Jon Maroney - February 2019
How to pitch an investor
Venture capitalists love metaphors. And nowhere is this more prevalent than when we talk about a good startup “pitch” – the first meeting with an investor where you get to tell your story.
We like to say things like, a good first meeting is like a good first date – the primary goal is to get to the second date.
However, one of our favorite metaphors refers to the pitch itself. And, whenever we work with companies on their pitch, we often say…
The best startup pitches are like a four-act play that even Shakespeare would be proud of.
First Act - The Problem (“The Why”)
This is the time to paint the problem that you’re solving. Address the questions of...
- How big is the problem and is it growing? (ie, market size)
- Who does the problem impact? (ie, target customer)
- And, who else is trying to solve the problem, and why are those solutions failing? (ie. opportunity)
Second Act - The Solution and the Plan (“The What and the How”)
This is the meat of the pitch! This is where you describe what you do and how you’re going to execute (at least, for now, anyway)
- How you are solving the problem you just laid out?
o Your solution/technology/product (ie, product/service)
o What does it do and why it’s better than the other solutions out there? (ie, competitive differentiation)
- Why is it resonating with customers?
o What have you learned so far– customer surveys? revenue? Beta tests? (ie, traction)
- How are you going to get the product into customer’s hands (ie, go-to-market)
- How do you plan to make money, or current hypothesis you’re testing for your business model (business model)
- How much money are you raising? What are the milestones you’ll need to hit to raise your next round? (ie, fundraising plan)
Third Act - The Team
- Why are you the best people in the world to solve this problem and create this company?
- Who is on the team that’s going to executive on this idea and why are you well positioned? (ie, team)
Final Act - The Goal
This is the peak of your pitch! It’s time to bring it to a conclusion. Discuss…
- When people like you (Act 3) have developed a product and plan (Act 2) to target a market opportunity as large as this (Act 1), this is what happens to those companies (ie, the exit). It’s a time to compare your company to something that has done really well and that you are going to be like. Just don’t be the “Uber of xxx”.
- And, what does the company look like 5-10 years from now? What’s the big, hairy, long term goal? (Vision)
Like any good play, you want your audience to come and see the sequel! You don’t have to go into detail on each aspect of the vision. However, you want to create a clear, concise, and compelling story.
You want the investor you are meeting with to come away saying, “Wow! Interesting team, big opportunity, and seems like a reasonable plan. I’m excited to learn more.”
And remember, raising money is like courtship – it’s a process that’s building towards a long-term, mutually beneficial relationship filled with ups and downs…and that can be expensive to get out of.