What to say in your investor pitch?

What to say in your investor pitch?

It’s raining deals in the start-up sector. But very few of those asking for funds actually get rewarded. What content can increase your chances of making it to that privileged group?
 
What pain point are you solving?
Make it very clear why you are asking for funds.
 
“We prepared a slide deck that outlined the problem we were trying to solve and our solution,” shares B Mohankumar, founder director & chief evangelising officer, iAccept Softwares Pvt. Ltd.
 
Investors want to see that you’re addressing a real problem, one that many people are facing because businesses serving a large market have greater scope to grow, says Mohankumar.
 
How large is the market you intend to serve?
Your addressable market opportunity is a vital part of your business plan, investor deck and business model snapshot. However, simply stating the size of the market is not enough. 
 
“It doesn’t help to say: ‘So and so consultancy has estimated the market as being worth 7 billion rupees,’ or some such line,” explains Aftab Malhotra, co-founder and chief growth officer, GrowthEnabler, a company offering growth advice and coaching to businesses globally. “Instead, identify the market niche you are going after. Say: ‘So and so consultancy has estimated the market as being worth INR 7 billion, in which we are targeting so-and-so group’. It conveys a far better understanding of your business growth potential and future ability to scale.”
 
Take a bottom up approach to market sizing—always! 
 
Project your growth:
Your market sizing expectation helps to assign a growth number against the niche market you believe you can capture, which in turn paints a picture of your future financial needs and growth rates, provided you get the right level funding to scale.
 
“Our set of financials included our projections for the next three years,” says Mohankumar. “Our business plan had a logical construct with assumptions, data on market size and a projected P&L account for each year.”
 
Substantiate your growth expectations:
Convince the investor of your ability to attract your target customers by demonstrating tangible progress in the form of net new customer growth rates, new strategic partnerships, net new users or community registrants--this is often referred to as ‘market traction’ or business traction’.
 
“How many people have you attracted into your world, as subscribers, registered users or any kind of consumer? Stating this also helps investors to determine your business’ scalability. Your growth rates are hugely important to investors,” says Malhotra.
 
What makes you the one to solve the problem?
If you are one of several businesses trying to solve a problem (with your solution) investors will want to know how your value proposition differs from your competitors. What is your sustainable competitive advantage?
 
“A good practice is to share key insights on your product evolution journey—through its various iterations, market tests and reworkings. This gives investors a better understanding of your product and builds confidence in your team. It’s a great way show an investor that you know your business,” advises Malhotra.
 
This process also involves sharing your early product failure, and outlining how you have worked on the product and evolved it into a far better offering than it was. If that is something you still haven’t done, it’s likely the product isn’t ready for funding, says Malhotra.
 
Businesses building on unique ideas have a first-mover advantage. However, investing in first-time-ever-done concepts is far riskier. So such businesses need to work doubly hard to convince investors of the merit of their product.
 
“Unique products lack benchmark figures. Also, creating a market for a unique concept and testing it on a massive scale has inherent risks. What worked in our favour was the fact that ‘no shows’ by new recruits is a huge problem in the software, BPO industries, etc. Our iAccept platform minimises the chances of such ‘no shows’, thus increasing the recruitment process productivity by at least 30% as per reports of early adopters. We hold the IP for this business process, which gives a virtual monopoly status,” explains Mohankumar.
 
What are people saying about you?
Media snippets about your product, your journey, your vision and so on can help investors build an opinion about what others at large think about you, says Malhotra. Put together a dossier of such coverage, audio-video coverage is very valuable.
 
How well organised are you?
Investors will want to see that you have adopted sound accounting principles and an accounting system, and that transactions are being recorded, shares Puru Gupta, CEO and co-founder at HealthyWorld.in, a functional foods company that has successfully fund-raised.
 
Having sound business systems in place shows that you’re thinking about the long-term and are serious about the initiative, and have the maturity to handle cash inflows.
 
Another way for investors to evaluate this aspect is to review your audited financials and a list of compliances for your legal entity, according to Gupta. Compliances include your annual income tax return, VAT returns, service tax returns, corporate returns required for private limited establishments, TDS deposits, property tax compliance, provident fund compliance, etc.
 
It also helps to obtain a basic valuation report for your business. “We prepared a discounted cash flow valuation and got it corroborated by an independent third-party valuation, these serve as guidelines for investors,” says Gupta.
 

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