Content and Structure of Your Investor Pitch

Structure your communication correctly, and your content will sink in effortlessly. As we’ve heard it before, it’s not so much what you say, but how you say it. Let’s go ahead and talk about a HUGE exception to that rule: The Investor Pitch. Structure is hugely important here, but if you don’t answer the question, “How will your business make the investor money,” then structure doesn’t matter. Neglect to answer that question overtly and specifically, and you’re going home.

Critiquing an investor pitch the other day during a Pioneer Program Jam Session at the Ranch, Raj Mehta, of Clikserv, gave the group a list to cover during a practice investor pitch. In classic Tech Ranch style, it was entrepreneur helping entrepreneur. So let’s share the list that Raj gave us. His perspective, is that investors are only “invested” in listening to your pitch to answer the previous question. “How can I make money on this person’s venture?” Since they’re already asking the question, if your pitch begins to answer it immediately, you are well on your way to securing your venture’s future. Take the following into account:

1) Don't make your sales presentation into an investor pitch. Investor pitch answers how the investor makes money. The sales pitch answers why your product makes someone’s life better. These are not the same thing.

2) What is your “beachhead” market? The more specific you can make it, the better and easier your marketing, sales, operations and investment plans are going to be. Where is your strategically chosen site to penetrate the market? This is the place where you get in, get traction, and get ready to expand once you’ve secured your base. This is not your ultimate goal of world / sales domination, just the easiest place to enter the market and get missionary sales. You will move on from here, but you have to secure Normandy before you get to Paris.

3) What is your market strategy? How large is it? How will you reach it? How much of the market can you realistically capture? Show the investor what your plan is to capture your market over time. Show understanding of the market need in relation to your product / service. Establish a reasonable market share you can capture. This market share MUST be large enough to get the investors their ROI.

4) What’s your exit? Since the investors are looking a few years out, they want to know when you’re going to exit the stage so that they get a return on their investment. Your exit marks when they can get their money out.

5) How would you use the money? Why is it important? If you’re going to pay salaries with it, interest will plummet. However, if you need the money to collect crucial market data, or to prove your technology, then they’re interested in helping. Also consider that asking investors for less than a quarter to half a million smelly fishy. Less than that may be family / friends territory. Also show how much of your own money have you sunk into it. Without a significant financial investment, how certain are you to stick to the plan through a rough patch?

6) What are your future milestones? Why do you think you can reach them? What’s the cost of reaching each milestone? This is where you show them why you’re asking for the amount you’re asking for. This Investment = These Milestones, which in turn = Even More Money.

7) Make your pitch shorter and leave a lot of time for Q&A. There's time for a fuller product discovery if you let them voice their own questions. Tell them how much you’re asking for almost immediately, and then spend the rest of the time telling them why their investment will come back to them many fold.

8) Establish credibility with pictures, data and references. This is the financial part of the pitch. Don’t tell them; show them this part of your pitch. So charts help to establish credibility for your market projects and the ROI.

9) Did you include calculations that show working capital and cash flow hole? Get someone who has the financial chops to put this together. There's no need for very detailed 5 year plans. What the investor is looking for is a window of what is possible with his investment in your product, with the chosen market. State all your assumptions.

10) Present a unit economics calculation (Price - Cost = Margin) early in your financials. Base this on total cost of ownership, actual cost, cash flow or whatever metric establishes it, based on validated data. Compare with alternative solutions in the market. If you're selling metals based construction materials, state what the user's TCO is likely to be with wooden or recycled composite materials. State assumptions.