So, you’ve come up with an awesome idea, checked there’s nothing like it online, found some friends who would like to start this business with you. You might even have worked on a prototype and joined an accelerator to help you propel your success. Now you figure you should pitch to get funding, and we know how intimidating this can be regardless of how confident you may be, so here’s a brief guide we wrote after visiting VCs such as Tumml, the Urban Innovation Fund and Hero City in Silicon Valley. In such a competitive ecosystem, there’s no time to waste, so we’ll go straight to it:
Audience research
Key to making a solid pitch is to make it memorable, and this is so subjective that knowing as much as possible about them, their previous experience, background and business approach can be an interesting strategy when defining your pitch. Regarding this, we’ve heard varied advice:At 500 Startups they recommend also knowing the size of the fund, their lifecycle and who makes the funding decisions on their end. To make sure the fund is a good fit for you as well and what to expect from the meeting. Juan Acosta, Director at Draper Uni told us they differentiate between Mission and Vision-driven investors, which we’ll explain a bit later. Basha Rubin, founder of Priori Legal told us she always suggests trying to pitch to someone who either understands your industry or who is amongst your target audience. All this information will allow you to customize your pitch and make it more likely to resonate in your audience. Remember you need to stand out by boiling your pitch down to make it unique, strong and interesting.
Practice!
Practice makes perfect, but humans aren’t! Try pitching to as many people as possible, actually listening to their questions and criticisms, you’ll benefit from hearing different outlooks. Then try to practice over and over until you overcome the detected weak points.
Presentation
You want to keep the focus on you and your idea, using the presentation only as a guideline, so we counsel you should bear in mind:
- Reduce the text to the minimum
- Make the content very clear and legible
- Visual and graphic aids are great to communicate your product, your company’s projections, numbers, etc.
- 8-10 slides should be more than enough
If you’re sending a deck to an investor over email, someone who hasn’t met you, then you can write something longer they can read through it and fully understand it just as if you were pitching to them. But in case of a presentation, reducing text to the minimum is a plus.This being said, let’s move to the substantial part of the presentation:
Introduce your company
First things first: Introduce your company presenting the mission and vision statements. If you’ve done your research, you’re likely to know if the investor you’re pitching to is either vision or mission-driven; which was exceptionally explained to us by Juan Acosta, Director at Draper Uni: “If they’re a visionary investor, you want to paint a big picture for the future rather than say what the market is now. So, SpaceX would pitch to a visionary investor as “hey man, we’re going to put men on Mars, whether what they’re doing right now is building rockets, the big picture is to put them on Mars. Whereas, if you pick a mission statement, that’s more of what you’re doing now.”You should be able to present a very simple statement of what you’re doing on the first slide, for example, Airbnb said: “Hi, we’re Air Bed & Breakfast, book rooms with locals rather than hotels”. Short, simple, easy to understand.
Story
It’s super helpful to start with a story and treat the entire pitch as a story, evoking emotions the investor can relate to. After you create credibility, it’s important to build some understanding and rapport. You need to show that you understand who the customer is and why they need your product or service. People connect better with emotions, so telling a personal story works very well, but it also does telling a story of a particular customer or potential customer you have.So, in the case of Airbnb, it’s important to bring up a specific need so people start to understand it better, for example: “My friend Peter works for a big business, who always sends him out for different conferences in different states, but he has a big problem: when he goes to all these cities it’s hard to find affordable hotels; and when it’s a very last minute trip, it’s almost impossible to find a hotel room so he’s left with nowhere to stay. So there you know his name, which is Peter, you know what he does, he works for a big business, and you could be a bit more detailed in what he does exactly. You also know he travels a lot and that he books hotels. And by doing so, you’re introducing both the problem you’re solving and the customer persona. This allows the audience to really understand who you’re solving this problem for.
