Tips for a Good Pitch

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An outline intended to be useful for developing a first pitch to a venture capital investor.

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Tips for a Good Pitch

  1. Outline For A First Pitch To A Venture Capital Investor<br />Todd Hixon<br />New Atlantic Ventures<br />September, 2009<br />
  2. Overview of NewCo  <br />State the theory of the business<br />Indicate what is novel/unique<br />You should be able to say this very succinctly, without a lot of wind-up.    <br />
  3. NewCo’s Market Opportunity <br />VCs are looking for businesses that can grow to be worth $100s of millions, and $ billions in the best case.  <br />Give a credible estimate of the size of the market<br />Explain how NewCo’s market gets to be that big.  <br />How do you expect to get paid?  <br />What are the critical assumptions and inflection points? <br />
  4. Expected Business Growth <br />Who is the customer? Describe a “poster child” customer.  <br />Explain why customers are strongly motivated to buy<br />What problem do you solve?<br />How important is this for the customer?<br />How much time until you are ready for revenue?  <br />How long are your sales cycles?  <br />How fast does this spread once it takes root?<br />Explain why is now the right time for this business to take off? I.e., “why this, why now?” <br />
  5. Market Traction    <br />Demonstrate that the business concept works in the market  <br />Examples: <br />trial purchases from well-regarded customers, <br />web site activity, <br />revenue from a predecessor business model, or <br />endorsements from industry thought leaders. <br />
  6. Competition <br />Who else solves the problem that you solve?  <br />How does this play out as the market evolves<br />How do you create competitive advantage? <br />You need to make the case that your success will be hard to imitate, and potential acquirers will chose to buy, not make. <br />
  7. Business Model<br />How do you get paid?<br />What motivates the other parties in the system to pay you?<br />What do you have to do to get to revenue?<br />The ROI characteristic of the business<br />The up-front investment to get to revenue<br />Ongoing ROI at the margin: $ of margin per incremental sales dollar versus $ of investment needed to support growth<br />
  8. Team<br />Who are the key people?<br />What have they done?<br />Who needs to be added?  <br />Investors are looking to understand what kind of people you have, their expertise, and their track record. <br />
  9. Exit Opportunity<br />M&A Exits:<br />Who are the potential acquirers?<br />Have they been active?<br />What kind of revenue multiples are paid (or other relevant valuation metric)?<br />Why will they chose your business and not some other?  <br />IPO Exit: why does your company have characteristics of an IPO company?<br />If it does; this is no a must<br />
  10. Investment Required<br />Show a financial forecast, focused on cash flow<br />Key issues:<br />How much investment does it take to get to cash flow breakeven?  <br />How high is your burn rate before revenue ramps up?<br />In today’s world this is a key risk factor. Venture capital has become scarce, and follow-on financing rounds are often painful.  If you build up a big burn rate on the threshold of revenue, and revenue is delayed (as often happens), the business quickly consume a lot of cash and be forced to raise money before it can demonstrate a revenue ramp<br />
  11. Proposed Financing<br />How much money do you want to raise?<br />Brief info on the current cap table is useful: how much money has been raised before, post-money value of the last round?<br />What value-creation milestones can you reach with this money?  <br />
  12. Investment Summary<br />Tell the investors why they should reach for this deal<br />“Ask for the order”<br />Focus on the elements that are exciting for investors, e.g.:<br />$ billion recurring revenue market<br />&gt;200% hard ROI for customers<br />Patented technology costs &lt;50% of competing solutions<br />Experienced team with record of start-up success<br />5 marquee names are already customers<br />

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