9 Main Things to Include in Your Pitch to Investors
A pandemic has brought the world into a slightly surreal state of emergency and the economy is taking a toll. But let’s look for silver linings: in these turbulent times entrepreneurial minds have a window of opportunity – a whole new field has opened for startup ideas.
If you already have a startup and now you plan how can you cost cut – feel free to contact Qubit Labs to discuss an outsourcing strategy. Setting up dedicated team in Ukraine is one of the most successful strategies of saving budget and steady product development.
Qubit Labs decided to host a webinar to discuss current situation in startup world and talk to Yuliya Sporysh, co-founder of CoinIndex Agency and founder of NGO Divchata, about the things that your pitch to investors should include, regardless of the world’s state.
Yuliya has had a long and thorough journey through the world of startups and was happy to share her views on what crucial points investors want to see in your pitch and how to prepare for said pitch.
First things first
There is this illusion that if you’re a startup, all is well in your world. Yuliya, however, described the startup life as “riding a bicycle that’s on fire while also being on fire”, and that should put things into perspective for you.
Where to go first
Who you’re pitching to plays a big role in your preparation process. There’s a huge difference between pitching to someone you know and who knows you and your profile well, and pitching to a big accelerator where the investors know absolutely nothing about you. Additional challenges come when this accelerator is geographically and culturally distant.
Your prep will also differ based on what stage your project is at – seed, pre-seed or Series A stage.
So, the first piece of advice to you as a Ukrainian startup would be to visit UVCA, Lift 99 and 1991 and get yourself acquainted with their activities, requirements and success stories. These projects work with startups in a variety of fields and market segments.
There are also corporate startup accelerators, like the one by UKRSIBBANK and Radar Tech, On top of that, there are numerous events, both free and with symbolic admission fee, where entrepreneurs can meet angels and investment fund representatives. And when you do meet them, you better have your 1-minute elevator pitch ready.
Your first pitch should be no longer than one minute long, always ready to be busted out and absolutely coherent to your grandma or a third-grader. The long 20-slide pitches are well down the road, and before you get to them you’ll have to explain your idea to people in brutally simple terms more times than you could have imagined. So, polish that elevator pitch by practicing – it will make clear what needs more work and identify the pool of additional questions people usually follow up with.
How to polish your pitch
The most basic step towards making your pitch concise and to the point is going to F6S portal, registering and starting your application. F6S is a place where a lot of accelerators and investment funds go to look for projects to invest in. While filling in your application, you will have to answer around 150 questions about your startup idea and each question will require deep understanding of your product, your marketing strategy, the market, your clients and your competitors. Answering these questions you will most likely prepare answers to any potential questions an investor would pose to you.
9 things to include in your pitch
Here are the questions you should most definitely expect your investor to ask and be prepared to answer even in your sleep:
- Problem you’re solving
- Market scope
- What exists already
- Where you are aiming to land
- What your competition is and what makes you different and better
Start with your idea – what you have thought up, why, with what purpose and what problem it solves and how your product or service will improve people’s lives.
It’s essential to give the investor a feel of the market – they don’t necessarily have to be an expert in your field, especially if that field is rather niche. On the other hand, if you’re pitching to a niche accelerator/investor, they will know the market very well and you need to make them see that your knowledge of the market is just as thorough.
Stemming from the previous point, the next vital thing to include in your pitch is your research on competitors. You should be well aware of what the market offers at the moment and who your competitors are. This will often require some deep research owing to the fact that your investors will most likely know of more competition in the segment than you.
Hence, do your due diligence and spend a whole lot of time researching your competition. You need to have a crystal-clear understanding of how your idea is different from anything that is currently on the market and why you have the potential to blow this market up.
Next step is to show where you are on your journey to profit. If your product is just an idea and you simply want to test the hypotheses you’ve come up with so far, this is a situation where you need to invest your own money, there is no other way. Think of creative and frugal ways to make your MVP and launch your first marketing campaign. If the project involves manufacturing, you invest in the first batch of hardware and give it to the first user focus group.
Once the hypothesis is tested and works, only then you start looking for outside money. Investors look for startups with a great idea, a great team and proof of revenue. To answer the question on your lips immediately: yes, you can reinvest and make money on your own , but you need an investor to speed up the process and optimize/maximize the profit. Investors aren’t there for startups just to give money, they are an invaluable source of experience, advice and mentorship. That is, if you ask. Make sure you do – at all stages.
Your next pitch step is forecasting. You should be able to timeline the development and substance of your product. Your plans and calculations should be clear and concise, too. Whether it’s releasing a new version of the product or improving its design, your pitch should have a coherent time frame for each development for the next 3, 6, 12 months, and so on. Naturally, nobody is safe from mistakes and miscalculations, but research and adaptation will be your best friends in completing this part of the pitch.
Your team is probably the most important thing on your investor’s interest list. One way or another, practically everything depends on the people who will be working on this product. Usually, at the early stage your startup will have 3-4 people working on the idea, and these people need to be in some amazing sync. Your project should be a kingdom of understanding and fast and painless problem solving. Investors would usually expect and want to work with startups whose founders didn’t just meet yesterday and decided to “try something cool”, but have worked together on other projects and have a good team history.
You’ve come to the point where you say how much investment money you would need and on what you’re planning to spend it. This is directly related to the share you’re ready to give to the investor. There are many scenarios for initial financing and share allocation. The most common ones at the early stages would be granting 5, 10 or 15 percent of the company’s shares for investments of $100K, $300K and $500K respectively. The important element here is your own assessment of your product – how do you estimate the value of your product? What do you rely on in this estimation? If you don’t have any revenue yet, how do you evaluate the market? If you have attracted investments before, how did the company’s capitalization increase after that inflow of funds.
Establishment and Structure
The investors will definitely want to know if your venture is an established company already or you and your partners are just friends who wanted to create something new. Nobody invests in businesses that aren’t structured. Investors like it when your startup already has assigned shares and has provisions for potential future employees and shareholders. Additionally, it is important for them to know what share you’re planning to allocate to them and what happens when new investors join the venture. So, spend some extra time on figuring these out and formalizing it.
To sum up, pitching to investors is not a precise science and a successful pitch depends on many factors that might or might not be on this list, but these steps will give you a good idea of the structure and direction your pitch should be looking at.