Perfecting Your Investor Pitch

by Bill Reichert at Garage Technology Ventures

Endless articles, books, and blogs have been written on the topic of business plan presentations and pitching to investors. In spite of this wealth of advice, almost every entrepreneur gets it wrong. Why? Because most guides to pitching your company miss the central point: The purpose of your pitch is to sell, not to teach. Your job is to excite, not to educate.

Pitching is about understanding what your customer (the investor) is most interested in, and developing a dialog that enables you to connect with the head, the heart, and the gut of the investor. If you want advice about pitching, you can ask a venture capitalist, but you probably won’t get a very good answer. Most VCs are analytic types, and so they will give you a laundry list of topics you should cover. They won’t tell you what really floats their boat, mainly because they themselves can’t articulate it in useful terms. “I know it when I see it,” is about the best answer you’ll get.

What is the investor most interested in? Contrary to popular belief, the venture capitalist sitting at the other end of the table glaring inscrutably at the presenting entrepreneur is not thinking, “Is this company going to make a lot of money?” That is the simple question that most entrepreneurs think they are answering, but they are missing the crux of the venture capital process. What the investor is really thinking is, “Is this company the best next investment for me and my fund?” That is a much more complex question, but that is what the entrepreneur has to answer.

To win over the hearts and minds of investors, your pitch has to accomplish three things:

• Tell a good, clear, easy-to-repeat story—the story of an exciting new startup.
• Position your company as a perfect fit with other investments the investors have made and their firm is chartered to make.
• Beat out the other new investments the firm is currently considering.

These latter two issues are beyond the scope of this modest guide. So for now, let’s just concentrate on telling a good story.

Tell a good story

Most of the articles on pitching are generally right about the topics, even if they miss the nuance (sell, don’t explain). But don’t take any template as graven in stone. Your story may require a moderate or even a dramatic variation on the list of slides below. You may need to explain the solution before you can explain the market; or if you are in a crowded space you may need to explain why you are different than everyone else early on in the conversation; or you may want to drop some very impressive brand-name customers before you explain your product or your market. The one thing you may not do is expand the number of slides to 20 (or 30 or 50)! Other than that, let the specifics of your situation dictate the flow of your slides.

Nevertheless, it is useful to have a guide. With the caveats above in mind, here is a basic outline for your pitch:

Cover Slide: Company name, location, tagline, presenter’s name and title.

If there are multiple team members participating in the pitch, put names on the next slide instead. Key objective: Everyone in the room should know the basic idea and value proposition of the company, including the target market, before the next slide is shown. All the words should not be on this slide, but with one or two sentences orally, reinforcing and extending the tagline, everyone should have a foundation for what is to come. Cardinal sin: Launching into your presentation with an investor at the table thinking, “I wonder what these guys do?”

Intro Slide: Team.

The three or four key players in the company. For some reason, everyone puts the team slide at the end, but investors almost always want to know this at the beginning, and it is just common courtesy to make sure everyone is introduced. But make this short, crisp and relevant. This is not the time to share everyone’s life story, or detail the resumes of all six members of the advisory board. Focus on a significant, relevant accomplishment for each person that identifies that person as a winner. In 10 to 15 seconds, you should be able to say three or four sentences about your CTO that says everything the investors want to know about him or her at that moment. Key objective: Investors should be confident that there is a good credible core group of talent that believe in the company and can execute the next set of milestones. One of those milestones may be filling out the team, and so it is important to convey that the initial team knows how to attract great talent, as well as having great domain skills. If there is a gap in the team, address it explicitly, before investors have to ask about it.

Slide 1: Company Overview.

