Students often approach me as part of the Monash Entrepreneurship program and virtually daily by early-stage start-ups or potential founders with an idea about how to go and get funding for their business or idea.
Pitching a start-up or idea to potential investors can be an exciting yet daunting task for any founder. It is essential to understand that investors are interested in hearing about, amongst other things:
The value proposition of your business;
The team behind it;
The market opportunity, and
The growth potential.
I wanted to share some of my insights and learnings about this process, some key strategies and best practices to help you craft a compelling pitch that resonates with investors and increases your chances of securing funding for your start-up.
Know Your Problem and Customer
The first step of being able to raise money is to be an expert about the problem you are solving and why this problem is a big deal for your customer. This takes the effort of both secondary (desktop research) and primary research, which is getting out there and talking to customers, at least 100 of them. That's right. You need to go and speak to 100 customers. This groundwork will give you deep and rich insights and the confidence that you understand your customers, have empathy with them and that your solution has a tight fit to their problem. Or, in other words, a tight product > market fit.
Define Your Value Proposition
Once you know your customer and their problem(s), the next step in creating an effective pitch is defining your value proposition. Your value proposition is a clear statement describing your business's unique value to your target customers. Investors want to know what makes your business different and why it is worth investing in. You need to articulate your problem, how you are solving it, and the benefits your solution provides. This is underpinned by the work you have already done with your customers and your deep understanding of the competitive landscape. Why are you different? Why are you better?
When crafting your value proposition, it is essential to keep it concise and straightforward. Avoid using technical jargon or complex language that may confuse investors. You should be able to explain your value proposition in a few sentences, which should be your pitch's focal point.
Highlight Your Team
Investors invest in people as much as they invest in ideas. When pitching your start-up, it is essential to highlight your team's skills, experience, and track record. Investors want to see that you have a team that can execute your business plan and overcome any obstacles that may arise.
Introduce your team members and their roles in the business. Highlight any relevant experience they have in the industry, such as previous start-ups, relevant work experience, or academic credentials. Investors will be more inclined to invest if they feel your team has the necessary skills and expertise to make the business successful
Describe Your Market Opportunity
Investors want to see a significant market opportunity for your business. You need to demonstrate that your company addresses a significant problem that many people face and that there is a large market for your solution.
Provide data on the size of the market and the growth potential. Use market research to support your claims and show that there is an actual demand for your product or service. Be realistic in your projections and avoid making bold claims not backed by data.
Show Your Traction
Depending on the stage of your idea of business. Investors are likelier to invest if you have evidence that your business has traction and is gaining momentum. Traction refers to your company's progress so far, such as the number of customers you have acquired, revenue generated, partnerships established, or other relevant milestones. It demonstrates that you have a good product>market fit and a good go-to-market customer acquisition strategy.
Present your traction metrics clearly and concisely, such as graphs, charts, or tables. Show how your business has grown and what you have done to achieve your results. If your business is pre-revenue, focus on other metrics that demonstrate early success, such as user engagement or customer feedback.
Outline Your Business Model
Investors want to understand how your business generates revenue and how you plan to scale. You must articulate your business model and explain how you plan to monetize your solution.
Describe your pricing strategy, customer acquisition strategy, and the lifetime value of your customers. Explain how your business will scale and what barriers to entry exist for competitors. Investors want to see that you have a clear path to profitability and that your business can grow sustainably.
Practice Your Pitch
Once you have crafted your pitch, it is essential to practice delivering it. Once you have practised it, practice it again and practice again. Practice your pitch in front of a mirror, with friends or colleagues, or in front of a mentor or advisor. Get feedback on your delivery, tone, wording, flow, engagement and body language.
It would be best if you also were prepared to adapt your pitch based on the audience you are pitching to. Different investors have different interests, and you should tailor your pitch to appeal to their specific needs and interests. Research the investor beforehand and try to understand their investment philosophy and what types of businesses they typically invest in.
Be Prepared to Answer Questions
During your pitch, investors may ask questions about your business, team, market opportunity, and other relevant topics. It is essential to be prepared to answer these questions confidently and succinctly.
Anticipate the types of questions investors may ask and prepare thoughtful responses. Be honest and transparent, even if the answer may not be what the investor wants to hear. Investors appreciate transparency and honesty and want to invest in open and trustworthy founders.
After your pitch, follow up with investors and provide any additional information they may request. Be persistent but not pushy, and remember that investors receive many pitches and may need time to evaluate your business.
If an investor expresses interest in investing in your business, be sure to follow up promptly and provide any additional information or materials they may need. Keep the lines of communication open and be responsive to their requests.
Pitching a start-up to potential investors is critical in securing your business's funding. By defining your value proposition, highlighting your team, describing your market opportunity, showing your traction, outlining your business model, practising your pitch, being prepared to answer questions, and following up, you can craft a compelling pitch that resonates with investors and increases your chances of success. Remember that investors invest in people as much as they invest in ideas, so be authentic, passionate, and committed to your business.
I hope they help!
About the Author
Adam Ryan is a Professor of Practice (Adjunct Professor) at Monash University and is a principal at Watkins Bay. Adam has over twenty years of start-up experience in Australia and the USA. An expert in Company Structuring for Innovation, Strategy, Mergers & Acquisitions, and Capital for early and growth-stage businesses.
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