When it comes to pitching investors on something like software, the presentation is often more pivotal than the product itself. It’s not something that can sit atop a conference table; it has to be explained, demonstrated and experienced.
That’s a lot of pressure on a meeting that lasts only a few minutes, so you have to make it count.
“This event was off the charts”
Gary Vaynerchuk was so impressed with TNW Conference 2016 he paused mid-talk to applaud us.
I recently asked a panel of nine successful young entrepreneurs the following question:
What’s one CRITICAL, must-include item or data point for a software startup pitching an investor for the first time?
Below are their top picks — some numerical, some conceptual, but all designed to leave a promising impression:
1. Show early success
Investors don’t want to invest in your idea without knowing that you’ve already had some success with it. Many ideas sound good on paper but fail spectacularly when put in front of customers. Unless you already have a stellar reputation, having a basic prototype and showing early success — user growth, engagement, retention or revenue — is critical to winning investor interest.
– Emerson Spartz, Spartz
2. Identify your KPI and articulate it well
There’s no magic metric in software startups (so don’t let anyone convince you there is). That said, it’s crucial to have a core KPI (key performance indicator) to benchmark your progress, and it’s typically ideal that such a metric be a revenue lever. In the rare case that revenue is an afterthought, a well-articulated KPI — and insight into how to grow it — is still crucial for investors.
– Derek Shanahan, Playerize
3. Answer “Why now?”
The single biggest question smart angels and VCs are asking these days is “Why now?” What is unique to your business that makes this the correct time to launch? Typically, this is a technology innovation, a shift in sentiment or a market landscape change. The answer shouldn’t be “I was born.”
– Adam Lieb, Duxter
4. Understand your sales funnel
Having a robust understanding of your sales funnel will be tremendously helpful to include in your pitch and presentation to investors. Not only does a sales funnel enable you to better model your financial projections and sales timing, but it will also spark conversations around how to increase conversions at each stage and where the investor can add value throughout the chain.
– Doreen Bloch, Poshly Inc.
5. Provide customer acquisition costs
Investors want to know how much it costs you to gain a customer. Ideally, you can provide this cost per marketing channel. For example, you could say, “It costs us $5 per customer through ads, but $2 per customer through affiliate networks.” Craft a story around the core of your costs and how you will lower them. Investors want to know that their money is going toward a scalable business!
– Aaron Schwartz, Modify Watches
6. Prove your team can execute
Smart investors invest in you and your team because it’s all about execution. You HAVE to prove to them that you are experienced and capable — and that you will be able to do everything in your deck.
– Trace Cohen, Launch.it
7. Offer key financial metrics
Let the investor see the assumptions you’ve built into your financial forecast. Include a forecast that takes into account your revenue projections for the next five years, your gross margins, the ROI for your potential investor and your anticipated exit strategy.
– David Ehrenberg, Early Growth Financial Services
8. Find a real audience
For a startup to succeed, there has to be a clear audience — something a little more specific than everyone, everywhere. Think tiny: Exactly who will use your software, and why? If you can be realistic about your audience and its size, you can be flexible about what you actually wind up building and how you price it. But if you can’t find an audience, you’re doomed.
– Thursday Bram, Hyper Modern Consulting
9. Craft a story
A bland, fact-based startup pitch won’t go over very well with investors. Get to know a little about the investor before crafting your story, and gear it toward something she’ll find interesting. It could be anything from how you came up with the idea to something even more creative (“Envision a world where…”). If you need help, investigate pitch gurus online — there are plenty of them.
– Andrew Schrage, Money Crashers Personal Finance
Image credit: Thinkstock
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