Pitching Notes From a World-Class Startup Accelerator
Here’s how we taught our startups to deliver awesome early-stage investment pitches
“Best ‘early stage’ event I’ve ever attended, anywhere — quality, investible businesses with world-class pitches.” Mark Vivian, movac (NZ VC)
In 2012 there were approximately one hundred ‘registered’ angel investments made into New Zealand startups according to the Young Company Finance Index, and all of these companies had to make an investment case, or pitch, to investors to raise this money.
Learning how to make an investment pitch is a critical skill for any startup CEO targeting fast growth where operating capital will exceed revenues in the early years, and thus much of this capital has to come from external investors.
When I designed and delivered New Zealand’s top startup accelerator programme, Lightning Lab, I had founders prepare for an investor showcase at the end of the three month programme. This ‘demo day’, was their best opportunity to pitch their businesses to a room packed with early-stage investors, in the hope of attracting enough early-stage capital to fuel the next stages of their business’ growth.
The pitch advice I gave those accelerator teams, and anyone who subsequently asks me for similar pitch coaching, consisted of two things:
“Get the pitch structure right first; then work on the content.”
In preparing an investment pitch, focus on the overall pitch structure first, then flesh out content afterwards. Whilst you’re developing the right pitch, enough will change as you iterate with feedback, that your content will change significantly — leaving this after structure avoids a lot of wasted time.
I recommend using index cards to plan your pitch structure, one card for each slide in your pitch.
On the front of each card, write a one liner that summarises the entire message you want to convey with that slide. On the reverse, write three bullet points for each supporting point you want to talk to in making that main point.
Focus your last bullet point on making a good transition to the next card.
E.g. Here’s a massive problem which customer X has →
But it’s not just customer X that has this problem (pause…transition)→
There are Y customer X’s in our target market who share this problem →
(now lead onto market size card)
When you lay out each card you should be able to read the one liners and see the flow of the pitch and whether the points make sense in that order — if not, shuffle them around until you get it right. You might have to throw out- or tweak- a key point to emphasise it slightly differently as you iterate or try out different stories.
Five to seven minutes is a good length to target for a more formal audience pitch, with the pitch having three distinct parts:
- Intro — 1 minute
- Middle — 3–5 minutes
- Close — 1 minute
This equates to around seven to ten slides — not many, and not much time either, so it pays to be succinct during pitch structuring to ensure you nail the key messages through the one liners on your cards.
In terms of content, a great investment pitch needs to cover two key things:
- It must tell me about the product/service, and particularly why I should care;
- It must then tell me about how you turn this into a business and the investment opportunity for me (in terms of my eventual return).
A good analogy when building pitch content is to think of it like reeling in a big fish: bait your investors with a good story and introduction; reel them in with a sizeable unsolved problem in a big market; prove your line won’t break with good differentiation from others in the space; then land the investor with a massive revenue opportunity, good traction, and team that can do it.
The intro should be no more than one minute and must set the background: make it very clear what you do and why the investor should care. It should have impact and want to draw the investor into the rest of your pitch.
Pull out the best thing about your business and put it right up front to grab attention (killer team? great traction? smart intellectual property?). Many people leave this ‘reveal’ till later in their pitch, but if the investor has switched off during the first part they will have often missed the rest of the pitch that gives this reveal the impact you wanted.
Things that work well in the intro are startling facts, an interesting and relevant personal story, or even some humour…!
A good length for the middle part of the pitch is around three to five minutes, nailing down quickly the problem; who has this problem; and then demonstrate how painful that problem is — high frustration, big inefficiency, or a significant cost of alternatives are good pain points if you can show me how.
Remember that your audience may know nothing about your market so you need to convince them that this pain is real. Use your market validation to your advantage here — show traction with existing customers or results of customer interviews if you’re still very early, or use a well known customer to setup your story.
Show Me, Don’t Tell Me
I highly recommend using a product demo to show how your product solves all of these problems. Rather than just telling me your product does X, Y, and Z — use one of your existing customers to demonstrate each feature and the benefits of each to that customer. This type of demo not only shows you’ve got more than just an idea, but it also immediately gives context for your progress, design, and product vision as well as added credibility of traction by using a real customer.
It’s also critical to remember that you’ll be pitching your business to an investor, so get to the investment opportunity quickly— investors are looking to give you their money and then have confidence that your team can execute fast and competently to grow the value of that investment.
So, How Do You Turn This Into a Business?
If you’ve presented a good solution to a compelling need, how you commercialise this solution will be the next question in investors’ minds.
The next part of the pitch should therefore transition to how you’re going to make money and size the market appropriately to show there’s some scale in what you’re doing. To demonstrate your understanding of this market, you should also touch on the competition, importantly, communicating why you’re different to them and why your customers will care.
At this point in your pitch, you’ve likely convinced the investor there’s a big opportunity to be had, so only left to convince them you’re the team to do it by talking about your team’s relevant experience in that market and show your traction and velocity in terms of recent customer acquisition and retention metrics to prove your team can execute.
Don’t Forget the Ask
After you’ve set this up, you need make a clear ask, stating how much you’re raising, and how much of this you have committed already.
Since investing is so susceptible to social proof, you should do your utmost to get some commitments, even soft-commitments, on the table before the pitch — if you can say you’re raising 500K and 250K is already committed, you’ll demonstrate investor traction and will pique other investors’ interests, giving you more credibility and your pitch more urgency as the round will likely close sooner.
With the ask, let investors know what you intend to use those funds for — not just paying salaries or adding new features; what significant business milestones do you intend to achieve that will increase the value of your company during this next stage (could be achieving specific user growth; building out a monetisation platform and adding 500 customers, or others — whatever they are, be specific and realistic).
With that, the meat of the pitch is done, time to wrap up.
Imagine you’re an investor sitting through a pitch event— you’ve heard ten or so other good pitches (if you’re lucky; 30+ pitches if you’re not ;) — how do you make your pitch stand out amongst those others?
Have a really memorable ending.
A great close needs to hammer home the two or three key things you want the investor to take away from your presentation: e.g. highly experienced team, with great traction, operating in a massive greenfield market.
Finally leave them with a good, visionary, and sticky one-liner they can take away and tell all their investor friends.
This structure should remain relatively consistent across most pitches, although the content will vary by company. The last key to delivering a great pitch is to practice, test, and iterate in front of real people — especially people who don’t know your market, so that you surface any implied assumptions and jargon you may have tacitly used in your pitch.
I recommend startups practice a live pitch in front of real people as many as fifty times (without notes) to be able to deliver the final content with all-important confidence.
Assuming you’ve got a great underlying business and team, if you can deliver an investment pitch like this with passion, energy, and confidence, getting investment for your early stage startup should be a breeze — good luck!
Dan Khan | @leancto
(This article was originally published in an abridged form in Unlimited Magazine, June 2012 edition — this is the original article, updated and printed in full).
Credit to David Cohen, Founder and CEO of TechStars for the inspiration on my pitch strategy.