Have you ever thought about the number of startups that actually have the ability to be funded? The Fundable website estimates less than one per cent of startups are successful in getting angel investors on board, and only 0.05 per cent get the funding of VCs. Although this might seem like a lot of anecdotal evidence indicates that for every investment made by startups, VCs evaluate about 1,200 proposals.
With odds that are staggering, it is vital to ensure that your startup has every competitive edge in getting the funding you need. One method to make your mark and outdo chances is to craft an impressive investor pitch.
The trick to creating an appealing pitch is to comprehend the parameters and factors that influence the investment decision. However, the final decision is determined by each investor’s own investment thesis and investment thesis, investors as a whole share certain expectations. The weight they assign to each factor is different, but these variables affect their choice.
Before you go to writing your pitch, let’s take a peek inside an investor’s head and figure out what they’re asking themselves in order to gauge the potential of your pitch. If you can answer their questions upfront on your deck, your chance of winning an investment is extremely high.
#1. Does your idea/product/solution solve a real problem?
What is the problem you are planning to address?
* Is the issue confirmed?
Who is the person with this issue?
How common is it?
Do people have to pay to make this issue disappear?
The pitch will be more effective if you relate real stories from customers. If you thought of the idea due to having encountered a challenge or observed someone struggling or similar issue, then tell your investors. An authentic story is crucial for showcasing and instilling confidence in your product or solution.
#2. Is your product or solution your “Right solution”?
* What’s potential or promise you to have in your concept?
* What other strategies have you analyzed?
* What are the alternative options available on the market?
What makes your idea superior to the rest?
Example: Ventureast, one of the pioneers of venture financing in India and is a firm that invests in companies that grow and scale quickly and leverage their competitive advantage. In order for them to finance your product or idea solution, you need to convince them that the idea can be a game-changer.
#3. Do market dynamics support growth?
* What is the size of the market in general?
* What markets are you focusing on?
Are you making accurate estimations and projections of the market you can address and your share of the market?
Have you got a strategy to increase market share?
* Who is your main competition?
What’s your strategy to be better than your other competitors?
Example: Zodius Capital, which has funded successful ventures such as BigBasket, Pepperfry and zivame, has always decided to invest in Indian companies that have the potential of disrupting the existing market or establishing completely new markets.
#4. What is it that makes the team you are with the most suitable fit for this concept or solution?
* What kind of background do your team have?
Have you got a track history of turning ideas into income streams?
Do you have any unique experience or expertise in this field?
Do you know micro-trends that determine the sector you’re involved in?
How are you and your team members committed?
* Are you willing to follow directions and change direction if the company has to? Also, can you be coached?
Are you an alliance that is compatible? Are your beliefs/values and approaches consistent with one another?
An example: Ashton Kutcher, who invests in his venture capital company A-Grade Investments, is clear that a brilliant idea by itself doesn’t entice him. To get his attention, the founders must know their business thoroughly, Be resilient, and the type of people they would love to spend time with.
#5. How powerful is your execution?
Do you have the results? What are the gains you have already achieved – sales figures or sign-ups/users numbers as well as conversions from free into paid clients, repeated purchases, etc.?
How do you define your profit strategy? Does your forecast for your finances look in good shape?
* What can you do to attract customers? What’s the price?
How do you determine the lifetime value of a customer when compared to the price of acquisition?
* Are you forming any alliances or a system to drive your expansion?
Examples: Vanessa Colella of Citi Ventures believes in the power of execution and the ability of performance to distinguish those who are genuinely successful from people who are smart but don’t have the ability to succeed. If you have an idea others have but have the ability to execute it brilliantly, then you stand a decent chance of being also funded.
#6. Are the rewards worth the risk?
* Does your company operate aligned with their principles and method of operation? Are you aware of the risks that could be posed, such as legal, regulatory copyrights, patent infringements, copyrights and other liabilities. ?
Have you got a strategy to limit risk?
* Is the idea/solution/product on-trend? What are the odds of a more sophisticated solution that could disrupt the market?
• What’s the exit strategy? What (and what) can the investor earn a return?
Example Sequoia Capital’s Shailendra Singh describes his work as supporting an underdog against the Goliaths of the industry. The company strives to achieve an excellent success rate with calculated risk and willingness to take occasional losses and also considering a 10 to 15 year perspective of its investments.
It’s an outline of your mind to guide the thought process of investors and to anticipate their fears. With this framework in mind, you can develop your pitch deck to help convince potential investors (angels in addition to VCs) that you’ve got an opportunity to be successful as a startup and that you are worthy of their investment.
The only thing left to do is to write a fantastic pitch. In the words of the Hunger Games, may the odds ever be favourable for you!
Sonali Raval is a Business Communications professional who has assisted world leaders such as Cisco, Ericsson & Quintiles convey their message to the world. She helps you build your brand, both organizational and personal, by helping you identify the best stories to tell. She also assists executives to create memorable presentations and building their personal brand.