How Startups Should Pitch Venture Investors

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I had the pleasure of mentoring the 2013 class of entrepreneurs at Founder Institute Chicago. Here is the presentation I delivered on "How to Pitch Venture Investors". The lesson provides high level …

I had the pleasure of mentoring the 2013 class of entrepreneurs at Founder Institute Chicago. Here is the presentation I delivered on "How to Pitch Venture Investors". The lesson provides high level guidance on: (i) how to sharpen your elevator pitch; and (ii) what points to drive home in your initial conversation. This lesson helps entrepreneurs learn what venture capitalists are listening for from startup pitches, and how to communicate your story in a way that maximizes your chance for funding.

The matching video for the audio part of the presentation can be found at https://vimeo.com/57294339. For more lessons, read my 101 Startup Lessons on the Red Rocket website (www.RedRocketVC.com).

And, please follow me on Twitter at www.twitter.com/georgedeeb.

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Transcript

  • 1. Pitching Your Company
  • 2. About George Deeb • Managing Partner (2010 to date) • Chairman & CEO(2009-2010) • Founder & CEO (1999-2008) • Investment Banker (1991-1999) • BBA-Finance (1987-1991)
  • 3. Elements of a Good Pitch• Present the Facts o Educate on your business/industry• Identify Solutions to Real World Problems o Detail your fix to known industry pain points• Create Excitement o Sizable market opportunity to yield high ROI• Highlight Barriers to Entry o Highlight patent protection or high-switching costs• Build Your Credibility o Demonstrate management is smart and backable
  • 4. Types of Pitches• Elevator Pitch o Explain your business/opportunity in one sentence o Best for networking events and email intros• In-Person Presentation o Explain your business/opportunity in 10-15 slides o Best for 30 minute meetings• Detailed Business Plan o Explain your business/opportunity in 25-50 pages o Best for deeper dives during diligence—not upfront
  • 5. Elevator Pitch
  • 6. Opening Line to Every PitchMy company, (company name) ,is developing (a defined offering) to help (a target audience) (solve a problem) (with secret sauce) .
  • 7. iExplore Example My company, iExplore.com , is developing a one-stop travel website to help 90MM adventure travelerseasily find and book customizable tours at prices 25% less than competitors .
  • 8. The Offering• Be Specific o Not: “a pet business” o But: “an e-commerce website for pet supplies”• Avoid Buzzwords o Not: “the Groupon of travel” o But: “group-buying for air/car/hotel bookings”• Skip the Adjectives and Superlatives o Do not use terms like “the best”, “the leading”, “most revolutionary”, etc.
  • 9. The Audience• Identify Specific Demographics o Not: “female consumers” o But: “new mothers”• Identify Specific Market o Not: “travelers” o But: “international air travelers”• Clarify the Buyer o Not: "large businesses“ o But: “CTO’s at multinational companies"
  • 10. The Problem• Make sure everyone can understand what problem your business is solving and why there is a need for your business to exist. o Not: “industry is flawed” o But: “existing technology not easily customizable”
  • 11. The Secret Sauce• Explain what makes your business unique. o Not: “cheaper labor costs” o But: “a distributed crowdsource of stay-at-home moms”• Explain what makes your business defensible. o Not: “the most unique technology” o But: “a patent-pending technology”• Explain your revenue model. o Not: “travel revenues” o But: “a 15% travel agent commission”
  • 12. MediaRecall ExampleMy company, MediaRecall ,is developing a B2B digital video technology to help CTOs at major film studios digitize their film archives 50x faster and 80% cheaper .
  • 13. Key Points toCommunicate
  • 14. Communication Points• Your Business/Revenue Model o Explain your business and how you make money• Your Industry/Competition o Communicate industry size, growth, competitors and barriers to entry• Your Management Team o Highlight relevant past experience of executives• Your Go to Market Strategy o Summarize expected sales and marketing tactics• Where You Are in Your Growth Curve o Summarize your progress and “proof of concept” to date• How Much Are Your Raising and Use of Proceeds o Summarize how much money you need, and for what purposes• What Are Your Financial Goals/Expected ROI o Summarize how big a business you can build with that raise
  • 15. Business/Rev Model• What Exactly Do You Do?• What is Your Secret Sauce?• How Do You Make Money?Make it Easy to Understand
  • 16. Industry/Competition • How Big is Your Industry? • How Quickly is It Growing? • What Market Share do Your Forecast? • Who are Key Competitors Today? • Who are Potential Competitors? • What are Your Barriers to Entry?Show a Big, Defensible Opportunity
  • 17. Management Team • What is the Past Experience of Team? • Is Experience Relevant to Industry/Role? • Any Past Startup Experience? • Any Track Record of Success? • Has Team Worked Together Before? • How Does Team Think? • Is Their Pitch Credible?Have a Winning/Credible Team in Place
  • 18. Go To Market Strategy• Are You B2C or B2B focused?• Are You Sales Driven or Marketing Driven?• What Tactics Do You Plan on Using?• Have You Successfully Tested Those Tactics?• What is Your Expected Cost of Acquisition?• How Does That Compare to Revenues?• What is the Lifetime Value of Your Customers?Present a Well-Thought & Tested Plan
  • 19. Progress to Date • How Long Have You Been in Business? • Do You Have any Proof of Concept Yet? • Any Visitors to Your Website? • Any Buying Customers? • Any Key Partnerships Signed? • How Big is Sales Pipeline?Don’t Approach Investors Too Early
  • 20. The Raise/Use of Proceeds • How Much Cash Do You Need? • For What Security, Equity or Debt? • At What Terms or Valuation? • How Will the Money Be Spent? • How Long Will Cash Last? • Will You Need Additional Monies Later?Make Sure Reasonable & Lasts 12+ Mos.
  • 21. Your Financial Plan/ROI• How Big of a Business Can You Build With Cash?• Is That Reasonable Given Market and Cash Size?• What Are Long Term Exit Options for Business?• What ROIs are You Forecasting For Investors?Show Credible 3-5 Yr Plan to 10x ROI
  • 22. Further Reading http://www.RedRocketVC.com• Lesson #4: How to Raise Capital for Your Startup• Lesson #7: Key Components for Writing a Business Plan• Lesson #10: How to Best Approach VC’s and Angels www.twitter.com/georgedeeb
  • 23. Thank you!www.founderinstitute.com/join/bootcamp