Problem
If you do the story right, you can lead right into the problem, which should be no more than one or two sentences. Keep it very simple, very short, don’t go off into huge detail especially if you’re presenting. This is just to hook the audience and for them to really understand what the problem is and who you’re solving it for. In the case of Airbnb:
- Price was an important concern for customers
- Hotel availability was limited
- Hotels leave you disconnected from the city and its culture
- There was no easy way to actually book a room with a local if you wanted to stay with a local host
Solution
So once you state your problem, you can lead right into the solution, so it’s: story, problem and then you can state the solution. Never start with the solution, as you may lose attention from the audience and not have them understand the problem fully and consequently the value you’ll be delivering. The solution should be between 1 and 2 sentences. People lose their attention span very easily, but if they can understand and relate to your story, then you’ll keep them hooked. In the case of Airbnb they said: we’re building a web platform, (always state what sort of platform you’re creating) where people can rent out their space to host travelers, to save money, make money, and share culture. This is the “channel” part of your value proposition if you’re creating a Business model canvas.At this point, your audience hopefully connects emotionally with your story, understands your problem and has an idea of how you’re going to solve it. Now’s the time to display how the product actually works, so people can understand the product better. Images can definitely help here and it’s even better if you bring the story and it’s character back to the picture. So Airbnb would say “it’s really simple, when Peter’s traveling to a new city like Chicago, he goes to Airbnb on his laptop, he looks at the area he’s going to stay in, reviews the listings of different hosts that have homes listed on our platform and with the simple push of a button he pays online and is able to book his trip.”Slides can help to describe what the customer journey looks like is way more important than just stating what you’re doing. Guide your audience as to how users would experience your product. That goes a long way and if you use a name, bring that name back and people will always remember Peter. So in terms of story, problem, solution; that’s similar to your elevator pitch, a very quick pitch, that should take around 35 seconds, story, problem, solution.
Market
Then start diving deep in what investors care more about: your market and how many people would potentially use this. For this, you can do some market research using many great tools available out there, some people just search it online, but some social media tools are actually pretty good at determining the size of these markets. This is something you don’t have to follow step by step necessarily. Sometimes you can bring this at the beginning, just make sure you relate this to your story. If you use Google Ads or Facebook Ads, and you don’t know your market really well, you can actually define market sizes there. Even by placing ads, you can do that. The Facebook market penetration in the US is almost 90% so the information is quite accurate. There you can target people by income, region, radius, tastes, and it can help you calculate your target audience. These platforms have so much information about people’s tastes that they have grown to be quite good at predicting behavior. You can actually calculate how much income you would generate considering a prediction of consumption of your target audience. You want to start with your total market but then bring it down to reality as to what you could target specifically and what you’ll actually capture. At the time Airbnb pitched, they determined their market size following that there were over 2 billion trips being booked every year online, offline, everywhere. Now, 560 million of those trips were being budgeted online, so that’s more like the market they were actually addressing, as they were targeting just people who were booking trips online at the time and might eventually use their platform. So they defined that capturing a 15% of the market in the next few years, that would represent 84 million trips, that would be booked through their platform. Back in the day, Airbnb already had some traction, and they knew that with this amount of team members they captured this amount of the city so they did a projection of that and said that they wanted to eventually capture a 15% of the market. Another good thing to mention is if the market’s growing, as the pie is getting bigger, so in this case, there were more trips being budgeted online, as population grows, more people hop on the internet, this number is probably growing at a certain percent per year, so it’s good to show it too. Then you want to go into your traction, which is basically what you’ve done so far with the very little resources that you have. A lot of people get caught up in the fact of not having an app developed, but there are many things that can be done, for example: how many customers have you potentially talked to or how many people have registered to use your platform. There’s a dating app for professionals called “The League” which reached the 100 thousand people joining their waiting list by organizing different parties where the interactions happened in real life. When she pitched, Amanda Bradford, founder of this app, she secured funding as investors knew there were 100K people that could potentially use her product.
Competition
Going into your competitive landscape, you should be very informed of who your competitors are and what they’re doing. Saying you don’t have competitors is the worst answer you can give. Always consider competitors either direct or indirect ones. How do you show things in such a short amount of time? there are many graphs to show these things, but this one is a really effective one when people are trying to understand the market: picking two variables on the X axis and the Y axis, that’s where you put your two variables. Airbnb picked price, which is one of their key variables and then, where the transaction happens, offline vs online.
AirBNB’s original Competitive Landscape Slide — Magic Quadrant Style Source: MediumSo then you start plotting in all the companies in your space, and why you’re better. Usually, you should put your company in the top right square, as in general people look at what’s at the top right for what’s better. Craigslist, for example, was one of their competitors, their transactions happened offline, and it was very affordable, so they located them in the top left square. Others were placed in online transaction and high prices, offline, and so on. So they found that there was a hole in the market for something that was affordable and the transaction happened online. There were many other variables, but this is a good way to show your competition. They were the first to market, they had the feature of listing once, and the design of the brand outstanding (founders were great designers!) so comparing to craigslist, it was exceptionally beautiful and they’ve gotten way better over the years. Another interesting way to present your company is what Slack did, using their competitive advantage of blending together their functionalities and showing how they strategically combine different functions delivering value which determines its differentiation.
