by too many people. Keeping it basic is okay. It’s actually better. You want to use the clearest language possible when describing what you do.
Walking through the user route can be an excellent strategy if you’re having problems explaining your?product clearly. For example, “We’re Google”. We create websites that have boxes. You can enter any question in that field, and we’ll try our best to look for answers.
Your objective should not be to explain your entire business but rather tell just enough to pique investor’s curiosity for follow-up questions:
Elevator Speech
A one to two-line sentence known that describes your target audience and the overall area in which you assist them is called an elevator pitch.
It’s typically utilized at?networking events?to draw potential clients and spark conversation and lasts about 10 seconds. Here are some examples of people describing what they do in an elevator:
A statement describing how you and your business are different from your competitors is known as a unique selling proposition (USP).
Its main idea is to foster?market differentiation. When speaking with clients who are prepared to buy, or in marketing materials, a USP is frequently used.
Here are some excellent USP examples:
Value Proposition
A value proposition outlines the specific benefits that customers will experience after using your goods or services. A compelling value proposition is specific, frequently using percentages or statistics. As a source of support and confirmation of your abilities, it might include a brief summary of your work with clients who have similar needs. Here are a few illustrations to get you thinking:
“Without lowering benefit levels, we assist large businesses in lowering the cost of their employee benefits packages. For the majority of businesses, this is a crucial issue given the rising expenses of healthcare today. A large manufacturing company like yours that was one of our most recent clients was having trouble finding ways to save costs in this area.
Triggering the Solution Reflex: What problem are you solving and how?
60 Seconds
Entrepreneurs frequently give reasons like, “I wanted to make the world a better place,” when asked why they started their businesses. But even more frequently, the response will be, “I noticed a problem and solved it.” And boom! This is the main aim. At its foundation, entrepreneurship is about finding solutions to problems.
It all comes down to making your audience feel the issue. When you saw the investors nodding their heads in agreement, you know it was successful. It’s crucial to engage the investors’ emotions with your story. They are more likely to feel linked to you and your concept if you can build an emotional bond with them.
Don’t you think the more severe the problem you are solving, the more valuable your solution will be?
From mediocre to memorable: why should someone invest in your business?
30 seconds
Investors put money into people, not into companies. Show the investor why you are the best for the position in order to spark confidence. If you’re having trouble, consider the past experiences that might be able to help you overcome your difficulties. Consider it your successful track record.
Here it becomes crucial to tell what makes you so special. Your?USP. The standard is greater than when asking, “What problem are you solving?” What you know about the issue that nobody else does is what I really want to know. This usually results from extensive client interviews, in-depth examination of competing products, and frequently, personal experience.
A straightforward route to monetization:
How will the investor recoup their investment? Help them comprehend how long it will take and when they can expect their money back. You should go over the procedures and timetable with them. Everyone is aware that there are dangers and difficulties. However, planning the route is essential to getting a good investment decision.
Acknowledgment of an investor’s right to profit:
Surprisingly, so many founders fail to recognize this. particularly those who rise early. How to reduce dilution is the main concern of most. Founders present investors with terms that are simply uninteresting. Investors have a right to profit, and the more the level of risk they accept, the greater the potential reward.
The investor’s path forward:
When an investor invests early, pre-seed, seed, or bridge, they usually want to know what their future holds. On a few brands, they might place early bets. Giving your investors a path forward not only helps them recognize the possibility but also gives your argument a little more swagger. You’re implying that you’ll be the brand they choose to double down on.
The support beyond capital:
The ability to help investors reduce risk is one of the reasons many angel investors get involved early. Do your homework on each investor, get to know them, and be ready with a list of ways they can support the growth of the company.
Balancing the books: How much capital are you seeking, and how will you use it?
30 seconds
It goes without saying that choosing the appropriate size for your?investment request?is a difficult task, but it’s also one of the most important considerations for investors when deciding whether or not to participate in your business. Your credibility will be destroyed if you change your request under duress, so you must get it right the first time.
Asking yourself “Why do I need money and how am I going to use it?” is where you should start.
Evaluating company worth
By requesting a certain amount from an investor, you contribute to?determining your company’s valuation. During every fundraising round, investors are hoping to purchase between 15 and 30% of the company.
Your business is valued somewhere between $3 million and $5 million if you’re asking an investor for $1 million. This is due to the investor’s expectation that his or her $1 million investment will represent between 15% and 30% of the company’s ownership.