The best way to give an overview of your company is to state concisely your core value proposition: What unique benefit will you provide to what set of customers to address what particular need? Then you can add three or four additional dot points to clarify your target markets, your unique technology/solution, and your status (launch date, current customers, revenue rate, pipeline, funding needed). Key objective: Flesh out the foundation you established at the beginning. At this point, no one should have any question about what it is that your company does, or plans to do. The only questions that should remain are the details of how you are going to do it. Another key objective you should have achieved by this point in your presentation is to make sure that if there are some compelling brand names associated with your company (customers, partners, investors, advisors), your audience knows about them. Feel free to drop names early and often—starting with your first email introduction to the investor. Brand name relationships build your credibility, but do not overstate them if they are tenuous.

Slide 2: Problem/Opportunity.

You need to make it clear that there is a big, important problem (current or emerging) that you are going to solve, or opportunity you are going to exploit, and that you understand the market dynamics surrounding the opportunity—why does this situation exist and persist, and why is it only now that it can be addressed? Show that you really understand the very particular market segment you are targeting, and frame your market analysis according to the specific problem and solution you are laying out. In some cases, however, the problem you are attacking is so obvious and clear that you can drop this slide altogether. You do not have to tell investors that there are a lot of cell phones out there, or that teenagers like to socialize. Save yourself, and the investors, the pain of restating the obvious.

Slide 2.1: Problem/Opportunity Size.

Even if your market opportunity is not obvious, in most cases you can assert the size of your opportunity on slide 2. But sometimes you may need a dedicated slide to clarify the factors that define the size and scope of the opportunity, particularly if you are going after multiple market segments. Or there may be a unique emerging trend that requires explanation. Do not use this slide to quote the Gartner Group or Frost & Sullivan; show that you really understand where your prospective customers are from the ground up.

Slide 3: Solution.

What specifically are you offering to whom? Software, hardware, services, a combination? Use common terms to state concretely what you have, or what you do, that solves the problem you’ve identified. Avoid acronyms and don’t try to use these precious few words to create and trademark a bunch of terms that won’t mean anything to most people, and don’t use this as an opportunity to showcase your insider status and facility with the idiomatic lingo of the industry. If you can demonstrate your solution (briefly) in a meeting, this is the place to do it.

Slide 3.1: Delivering the Solution.

You might need an extra slide to show how your solution fits in the value chain or ecosystem of your target market. Do you complement commonly used technologies, or do you displace them? Do you change the way certain business processes get executed, or do you just do them the same way, but faster, better and cheaper? Do you disrupt the current value chain, or do you fit into established channels? Who exactly is the buyer, and is that person different than the user?

Slide 4: Benefits/Value.

State clearly and quantify to the extent possible the three or four key benefits you provide, and who specifically realizes these benefits. Do some constituents benefit more than others, or earlier than others? These dynamics should inform your go-to-market strategy, and your product/service roadmap, which you will discuss later.

Slide 5: Secret Sauce/Intellectual Property.

Depending on your solution, you might need a separate slide to convince investors that no one else can easily duplicate or surpass your solution (assuming that’s actually true). If you are in a business sector in which intellectual property is important, this is where you drill down into your secret sauce. This is usually some combination of proprietary technology, unique team domain expertise, and unique partnership. Boil this down to simple elements and terms, devoid of jargon. Do not walk the audience through a detailed tour of your product architecture. Instead, highlight the elements of your technology that give you unique potential for leverage and scale as you grow. If you do slides 4 and 5 well, it will be easy to make the case for your …

Slide 6: Competitive Advantage.

You may be good, but are you really better than everyone else? Most entrepreneurs misunderstand the objective of this slide, which is not to enumerate all the deficiencies of the competition (as much fun as that may be). Just because you have really cool technology does not mean you will win. You need to convince the investor that lots of folks will buy your product or service, even though they have several alternatives. And don’t forget that the toughest competitor is often the status quo—most prospective customers can muddle on without buying your solution or your competitor’s solution. The best way to convince an investor that you really do have a better mousetrap is to have referenceable customers or prospects articulate in their own words why they bought or will buy your offering over the alternatives. Use this slide to summarize the three or four key reasons why customers prefer your solution to other solutions. Many entrepreneurs have been coached to use a four-square matrix that shows that they are in the upper right-hand quadrant, but this has become a joke in the venture community. Check-boxes are better, if they are not abused. Make sure your check-box criteria reflect the market’s requirements, not just your product’s features.

