I really want to dive deep into the area of launching startups and getting ready to pitch/present to potential investors. We’ve already explored the customer-centric model to building a business and discussing Four Steps to Epiphany. Now, I want to get into the nitty-gritty next steps of how to understand what your startup stands for, how you’re going to make it happen, and then package that into a succinct, powerful pitch and presentation that can be delivered modularly in 30 seconds, 3 minutes, 5 minutes, with slides, without slides…getting you ready to go for whatever situation you face.
This cheat sheet is all about questions. From the right questions, come the right answers.
The first part is to create a painted picture that hones in on the ‘why’ your company exists and ‘why’ it will be successful. It covers your origin story, describes what your startup will be doing when run perfectly, and why it will reach that level:
Painted Picture
- Vision
- Why was it started
- Words to describe us
- What we are doing that no one else does
- When we are at our best, we are…
- Identity
- What are we doing beyond just being a media company?
- At our core, what are we trying to accomplish?
- What will we look like in five years?
- Evangelism
- How do we enable our customers to be brand ambassadors?
- Why do people want to be our brand ambassadors?
- What value are we providing our customers?
- Action
- What do we focus on first?
- Conclusion
- What’s the resulting mission?
- How does our company and each department in it look, feel, act?
The next step is to identify a basic business canvas, the ‘how’ your company will get to where you’ve painted it to be.
Business Model Considerations
- Value Proposition
- What value do we deliver to our customers?
- What specific customer problem are we solving?
- What other customer needs are we satisfying?
- What bundles of products and services are we offering that provide this value?
- How does what we provide compare to other companies trying to add similar value?
- What do we do better than our competitors?
- How protected is our value proposition
- For…..who need….a…..which is a….that….because….
- Customer Value
- For whom are we creating value?
- Can we segment the value across different customer segments?
- Which needs are explicit v. implicit?
- Who are our most important customers?
- What relationship do we have with our customers?
- What do our customers expect of us?
- How do we reach our customers?
- Which customer channels are best?
- Economic Value
- How much will we sell?
- What are customers willing to pay for the value we offer?
- How price sensitive is our product/service?
- What are the primary costs in our business model?
- What will it cost to get and retain a customer?
- How expensive are the resources to deliver our business model?
- Which activities are most expensive?
- Resources
- What do we need to deliver our value proposition?
- Who will help us achieve our economic value?
- What internal skills are required?
- Who are key suppliers and what value to they provide?
- Who are our key partners and what activities do partners perform
- Market Sizing
- Top Down: Population x Percent of Population Who Buy in Your Company’s Market x Percent who buy your type of Product x Percent Your Company Will Capture
- Example: your own coffee bean company sold to customers in Manhattan
- 1.6 million people in Manhattan x 33% drink coffee daily x 25% of coffee drinkers make their own coffee x 20% market saturation our company will get
- Bottom Up: Number of Customers x Average Purchase Size x Number of times purchasing
- Example: 250 customers x $10 for each bag of coffee x 12 times they purchase
- Validation: both methods ideally should be relatively close to each other, identify the assumptions that create greatest variance, spot check your assumptions with a known variable, main point is to demonstrate your thought process and show you’ve considered things
- Top Down: Population x Percent of Population Who Buy in Your Company’s Market x Percent who buy your type of Product x Percent Your Company Will Capture
- Market Themes
- Industry Specific: fragmentation, maturity, growth/decline
- General Trends: supply vs. demand, demographic, socioeconomic, cultural, political, technological, global
- Key drivers: price x volume, cost, recurring revenue, duration
- Competition share and customer segmentation
- Types of Business Models
- Monopolists: owning the market
- Disruptor: redefining the market
- Me too: competing head on in a crowded market
- Incrementalist: seeking a competitive advantage through marginal improvements
- Evolutionist: redefining the company to go after a new market
- Defensive and reactive to competition/the landscape
- Offensive and proactive to define a new market
- Considerations for probability of success
- Time, Cost, Level of Effort
The final step is to put it all together in “the what”, that is the presentation and pitch that you can expand upon or simplify depending on the situation.
Business Plan Pitch
- This is the situation
- This is why it is a problem
- This is why our idea is the solution
- Market overview
- TAM: Total Addressable Market: the total market demand for a product or service
- SAM: Serviceable Available Market: the part of the TAM targeted by your products and services which is within your geographical reach
- SOM: Serviceable Obtainable Market: part of the SAM you can capture
- For a great image and further explanation of this, click here
- Competitive landscape and how you fit into it
- Customers & Sales Plan
- Who they are
- What you are selling to them (value proposition)
- How you will sell to them
- Why they will buy from you
- Financials
- Business Model
- Contribution Margin
- Break Even Analysis
- Milestones
- Risks
- Macro Risks
- Industry Risks
- Operational Risks
- Customer Risks
- Management
- Team
- Advisors
- Investment Summary
- Investment request
- High-level use of funds
- Milestones funds will achieve
- Appendix: all the detail/complicated slides that show you’ve thought through things
- Detailed financials, market research, explanations of things you’ve simplified in the pitch
From there, build your presentation in pieces, that is, plan and master pitching the most important sections first and find out the minimum amount of time needed to present it. Trust me, you can simplify even further than you think. Typically those are your Situation, Problem and Solution. If you have only 30 seconds, that’s about all you can deliver.
Once you have those in your pitch nailed down, and only then, you can start to add and perfect the other sections. That way, if you have a full 5 minutes you can deliver the full presentation. But if all of a sudden the investor says, instead of 5 minutes we’re running behind and you only have 3 minutes (which happens often), you don’t have to feel rushed or flushed or wing it, you know that a 3 minute presentation only includes Situation, Problem, Solution, Market Overview, and Management.
The point of the pitch isn’t about delivering the full plan, it’s about getting the investor and/or audience to be bought in, to start thinking and asking questions, to start wondering “hmm what holes can I poke in this, how much has this person thought through the idea.”
More often than not, those “hole-poking” questions will revolve around those areas you hadn’t covered in the pitch because you had to cut it short, but which you’ve already prepared and mastered the response to. The other types of questions that arise are often value-adding to your startup and often present things which you may not have considered.
One word of advice, investors know when you’re making things up on the spot, when you’re winging it/haven’t thought about it, and when you’re getting defensive. The feedback and question session is the time to be open and receptive to their insights–ultimately, they are the one’s you’re here to convince, the ones who have to say yes to you. It’s your baby, but it may have flaws. Don’t be spineless and absorb their critiques without subtle push-back, but don’t be walled off. Their feedback, concerns, questions, will only make you and the startup better. Seek understanding in their concerns and thought process. In doing so, you immediately draw them in at a subconscious level to have a greater buy-in to your company. It doesn’t mean they’ll invest, nor that they like it. It just means you two are now collaborating instead of competing. Often, their concerns lay out your next steps and when you accomplished those next steps, it provides the fodder for a follow-up meeting.
And finally, don’t forget a follow-up thank you email explaining your startups next steps, what you’ve already started to implement since the meeting, and the next time you’ll reach out to them (either after a certain amount of time has passed and/or once a milestone has been reached).
Next up, looking at startups from the other side of the table and frameworks venture capitalists apply to potential investments.