Today I decided to prepare a blog that shares the lessons that we’ve learnt from our recent experiences in preparing investor pitch decks. As some of you may know we’ve built our first product, BusinessManage.com, which helps businesses to proactively and effectively manage all facets of their business – projects, tasks, employees, human resources, sales, marketing, finance, knowledge, facilities and the list goes on. As part of this experience we’ve been rewarded with a lot of positive attention from investors in Ottawa, Canada and Los Angeles, California.
If you’re planning to perform a pitch to investors, these tips will really help.
Where do I start?
Every investor pitch deck should have two decks – one for presentation and one to hand out at the end including all of the information you discuss. The reason for this is because if you put too much text in your slides then the potential investors you pitch to will be reading your slides while you’re talking. This is bad, because investors make decisions based upon their belief in you being able to make the business succeed. You need them to listen to you.
What should be in a pitch deck catered to investors?
Investor pitches are typically 15 minutes in duration. Within this timeframe you need to cover the most important topics. Typically I like to design my pitch deck to cover the following items:
- Our story – one minute about what you’re about to pitch – warm up the audience
- The opportunity / problem – what problem are you solving? what opportunity are you fulfilling?
- The solution – how are you fulfilling the opportunity?
- Unique selling proposition – what is unique about your product / service?
- Market size – how large is the market (research this in-depth)
- Business model – clearly define how you make money today and how you’ll make it in the future
- Competitor differentiation – how do you differ from competitors who provide the same services/products?
- Milestones & The Ask – what milestones do you intend to reach within the next 2-3 years? How much money are you asking for in seed investment? Are you aiming for a round A investment within the next 2-3 years?
- Monthly recurring revenue (MRR) – show your revenue forecast and how you intend to meet it.
- Exit strategy – identify how you intend to exit and/or how the investors can exit with a healthy ROI (e.g. mergers, acquisitions, IPO, etc.)
- Business model validation – validate your solution, revenues, etc. by showing other business models that have succeeded in this or a similar space (e.g. another game)
- Why choose us? Conclude with why investors should choose you (e.g. proven founders, experienced team, cashflow positive and growing at x% in a proven rapidly growing market)
How do I prepare myself for the pitch?
It’s vital that you get into the mindset of an investor. Imagine you’re retired, you’ve made all your money and now moved to another city but you’re bored. You don’t want to run a business, so forget about what you’re running now, but to appease your boredom you want to invest in some businesses to keep things interesting. Now that you’re in the mindset of an investor, think about these things as you design each slide:
- What would you want to hear about the opportunity?
- What questions would you have?
- What risks would you consider?
- Once you’ve done that the next step is to think about anything an investor will question; because at the end of your pitch they will dig deep to ensure you know your business, your competitors, your market and that you’re serious. Some questions may throw you off, know how you’ll answer them beforehand so you don’t stammer:
- How do you differ from competitor X? Do not allow them to know your competitors better than you; be prepared to address them. Investors are very serious about their investment decisions and will have done their homework on both you and your competitors prior to hearing your pitch.
- What are your projections for the next 2-5 years?
- Tell me more about your target audience and target market.
- Tell me how you intend to grow. What advertising methods will you use?
- How will you adapt your business model if your product/niche/service becomes 50% less popular? how about 90% less popular?
- How will you adapt if your revenues decline significantly or don’t meet projected goals?
- I know the perfect CEO to run your company; would you be opposed to having me bring them in?
Above are just preliminary considerations. Once you brainstorm you’ll have 30-50 questions off the top of your head that you can prepare to answer. The more prepared you are, the more relaxed and confident you will be. Finally a few more tips based on my experience to date:
- If you can see the room first before you perform the pitch, even if it’s only for 5 minutes, you’ll do a much better job. You won’t worry leading up to the day and imagine how it’ll be. Side benefit – take those 5 minutes to test their digital projector with your laptop and slides. It’s one less thing that can go wrong.
- If you are presenting through an organization (e.g. an angel investor network, incubator or accelerator), ask if they have mentors that can help you finalize your pitch. They won’t see this as a sign of weakness; this is a sign of strength, leadership and open-mindedness and can give you a significant advantage.
- Don’t ask for too little money. If you need $100K to get through the next 6 months, don’t ever ask for $100K; always have a reasonable contingency budget. If you are cutting corners on the most important activities that lead to revenues (sales & marketing) then investors will flag this as a huge risk and consider you too inexperienced. Don’t do this either; I’ve lost investment opportunities with this mistake.
Preparing for a pitch to investors can feel overwhelmingly stressful. Take your time to brainstorm your pitch, learn about your competitors and brainstorm answers to any questions you can anticipate. Being prepared is the most important element to a successful pitch! Oh and if you don’t succeed during your first pitch, walk away with a ton of valuable lessons and get started preparing your next one. Good luck!