Don’t oversell yourself
On the other hand, you would be better off avoiding wasting the investor’s time if your pitch deck is sloppy, disorganized, or challenging to understand. Do not attempt to manipulate the process by making comparisons to more seasoned businesses.
At the end of the day, investors won’t be duped by smoke and mirrors.
Underselling is equally bad
Let’s assume that you don’t need to raise a lot of money because you have a positive cash flow and little overhead. If you want to preserve more equity in your business or you’re confident you can raise more money in the future, be upfront about why you’re just asking for a small sum of money.
Seeing eye to eye: What do your market and competition look like?
60 seconds
There must be a substantial market for your commodity or service. Find credible market data to prove that the pond in which you are fishing is huge with well-stocked hungry fish. Consider the numbers. How many users are necessary to reach your yearly, three-year, and five-year revenue and profitability goals? How many users are required to break even?
Competition Analysis
In order to address the issue in your pitch deck and obtain support for your solution, your?competition analysis?is equally essential.
Determining market size
There are two approaches —?top-down and bottom-up?— for determining the size of the market and the possible ownership percentage. Using the top-down method, you may calculate the market’s overall size and project your prospective market share. With bottom-up, you determine the locations, sales volumes, and share of those sales that are available for comparable products. Because it helps you avoid the classic top-down mistake of not narrowing the client enough, the bottom-up approach is usually preferred.
The selling point: How will you go about marketing and sales?
30 seconds
Even if you provide the best possible product, if no one knows about it, your venture will eventually collapse. Make sure you have a plan for how you will approach your?ideal client. Anything from PR to distribution partners to social media marketing could be included.
Business owners must delve deeply into the specifics of their sales and distribution plan. What partners and distribution methods are you planning to employ? When does a sale finally close? What does it cost to bring in a new client? What are your key pricing metrics? Such details will make your investors confident about your company.
Path to Profit: How will you make money from the business?
30 seconds
Investing in your startup shouldn’t cost your investors an arm and a leg. Always keep in mind that they’re listening to you in order to learn how they can make a lot of money. Show that you have a thorough understanding of your finances. Display a credible revenue-to-expense model together with your initial thoughts on possible exits, including the anticipated time of your exit.
By investing in?high-risk projects?that others either won’t or can’t, investors are in the business of making money. Investors want to know how you plan to make money before analyzing any pitch. If you have a target market for your product who is willing to pay for it, investors want to know. Also, their wish list is to see…
The unit economics will also be important to investors; while revenue is good, they also want a path to profitability and free cash flows that can be used to recoup their investment. These responses will impact whether or not an investor decides to fund your company.
Making a case for why someone should invest in your company is your responsibility as an entrepreneur. This should be supported by evidence. The proof comes from your initial sales and?user traction,?market research,?competition analysis,?beta testing, and customer discovery. If the business case supports it, you should go on and target investors.
Teamwork & dreamwork: What qualifies your team to execute this business idea?
30 seconds
Here the question of what constitutes a?successful startup team?arises. The success of a team cannot be determined solely by experience. While experience increases a team’s pool of resources, aids in?opportunity identification, and has a positive relationship with successful teamwork, a team also needs soft skills to function at its best.
While previous experience has often been cited as a key ingredient for entrepreneurial success, a study by Harvard Business Review proves that such is not the case. Shared entrepreneurial passion and strategic vision are required to get to superior team performance as rated by the external venture capital investors.
There is a sweet spot where great teams appear to reside when we talk about this?balance?between team member experience (hard skills) and passion and vision (soft skills). Team members’ expertise is useless to the firm if they are extremely intelligent and experienced but don’t want to share it because their vision differs from that of the company. In fact, teams perform inefficiently as a result of these passion and vision gaps.
Conclusion
While each startup is unique, every pitch somewhere or the other has the same objective which is to convince venture capitalists that your business has the potential to be valued at over $1 billion. Someone will need a pretty compelling reason to invest their money in what you are building. Because of this, developing a fundraising pitch deck and asking these questions becomes crucial.
Your startup may not have made any money yet, but it has to inspire confidence, isn’t it?
Looking for a second opinion on your business pitch? We got you covered.
A business pitch can either break you or can give you your dream break. If you aren’t sure whether your pitch deck’s good enough just yet, don’t risk it. Send us a video of you presenting your pitch at?[email protected]?and we’ll come back with actionable recommendations for you to make improvements.