The Investment Pitch- How to be succinct in 10 minutes-Answer seven basic questions to persuade investors to fund your company

You’re standing in front of a room filled with angel investors and venture capitalists, and you have 10 minutes to pitch your company.

By:
Dan Rosen
Puget Sound Business Journal
Seattle, WA

While confident of your material, the butterflies in your stomach and dampness on your brow emphasize the importance of the next
few minutes. You have invested more than a year of your life and an appreciable part of your life savings to build your startup
company. What do you say?

The ultimate goal of presenting to investors is to get funding. In a 10-minute pitch, though, the purpose is to generate enough interest
to secure a follow-up meeting with investors. A successful presentation accomplishes this by answering seven basic questions with just
enough detail to be compelling and convincing.
What does your company do?

Begin with a clear description of your company and product. This is one of the most important parts of your presentation because
investors will lose interest almost immediately if they don’t understand what your company does.

You’re probably not talking to experts in your particular field, so avoid using a lot of technical terms. Instead, give a one-sentence
description of your company that would make sense to your neighbor. Follow this with examples of how your product or service is
used and why a customer would buy it.
Who are you selling to and how big is the opportunity?

Just because you have a cool technology doesn’t mean that you have a compelling business opportunity. Investors are looking for
strong business models that sell into large and growing markets. They need to know the projected number of customers, the size, and
the growth rate for each of your key markets. This discussion should be limited to only the markets your company is addressing, and
don’t inflate the size of the market.

If there is a business opportunity, you have competition. List your direct and indirect competitors from industry leaders to other
startups. Ignoring competitors or claiming that you don’t have competition tells investors that you don’t know the market. You also
miss the opportunity to highlight your competitive advantage.

Do you have patents on key technologies? How large is your lead and what barriers to entry do your competitors have? These are the
points that can sell investors on your company, even in a tight market.
How do you sell it?

A comprehensive marketing plan is less important because investors understand that it may change as the company evolves. However,
it’s still important to show a clear strategy. Investors are particularly interested in whether your company has a well-constructed and
realistic distribution plan. Outline direct and indirect sales and explain how you will reach these customers. In addition, note key
partners and how you work with them.
How do you make money?

Investors won’t put money into your company if it doesn’t have a revenue model. For each customer you have, explain the type of
fee, the amount they pay, and the length of the sales cycle. Do you get revenue through licenses, subscriptions or maintenance
contracts? Are these fees based on one-time use or do you have a recurring revenue stream? Are there other companies that have
used a similar model successfully?
How much money will you make?

The amount of money you will make and when you expect to break even are critical. This information is best presented in an easy to
read graph that projects your revenue, expenses and net income for the next five years. Highlight your break-even point and state
assumptions in your calculations, such as the number of customers and further rounds of financing.
How much money do you need?

Now that investors understand your company, your product and your financials, it’s time to let them know how much you need. Start
by listing previous funding and the type of investors involved. This can be as simple as "financed by friends and family." When
explaining your current funding round, note money already committed and the terms. Next, provide a breakdown of how the money
will be used and indicate whether you plan to seek funding in the future.

Be sure to include a pre-money valuation for your company in this discussion. A lot of presenters avoid valuation because they don’t
want to get locked into a price before starting negotiations. This can undermine your presentation, because investors use valuation to
size up the opportunity and make sure that you are being realistic. The best approach is to offer a valuation range that is in line with
your company size and market, and show a willingness to negotiate.
Why should we believe in you?

In the current funding climate, even a great idea or product won’t attract investors unless it is backed by an experienced and
entrepreneurial management team. When introducing the leadership, briefly mention their relevant experience. You can also list
noteworthy advisory board members, especially if you have unfilled management positions.

Making an effective pitch in 10 minutes isn’t easy. It can be done, however, by clearly and succinctly presenting the right information.
As a result, you’ll find yourself much closer to that second meeting.

Dan Rosen is chair of the Alliance of Angels, an organization that provides early-stage technology companies from the Pacific
Northwest with access to financing from a network of angel investors. Dan is also managing partner of Frazier Technology
Ventures.

http://www.nasvf.org/web/allpress.nsf/pages/5052