Forbes India – A Beginner’s Guide to Pitching Startup Ideas to Investors
India has the third largest startup ecosystem in the world with around 60,000 startups. And he managed to raise $42 billion last year. Both of these numbers are expected to grow at record speed over the next three years, as will the need for these new founders to create a pitch deck to raise funds from pre-seed, seed, Series A to the F series.
Today, most entrepreneurs in India do not have MBAs from sophisticated B schools. They are humble traders, inventors and artists turned entrepreneurs who don’t deserve to be left behind simply because they haven’t been taught to articulate their purpose and mission in a way that makes sense to the financier. It is therefore for them, the scheme that you must always have in mind when you go to a meeting to raise funds.
Articulation of the problem
Why does the world need what you are doing right now? The entry point is crucial for success. Too soon, you are avoided; too late, you’re unconscious. So, before moving on to USPs (Unique Selling Points) and strengths of your startup, always clarify the current need. The world doesn’t need another cryptocurrency, but if you have a way to massively reduce energy consumption by having mining run entirely on recycled energy, then we speak.
For Dropbox, it would have been like, “In this emerging digital world, wherever you are in the world, your ready-to-share, easy-to-compress data will be with you.” For Airbnb, the crux was: “Soaking personalized local culture into affordable prices and an independence that big hotels looking like clones of each other around the world can’t offer.”
And that clarity from the start will help you control, grow, and steer your startup in the right direction.
Do not solve all market problems. No one can at a time. There would be other players in the same segment looking at it from a different angle and your refreshing new focus can make all the difference. Match your offers with the problems you are best equipped to solve and put the pedal to the metal. Ask yourself, do you want to be a merchant or a brand?
A cheap and unorganized local fashion market sells everything and is therefore not known for that “something”. And just as important, especially before you say “but Amazon does everything”, please calculate the resources you currently have. If you only have two arrows to hit the target, how much focus do you need? Even Amazon only started out selling books online when no one was, and Uber was solving the problem of guaranteed pickup in a faster time before food delivery and their current investments in self-driving. When you have warehouses full of arrows, you can branch out into anything until then – surgical precision, please.
The clarity of the metrics
A good pitch makes its concept clear to a college student. A big one also makes you believe it through undeniable numbers. Have every data point handy before you walk into that conference room and not just the top line, bottom line, and burn rate.
However, the most important research is not actually market size and competition, they are both constantly expanding and changing for every industry. TikTok happened when all the pundits said that the social media market was completely saturated and had way too many billion-dollar competitors. What will make you confidently stand out is your audience research – the why, when, what and how of their every move. Know them like you know your family. Real customer surveys about their experience with your brand work like a charm for an opening section for this purpose.
If you’re in the content industry, your investors might be very interested in your DAU (daily active users) to MAU (monthly active users) ratio, your retention curve, and average time spent per user. If you’re into FMCG, basket size (AOV), sales frequency, and CPA (cost per acquisition) are important to gauge your product line’s promise.
When you’re in that conference room, the analyst’s job is to poke holes in your narrative and venture out to see how long you can float in your speech. A little trick is to internally create a list of one hundred questions that your biggest critic will ask you if you were in the same room. ‘Why did you choose audience A when audience B has more ability to pay?’, ‘By when do you expect to be profitable?’ or the one who asked in eight out of ten meeting rooms, “What happens when others steal your idea?” (Cheat code: 90% of the time, maximizing logistics efficiency is the right answer. If your distribution penetration and warehousing are high-end, you’ll thrive even if you’re a good e-tailer. This is not necessarily true although for a large cookie marketing campaign the customer would buy another cookie if that brand is not available in the local store at the time. )
The scalability plan
Investors are betting on the promise of tomorrow rather than the guarantee of today. It’s great that you’re generating X right now, but how aligned are you to hitting 100X in three years with your current revenue stream and business model. It’s also imperative that your visions align with theirs, especially when entering a crowded market. They’re looking for that big picture, not all fleshed out micro schedules, but definitely intention and ability through a confident macro concept. Pro tip: dance on the edge of being fairy tale and believable, too much on either side hurts credibility. Uber had literally offered the best, most realistic, worst-case scenario in the same slide of their 2008 pitch.
Buzzfeed promised during the first round of the presentation: they will “dramatically increase traffic without hiring publishers” and create a profitable revenue stream by considering “advertising as content” and “trend targeting”. So, before entering this meeting, it is advisable to know at least some benchmarks and strategic routes that you are aiming for in the next two years.
When you approach an investor for money, your chances of approval find a comfortable advantage if you can burn the spending plan. You will be trusted when you have a budget mapping shield of at least a one-year plan to successfully scale with the capital you seek to raise. And if you’re a first time entrepreneur you don’t need to get into the nuances with a thorough excel, it can always follow and evolve but unless you’re already a successful entrepreneur for your second or fourth major pivot, it generally shouldn’t be an open request.
“We need a million for our startup vs. X% equity” vs. “We need a million to expand our product team, spend a quarter of that money on marketing, including e-commerce deals and another to operations to reduce costs by 35% by completely streamlining our in-house distribution from the current third-party deal and delivering X percent equity dilution for the same. investor, who will you trust most with your money?
Raising funds and diluting equity is a long game with longer repercussions, try to be as informed as possible about your offer and expectations. And wrap up the above points even when writing cold emails to VCs or angel investors. May your business elevate both your ambitions and the category itself. Go be the sun.
The writer is the chief strategist and founder of Salt and Paper Consulting. The views and opinions expressed here are personal.
The thoughts and opinions shared here are those of the author.
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