MARKETING

10 Steps to Structuring Your Funding Pitch

To succeed in business, you must fully understand your customers' needs and desires, and then deliver the right solutions at a profit. Similarly, if you're pitching to potential investors, you need to understand what they want to know about you and your business, and be able to convey that information in a clear and concise manner. Angel investors and venture capitalists seek growth above the norm and accept that the risk is higher. In fact, the risk potential raises the importance of risk management and explains why companies can be given a 'grilling' when talking to investors. A number of risks are involved, including the product or service being unsuccessful, as well as the potential for the entrepreneur or company to make inadequate decisions with the investors' capital. It's no surprise, therefore, that investors' minds are always preoccupied with the market opportunity and the management team when facing a pitch. As a pitching company, you need to demonstrate expertise, confidence and trustworthiness, as well as demonstrate familiarity with the financials and the market. But what should you include in your introduction slide? How will your business solve a problem? Why is investment necessary? We'll provide you with the answers to these questions, and many more.

How to structure your funding pitch

A typical presentation should follow a structure like the one below. With this framework, you can prepare strong answers to any questions that may arise. Consider giving yourself about 20 minutes, and modify if necessary. Don't make the classic mistake of talking too much. Pay attention to the answers, and consider what motivates the investors. Here’s what to cover in a funding pitch or presentation:

1. Introduction slide

Your first slide should summarize the content of your presentation. Number each section and provide a general outline.

2. The problem

You can use this slide to show the gap you have found in the market and the position it occupies today. To understand your market, you must understand the key players and the different channels of distribution. You should also demonstrate your understanding of where the market will be heading in the future, as well as how to stay one step ahead of the competition. How does your solution address the need?

3. Your solution

What makes what you do unique or better than what others do? Your product is the only one in its class that solves real problems for your customers. You should back up your claims with your track record: your sales history, customer testimonials, or competitor analyses from credible sources. Be specific about the product category, the target buyer, and how you are different.

4. Competitive position

In this section, you should outline how a customer can solve the same problem (the need or requirement your business meets) in another way.  What are the customer's options, and how do yours compare? The best entrepreneurs demonstrate a comprehensive understanding of the competitive landscape from an insider's perspective. Make sure to convey this!

5. Your team

Investors value a company's team as crucial for advancing the company and ensuring its success. Display your track record, industry expertise, and knowledge. What is your vision for a successful company, and how do you expect your team to achieve it? Who are the advisers or non-executives on your board, and what role do they play? Are you willing to step aside and appoint a new CEO for the next phase of growth if you are the founder? Make sure you're prepared for this question, which may be the toughest to answer.

6. The business model

How has your business operated so far, and how has it been funded? What is your company's revenue model? Any changes to the company's structure, as well as any significant risks that could affect investors, must also be disclosed. How can you reach a point where your products or services can be sold? Indicate any license deals that might be necessary, and how much they will cost. Let potential investors know what your most important or most difficult challenges are, and how you plan to overcome them. Investors look for openness and honesty. After all, they're not only investing in your company, but also in a long-term relationship.

7. Back up your key forecasts

What is your expected profit? What is your projected revenue in five years? If the company is to reach the next level of valuation, how much money is required, and when do you expect the next round of investment to take place? Be sure to explain the key assumptions behind your statements and forecasts, without forgetting that they need to be based on market forecasts. It makes no sense to forecast $100m in a market worth $5m. Most importantly, tell the investor when and how they will get their money back.

8. Valuation and investment required

Investors need to know how you value your company and what kind of funding you are looking for. Identify how much money the founders have put into the business as 'cash and sweat equity' - your mental and physical efforts. What investments have the directors and advisers made? Tell us how you arrived at the valuation for this round of funding and what you are using to calculate the valuation for your proposed initial public offering (IPO) or exit. It is important for investors to know what will happen if conditions change - for example, if the product is late, or if market adoption is slower than expected. It is important to note that you will be at a disadvantage at this point since most investors are familiar with this stuff more than you are - so it is wise to get help so that you can be prepared. Be prepared to walk away if a deal isn't right, and have a limit beyond which you won't go. Angel investors - less so than venture capitalists - expect to deploy a reasonable level of cash, so you need to reach a point where you have enough funds to give you a meaningful chance of success.

9. Key milestones (and how to hit them)

Indicate your key milestones. Have you demonstrated that you have met them when working on similar projects? Will you need to hire people to achieve them? How will you succeed where others have failed? Make sure you explain how you will handle any emergency that arises.

10. The business exit strategy

Ultimately, investors are only concerned with the return, so you need to provide a way for them to get their money back. You can use this slide to explain why competitors cannot just step in and take the market share. Tell potential investors why this is the most exciting business opportunity they will see for a long time. The right investors - those who will be most interested - will create the most buzz. Investors talk to each other. It is also driven by supply and demand. The fewer opportunities there are, the more likely you are to be successful. Time is of the essence. Finally, remember that these are just guidelines. It is not necessary to have all this detail in a pitch, but you can use it to organize the flow. With the right presenter and supporting materials, relevant imagery or bullet points may suffice. Take into account your company's needs and the type of funding you are looking for when preparing your pitch. It's important to always put your best points forward, and to expect to be challenged by investors - if it were your money, you would do the same!