Prepping for your big pitch
There’s an unfortunate reality about getting a startup off the ground: having a promising idea simply isn’t enough to get you funded. If you want to gather the capital necessary to get your business operational, you need to have a good idea as well as a solid bank of statistics, plans, outlines, and documentation to support that idea. Though it would seem like many ideas simply “sell themselves,” this is almost never the case.
The prudence of investors
You’re going to be pitching to potential investors, so remember that investors aren’t looking to give money away for free; they need to get something out of this. This is a risky endeavor, and they need to be assured that this isn’t just a good idea, but that it’s also a practical one with a genuine potential return. That’s the entire reason behind the standard formatting of a “pitch deck,” which theoretically tells investors everything they want to know.
So what is it that investors want to see in a successful proposal?
Ingredients for success
These are the things investors want to see in a winning proposal:
- A unique value proposition (UVP). First and foremost, your idea needs a unique value proposition; something that explains exactly what the company does and why it’s valuable, not to mention why it’s different than everything else on the market. This is a strong lead-in for any investor, as most prospective investors will only give ideas a cursory glance before dismissing them or probing for more information. Your UVP will also be useful later down the line, when you’re convincing clients instead of investors to do business with you.
- A detailed financial model. Ideas are powerful conceptually, but investors are going to be putting real, countable money into your startup. You need to be able to quantify everything in a detailed financial model; explain how you came up with the exact figure you need to get started, and how that money’s going to be used. Figure out and explain your cost basis, your potential for profits, and how you expect to grow over the coming years. The more detailed you are, the better.
- Thorough market research. It’s easy to form a hypothesis about how your idea might sell in a specific target audience, but again, investors like to see numbers here. What is it about your demographics that make your business so necessary? What hard evidence do you have to support your hypothesis? Thorough market research shows you’ve done your homework, and adds a layer of validation to your idea.
- Acknowledgment of the competition. You aren’t the only business doing this; chances are, even if your specific niche is unfilled, there are related businesses doing something similar already in play. Ignoring these competitors is a glaring flaw investors will see in your pitch deck immediately, so be sure to list at least a handful of your toughest competitors and explain why your business has an advantage over them.
- A reputable leader. Companies may be based on ideas, but they’re built and supported by people. All businesses, no matter how good they are in theory, target=”_blank” rel=”nofollow”need strong leadership if they’re going to survive. If you’re the one who’s going to make the decisions, you need to justify your acumen and experience, proving that you have what it takes to lead the business. Otherwise, you’ll need to find partners and employees with niche expertise who can compensate for your weaknesses.
- An expectation of return. This should be a part of your financial projections already, but make sure you have a specific callout for how you expect to return on your investors’ contributions. You’re asking them for a hefty sum of money, but what are you going to give back to them when you’re successful?
- Challenges and risks. Finally, your pitch deck shouldn’t all be blind optimism and pep talking. Be sure you include a section on the significant risks, challenges, and obstacles your business is going to face. This isn’t pretty, and it may not be fun to think about, but it’s a necessary admission for an all-around strong business plan.
If you can put together a pitch deck that addresses all seven of these items satisfactorily, you’ll be in a good position to convince any investor that your business is worth investing in. These are basic and practical factors that, when presented, show that you’re a competent entrepreneur and that your idea has real merit. The other benefit in including these factors is that they’ll force you to confront the weaknesses of your business early on—when you have time to correct them.