Slide 6.1: Competitive Advantage Matrix.

Depending on how important the analysis of competitive players is in your market segment, you may need a detailed list of competitors by category with their strengths and weaknesses in comparison with your company. Preferably, you develop this as a “pocket slide” to be used for Q&A, if necessary. Whether or not you present this slide, it is important that you do your homework on the competition, and that you don’t misrepresent their strengths or their weaknesses.

Slide 7: Go to Market Strategy.

The single most compelling slide in any pitch is a pipeline of customers and strategic partners that have already expressed some interest in your solution—if they haven’t already joined your beta program. Too often this slide is, instead, a bland laundry list of standard sales and marketing tactics. You should focus on articulating the non-obvious, potentially disruptive elements of your strategy. Even better, frame your comments in terms of the critical hurdles you need to get over, and how you are going to jump them. If you don’t have a pipeline, and there is nothing unique or innovative about your strategy, then drop this slide and make the elements of your sales model clear in the discussion of your business model (next slide).

Slide 8: Business Model.

How do you make money? Usually by selling something for a certain price to certain customers. But there are lots of variations on the standard theme. Explain your pricing, your costs, and why you are going to be especially profitable. Make sure you understand the key assumptions underlying your planned success and be prepared to defend them. What if you can’t sustain the price? What if it takes twice as long to make each sale? What if your costs don’t decline over time? Many investors will want to test the depth of your understanding of your business model. Be ready to articulate the sensitivity of your business to variations in your assumptions.

Slide 9: Financial Projections.

The two previous slides above should come together neatly in your five-year financial projections. You should show the two or three key metrics that drive revenues, expenses and growth (such as customers, unit sales, new products, expansion sales, new markets), as well as the revenue, expense, profit, cash balance, and headcount lines. The most important thing to convey on this slide is that you really understand the economics and evolution of a growing, dynamic company, and that your vision is grounded in an understanding of practical reality. Your financials should tell your story in numbers as clearly as you are telling your story in words. Investors are not focused on the precision of your numbers; they’re focused on the coherence and integrity of your thought process.

Slide 10: Financing Requirements/Milestones.

It should be clear from your financials what your capital requirements will be. On this slide you should outline how you plan to take in funding—how big each round will be, and the timing of each—and map the funding against your key near-term and medium-term milestones. You should also include your key achievements to date. These milestones should tie to the key metrics in your financial projections, and they should provide a clear, crisp picture of your product introduction and market expansion roadmap. In essence, this is your operating plan for the funds you are raising. Do not spend time presenting a “use of funds” table. Investors want to see measures of accomplishment, not measures of activity. And they want to know that you are asking for the right amount of money to get the company to a meaningful milestone.

Summary Slide.

This slide is almost always wasted. Most entrepreneurs just put up three or four dot points about how wonderful their investment opportunity is. Generally the words are the same words that investors hear from scores of other entrepreneurs, such as, “We have a huge opportunity, and we will be the winners!” Your key objective on this slide is to solidify the core value proposition of your company in words that are memorable and unique to your company. If the venture investor in the room has to give a short description of your company to his partners, these are the words you want used. This is a good place to reinforce your tagline, or mantra—the short phrase that captures the essence of your message to investors. The best solution to creating your summary slide is to imagine that this is the only slide you will ever be able to present. If you had to do your whole pitch in one slide (with 30 point font), this is that slide.

So here we have a good general outline for pitching your company. But remember, it’s about selling your investment proposition, not about covering points. Don’t get fixated on using this or any other template. You should know the issues about your company that investors are most concerned about. Those are the issues you need to concentrate on. Make sure you address all the predictable “burning questions” as early as you can in your presentation, even if it means violating the sequence above.

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