As a growing number of startup founders are vying to get noticed by potential investors, it is vital for entrepreneurs to craft a compelling pitch that will clinch the deal for them. But how does one ace the art of the perfect pitch to receive the coveted funding they are seeking?
It would pay to strategise the pitch as despite the volatile IPO market in 2019 — that saw the debacle of WeWork and others — 2020 is expected to witness robust venture capital (VC) backing and deal flows, both in early and late stage rounds. Here are five key insights that we believe would help startups hone their pitch and win a cheque from the investors at the end of the presentation:
First-time entrepreneurs often get intimidated by a room full of powerful investors. Startup founders should, therefore, optimise their pitch by coming prepared to answer tough questions about their sector and demonstrate in-depth knowledge that will add value to the presentation. A focused approach to articulating the commercial aspect of the business idea will help investors engage better with the pitch.
The homework doesn’t stop here. The startup founder should also study about the investor or fund. She should assess whether the investors’ expectations align with the startup’s business goals. Investors must be selected with care as there is more to the partnership than just funding. When startups onboard an investor, the latter should be a good fit for the startup and have the reach and influence to enable future funding rounds.
A confident and well-prepared pitch along these lines will not only save the investors’ valuable time, but also convince the investors about funding the startup.
Startups are born when entrepreneurs identify unique solutions to solve society’s problems. The essence of the pitch deck should clearly establish the problem the startup founder is trying to solve and take the investors through the proposed solution. A deep dive into the problem while demonstrating why the funding is crux to solving the problem is a critical component of the pitch. For a more effective pitch, the startup may adopt a storytelling technique that will hold the attention of prospective investors.
More than data points and graphs, investors must go deeper and understand the story behind why the startup was founded. This element should be at the heart of the pitch. Sometimes, the pitch comes directly to the point: intrepid entrepreneur, Richard Branson famously green lit the idea for Virgin Blue (now renamed Virgin Australia Airlines), solely based on a pitch written on the back of a beer mat!
Startup founders should view the pitch as a valuable opportunity to strategically position their company’s offering in their industry. They need to hard-sell their product’s USP and explain its differentiating factor.
Know your customer
A key element of the pitch should be an in-depth analysis of the target audience. Investors seek to understand the startup’s customer base and assess the risks and opportunities the competitive landscape presents. The pitch should aim to tackle questions about how the startup will overcome potential volatile or unpredictable market forces.
Though investors grasp the fact that any investment brings along its share of risks and opportunities, they are averse to funding startups that are ambiguous about their customer base and the proposed growth trajectory. Crucially, investors anticipate a handsome ROI (Return on Investment) when they decide to invest in a startup. Thus, the key to profitability lies in understanding the precise customer value proposition and strategies to ensure customers will be retained in the long run.
Build a valuable team
Before deep-diving into a startup’s pitch, more often than not, investors are curious to learn about the founder and her team. It especially holds true for early-stage startups where potential investors will scrutinise the team members’ educational and professional background. Thus, startup founders should invest time in integrating the larger team into the pitch and ensure it reflects diversity and inclusivity, which the modern workplace demands. Startup founders could consider onboarding notable industry advisors and influencers. It will help the startup lend legitimacy and credibility to the company’s team and convince investors that they are qualified to deliver the goods.
Investors also look for teams that are willing to be mentored and are accountable to their investors and customers. They seek leadership attributes from startup founders as only they would be able to steer an idea from paper to market. Further, more than the idea, it is the execution aspect of the pitch that will grab the attention of VCs.
Devise an exit strategy
No pitch is complete without presenting a viable exit strategy to potential investors. . As VCs would like to capitalise on the startup’s market potential and help it scale, they aspire to see a well-thought out ROI strategy at the pitching stage. IPOs, mergers and private offerings of shares are some of the avenues through which investors will get their money back from the startup. Besides providing a cushion to potential investors, an exit strategy also safeguards the long-term strategic goals of the startup.
The investment landscape is fraught with risks, and it’s only fair that seasoned investors increase the odds of a favourable ROI ahead of investing in the startup. Thus, if founders have this element covered in their pitch, they could even expect larger investments from the investors as the business scales.
Going public or getting acquired as quickly as possible should not be the sole foundation on which a startup should scale the business. Above all else, startup founders should not forget the personal ‘human’ touch when pitching to investors. A fancy pitch deck with the afore-mentioned elements is only half the battle won. The greater challenge lies in making a personal connection with the investors and making them ‘feel’ the entrepreneur’s passion and sincerity for the startup idea. Only then, will the funding kick in.