Source: Medium
Revenue Model
The next thing you should talk about is your go-to market strategy, meaning how you’re going to capture the market. Investors want to see that you have a plan and that it’s been tested already in some way. They want to be confident that if they give you $100K, you’ll have already confirmed that a $2 investment add on Facebook will convert to 100 app downloads, for example. From this section, you should always remember to mention on your pitch: your market strategy, customer acquisition, and partnership agreements.Airbnb marketed with events, as when events fill up, hotels fill up, so partnering with events before, and telling them to promote Airbnb when hotels ran out, they got many people to sign up via events. That’s one of the strategies they used to capture some users. When you pitch, you’re basically trying to make someone go on business with you, without knowing you. So it’s a good thing to explain how you’re going to make money out of this project. Stating if you’re a B2B, B2C, B2G, how much you’re charging people for it and how big could this potentially get is a great way to reflect you’ve given thought to this. Presenting a 5-year projection is usually good, although most investors know this is not accurate, it shouldn’t be too outrageous. Though projections are usually off, it’s good that you show realistic projections because it shows that you have a plan of some sort.
The Team
And this is the most important part of an entire pitch, which is suggested to take the longest in your pitch: THE TEAM. It’s fundamental to make it clear why you’re the right people building this, as there are probably tons of ideas and products competing with you, but investors looking at very early stage startups tend to invest in the team and what that team is capable of doing. One thing is clear: you need your team to be exceptional and resilient, otherwise, it won’t work.So make sure you spend more time on “Hey, I’ve worked as an Uber driver for this time and from my experience I know what drivers are looking for, and my co-founder is a developer and he used to work at Twilio….etc”, so your investor can rest assured that you’ve got a great understanding of your user, and are likely to have an interesting communication and development strategies, for example. If you have any technical advisors or previous investors, it’s always good to know as well, to create confidence. Slack is a great example of this. It started as a video game company, and now they’re Slack (learn more)! Their video game was really bad, so nobody played it, but they ran out of money and had to seek further investment. The thing is that investors still believed in them, and Slack founders said they had this tool that they’d been using internally which worked really well, so they were thinking about spinning it off as a product. Now they’re worth over a billion dollars, but back in the day, the investors were believing in the team, not necessarily in the video game at that early stage. And there are many stories like that. In the case of Airbnb, they had 3 co-founders. When you’re pitching, you want to show the relationship you guys have. So the first two went to the same college, studied together and did other things in the past together, and their developer had built a Facebook-like app that had 75 thousand users at one point, which reflected he was able to scale applications, among other things. This shows the relationship between them and how their capacities and experience make up the dream team to execute this idea. As a reference, they could say they shared an apartment and would sleep in the same room whenever they needed to rent the room on Airbnb for people who would potentially come in. So those are the things you want to outline.
Ask for what you need
Everything we’ve been talking about is what will lead your audience to reply “Yes”, but for them to say so, you need to clarify what you’re looking for. At the end of your presentation, you should mention how much money you’ll be raising, whether you’re looking for partners, for clients, for introductions for someone in particular, to expand your team, or whatever you need. And if this is a casual, unplanned pitch, you might find yourself pitching trying to make your audience become your client. When asking for money, you should mention how much time this money is supposed to last and what you’re going to achieve with that money. In the case of Airbnb, they said “we’re raising 500K, it’s going to take us to 80K trips being booked on our platform, which will become 2M dollars in revenue in the first year. What you want to show here also is the breakdown of how you’ll use this money. Maybe 20% in marketing, 30% will be used to hire a developer, etc. To close, make sure to make a brief run-through your pitch including what you do and how; and how far you’ve come so far; making sure to close with a memorable phrase that relates to the emotion you tried to evoke earlier on.Be ready to answer questions and hearing criticisms remaining calm and staying confident, and keeping true to your company’s core values. By now, investors have already made up their minds and hopefully believe in your value proposition, so as long as you remain true to what you just presented, you should be ok. Relax. That’s all. You should take all this into account when pitching for investors to understand the whole story and relate to it. The story will hook the audience. Problem and solution in 1-2 sentences. And then show the product and how people would use your product. Once they understand the value of it, just ask for what you need and we hope you get it and use it wisely! ** 500 Startups created a template for pitching you can find by clicking here.
