1. The Hook
You want to land the biggest punch first – so lead with the hook. That “wow factor” is worth five million dollars… at least, it could be – so make sure you hit hard with your biggest idea straight off the bat. Hit us for six and you’ll be a lot closer to securing your investment. This should be a concise, clear statement, not necessarily simple. Make it direct and specific, not conceptual or theoretical. Got some names to drop? Now’s a good time to mention them, but make sure they’re truly world class. Don’t expect an investor to be impressed when they find out you have a nobel prize winner on the team in the third paragraph… they might not get that far.
2. The Pain Point
If there’s no problem, there’s no solution. We want to know what the issue is up front, and the bigger the frustration, the better. Nothing spells out market opportunity like an unsolved problem; either existing or impending. In the heart of that complication lies your Value Proposition – your worth is equal to the cost of the problem you solve, so tell us what you’re going to do about it. Boost revenue, improve efficiency, extend reach, cut costs, speed it up… whatever you’re going to do, now’s the time to tell us. But don’t mix up the pain point with the prospects of the market. That comes later.
3. The Solution
Let’s get down to the nitty-gritty. What exactly are you selling, and who’s buying? Software, app, website, all of the above? Don’t try to baffle us with jargon, tell it as plainly as you can and tell us why it solves the pain point you described. Stay away from acronyms, spell it out by all means, just not like that. Get to the point without coining any new phrases, leave that for the brand boffins. Show us where you fit within the value chain or distribution channels, where you fit in the industry ecosystem, what about the sector? Why do they want to work with you? Have any customers? Got revenue? Now’s the time to say. If not, tell us when you will.
4. The Opportunity
The next few sentences should be devoted to market segmentation, size, growth and dynamics. Tell us how many people or companies, how many dollars, how quickly it will grow, and what’s behind movement in the segment. It’s much more compelling if you’re targeting a significant percentage of a small, defined, growing market than laying claim to the tiniest portion of a massive, heterogenous, established market. Be realistic, if you’re really looking at a small portion of the micro-blogging market, don’t tell us you’ll be bigger than Facebook.
5. The Advantage
We’ve got news for you, you’ve got stiff competition. Even if there’s no-one out there doing what you do (and trust us, there will be eventually), you’re still up against the current way people do business. There will be someone who does something similar, or an established brand who decides to do what you do, but with more financial clout behind it. So sell us you. What do you do that’s different? What stops anyone else from being you? And being first isn’t an advantage, so be specific – whether it’s talent, an IP, or a philosophy that sets you apart, we need to hear about it. What’s more, you should be able to cut this down to a few sentences.
6. The Business Model
Now for some good, old-fashioned business. How are you going to make money? And who’s going to pay it? How can it be scaled and leveraged? Tell us why it’ll be capital efficient. How do you measure success? Is it customers, licenses, units, revenues, margins? Now we know what you call success, tell us just how successful you’ll be in the next few years.
7. Your Team
They’re good… we’re sure. But how good? We don’t want to know about the combined years of experience in social media. We want to know that your CTO was the lead developer of Facebook Open Graph – it’s real, relevant experience that impresses us, not fleeting CV snapshots and generalisations. Tell us why they fit into your team and what they did that’s extraordinary. We only care about the brands we know – and don’t name drop if you’re not prepared to hand over reference contacts later.
8. Your Promise
It’s simple really, what investors want to hear – and believe – is a promise that you’ll make them a lot of money. Prove to us that you can make a fortune without costing a fortune through your Summary Financial Projections. If they aren’t realistic, we’re not going to bite. Outline five years of revenues, expenses, profits/losses, cash and headcount. And tell us what’s behind your growth, like customer numbers or ads sold.
9. Your Number
So… how much do you want? What’s the minimum equity you need to hit the next big marker? Planning a later round of funding? Let us know now, and let us know how much. And don’t beat about the bush – clear, realistic figures fills us with confidence and could be the swing factor.
You should be able to tell this whole story, from the hook to your number in less than ten paragraphs. That means about two to three pages at most. You might hear that this absolutely must be a page. That’s nonsense. We base decisions on information, so make sure we have it at hand. Don’t take this guide as gospel. If there’s something you need to expand upon or that’s less important for your company, make it fit… but you should touch on each point.
A few extra tips:
- The market opportunity isn’t defined by generalisations and observations. It’s a specific problem and pain point that you can solve. Investors are more compelled by solving a particular problem for a niche market than adding a small improvement to an established market.
- Don’t abbreviate your brand. Build respect for it by using it in full. Of course, there are endless global brands built around acronyms. But once you make a choice, stick to it.
- Don’t smoke-screen us with brands and names that are irrelevant. Name drop when the impact is enough to grab our attention and the experience is valuable.
- Stay away from the big, meaningless words. Dynamic synergy sets all sorts of alarm bells ringing for smart investors. Tell us what your product does the same way you’d describe it to your friends at the bar (after the first drink, not the sixth).
- Tell us what you can do, not what others can’t. Of course, when it’s a huge competitive advantage you should mention the distinctions, just make sure the bias is to positivity about your product, not negativity about a competitor’s.
- Use simple sentences, not multi-tiered compound sentences.
- Tell your story as best you can. Use analogies but only to describe a specific comparable. You’re using Facebook’s ad model, you’re not the next Facebook.
- Tell the truth! There’s no difference between being dishonest and being misleading in the eyes of the law. If we spot an exaggeration or creative phrasing, it might just throw the rest of an otherwise excellent pitch into doubt.
- Reread everything. Is your pitch as clear, concise and compelling as it could be? People read from one sentence to the next – make sure each one is adding to your case.
Most investors used to be entrepreneurs, so we know where you’re coming from and we want to invest in good companies. Essentially, we’re on your side. Do yourself a favour by making our job easier – tell your story the best you can and you might just get us on board. Good luck!