Running your start-up is incredibly challenging once you get to a specific size and want to grow. A problematic element for many founders can be pitching and fundraising, and then finding the right investors can be even more overwhelming, let alone closing a deal.
To help start-ups get the funding they need, leaving founders to focus on growing their company, we have spoken with Serkan Ferah, the founder of Pitch.Space, an automated pitch deck builder aiming to help start-up founders raise venture capital.
Below, he shares the five common problems that founders can come up against when pitching investors, along with suggestions for how to overcome them.
Creating a compelling pitch
An investment deck is the backbone of a start-up’s entire funding round and poorly prepared pitch materials, created without understanding of the investors’ expectations can put the survival of many start-ups at risk. It is key that as you prepare your pitch, you articulate the unique value that your start-up offers. So, how can you create a compelling pitch deck?
The flow of your pitch deck should roughly follow the below format:
- Founder’s story
- Team
- Problem that your start-up addresses
- Product
- Market
- Competition
- Marketing strategy
- Traction & Roadmap
- Business model
- Finances
It is also a good idea not to go overboard when it comes to designing your investment deck – keep it simple and follow similar design pattens on each slide so that investors can follow the structure of the pitch and find what they need easily.
Finally, never use your investment deck to present – the slides that you use to present should only feature images and headlines – no more than that, as you want investors to pay attention to you, instead of getting distracted by your slides.
Being agile in fundraising
As founders, we are all very busy and it becomes even more challenging to respond to investor enquiries in a timely fashion and be agile in capturing the opportunities.
Success happens when good luck meets preparedness. If your pitch isn’t ready and you don’t have pre-prepared answers for your investors, the leads will become colder, lowering your chances of getting investment.
You should prepare in advance and consider what you will do in the following scenarios:
- What will you do if you receive an unexpected inbound investment lead?
- How will you respond to an investor who challenges the valuation?
- What will you do if a VC is interested at a time when it’s too early for you to bring one onboard, but you don’t want to say no either?
- How will you manage a situation where your round is fully subscribed, but a big ticket investor decides to get involved at the last minute?
Setting the right valuation
One of the most difficult things for founders to discuss and decide on is the valuation. It’s not only subjective from investor to investor, but can also change in accordance with the overall funding climate.
Founders generally fall into the same trap and lower their valuations just to get a ‘yes’ from investors without calculating future risks and how they will play out in future funding rounds i.e. further dilution of founding team and losing majority.
So how can you defend your valuation?
- Research similar start-ups that completed their funding rounds, look at their traction and try to find out their valuation at the time of raising investment. Then, use this as a starting point, laying out your differentiating points alongside any similarities.
- Remember to sell the vision – they’re investing in the future of your business, not in the today.
- Most importantly, be confident and explain how the size of your ask and valuation will play out in future rounds and how it will benefit investors.
Sizing market opportunity
One of the most important things investors look at while evaluating a start-up pitch is the size of the market and its potential to scale. With the current speed of technological advancement and the fact that many start-ups are focusing on tech that has never existed before, it might be difficult to compile a reliable source of market insights.
Sometimes, market size research can take days and what you get can be just a figure that shows the size of the market.
However, it’s crucial to support this figure with additional insights that support the opportunity you claim is there and the product’s scalability.
- For this reason, create a library of market research and insight reports for yourself, not for use in your pitch, but to pull up when and if needed. Investor conversations can get really granular details at times, especially at later stages of negotiation.
- Big corporations pay a lot of money to get their hands on these reports, so any blog post with the figures and a source link is a gem for you. Simply – thank you, Google.
Being confident in front of investors
Because founders are asking for investors’ money and the amount is generally high, founders tend to feel less confident about themselves and their start-ups.
However, investors like to see a team pitching their start-up confidently, so that they know that you can deliver.
A pitch made by a not-so-confident team will make investors think that you’re not sure about the potential or viability of your start-up and therefore they can’t be sure if you can actually deliver. Many great ideas were wasted due to a lack of confidence.
So, what can you do?
- Always remind yourself of the excitement you felt the first time you came up with the idea for your start-up.
- Try not to define yourself by the compliments made by others.
- Remember, starting a business is crazy, brave and not everyone is cut out for it. The fact that you’ve done this already makes you unique.
- Nobody knows your business and vision better than you, so you are the person who has all the answers, although they can be difficult to articulate at times.
- The best way to be sure you’ve got all the answers you need is to use your pitch building process as a strategic validation exercise for yourself.