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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.

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

Published in: Economy & Finance, Business

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