Raising capital is one of the most critical and intimidating parts of the startup journey. Capital is the fuel you need to obtain resources, scale and ultimately achieve the success you desire. But an idea, a great name and beautiful presentation are not enough to get investors to say "yes." At the end of the day, investors are looking for substance.
Whether you're a new founder or raising your Series C, don't walk into your next investor meeting without preparing and nailing these six key elements of a good pitch.
The customer and their problem
Many founders have a tendency to fall in love with their product or service and spend most of their time on specs and technology. Great startups do not make technology for the sake of it. They solve a real problem.
Successful founders tell a narrative around the customer and their problem. You want to share this in the very beginning - and then continue referring to the pain point and how your product offers a solution.
Also, providing data that quantifies and substantiates your claims will add weight to your statements.
Know your "Why"
This is the reason you exist and the foundation that your entire pitch is built on. You are not a product or a service. You are a mission and a vision. You want to tell that story in your pitch.
Make this clear early in your presentation and restate it. The customer, the problem and the solution should all tie back to the mission.
In his powerful TED talk, author Simon Sinek highlights what truly persuades others when he says, "People don't buy what you do, they buy why you do it."
While you can expect that your investors will substantiate their decisions with facts and data, it's your mission that convinces them to join your cause.
Use of proceeds
If I asked you for $500, you'd likely respond by asking, "What's it for?" Now, imagine if I asked you for $50,000 or $5 million. Your response would be the exact same.
A "use of proceeds" document justifies the amount of money you are raising. List all the areas you'll spend money in order to reach your next milestone. This should include expenses like "programming talent" or "online marketing spend."
A good use of proceeds proves that you know how to allocate resources and execute.
While not the most exciting part of your pitch, the financial model is crucial to receiving a check. A financial model articulates how your business will unfold and details the key economic metrics that are important to investors.
Your financial model should show how your revenues, costs and profits will change over the next 6, 12, 24 and 36 months. You should highlight key metrics like profit margins and a break-even point.
Work with a CFO, in-house or outsourced, to create accurate and polished financial documents.
New entrepreneurs often lack a strong understanding of the metrics they need and what they mean. Metrics are unique to each type of business and industry. A Software-as-a-Service (SAS) app will have different metrics than a hardware product company.
Take the time to understand the metrics that are unique to your company and industry. Talk to an advisor or mentor about which metrics you need to include and then calculate the data for each.
Effectively addressing competition is a great way to show your strengths as a company and as a founder.
Allocate time to highlight the strengths and weaknesses of your competition in an honest way. Share what you think their strategy will be and why it won't work. Then explain why your strategy is better and why you are uniquely positioned to succeed.
Don't be negative about your competitors and don't make subjective statements that you can't prove, like "we're smarter" or "we have the best people." You'll come off as arrogant and dismissive.
Nailing these six substantive parts of the pitch will maximize an investor's trust and confidence in you as a CEO. By addressing the most important parts of the pitch, you will maximize the possibility that an investor will understand why you and your idea are worth their investment.