Our team at Sage Partners hears hundreds of investor pitches annually. Many of us start with the “R-W-W” framework as an overarching approach to assess the prospects of these companies:
R: Is the opportunity Real?
W: Is it Worth it?
W: Can the company Win?
Unlike an attention-limited investor, we offer a “safe” environment for entrepreneurs to pitch. We provide actionable feedback to the founding team based on their presentations and content. Looking back on the feedback we have provided, I’ve identified five “must have” characteristics for investor pitches and decks.
1. Tell a logical, compelling story:
Storytelling is a critical skill for entrepreneurs. Stories relate a tale of connected elements that tie together the key R-W-W components. As noted in the book, “Get Backed,” by Loomis and Baehr, compelling stories have sub-plots. These sub-plots might include: customer stories (about a problem or opportunity and a solution); market stories (a large, defined target market willing to adopt and pay for that solution; a positioning that resonates with that market); an execution story (how the team will get it done; what it’s already accomplished); and an investor story (a profit engine and way to appropriate the lion’s share of the value created; a defined ask for and use of the funds).
Why tell a story?
Stories are memorable – messages flow and stick
Stories can make complex subjects simple
Stories can trigger emotions and emotional connections: they convey passion for the business
Not only does a storyline assist in your investor presentation, but also in developing a tight, concise elevator pitch for potential customers.
2. Exhibit and maintain focus
Having multiple pathways to solve customer problems and grow over the long term provides founders and investors with lots of potential upside to increase the return on their investment. However, we counsel early stage startups to focus. Focus can take many forms: target customer (a specific vertical or set of customers with a common attribute); target use case; target geography (e.g., one city or region versus a national launch); a focused go to market approach and vehicles for gaining traction. Focus enables resources to be deployed most efficiently and effectively and allows hypotheses to be tested and strategy to be refined to prove traction before seeking additional funding (see #3, below).
There’s a balance between accepting considered feedback and being too eager to pivot to a new idea. On the one hand, if we perceive a critical flaw, we like entrepreneurs who adjust tactics to reflect new information. On the other hand, when the natural debate during our conversations suggests new markets or product changes, we are more concerned when the founder appears too willing to switch directions and abandon their initial intent. A good idea should be ruthlessly pursued with a single-minded focus that shows the founder can stay on track despite the many distractions they will encounter.
3. Have hard proof of the value of your product or solution
In our work with clients, we usually focus on developing or refining two key deliverables: the investor deck (along with supporting materials, such as a business model, financials, capitalization strategy, fundraising needed and funding approach, etc.) and the client sales deck (if an enterprise sale). Each constituency is looking for proof of value that your product/solution will deliver.
For clients, “value” is perhaps most compelling in economic terms: what does this product/solution save me in costs or gain me in revenue? In my experience, barring compelling pilot program results, client references or case examples, large enterprise prospects give much more credence to cost savings numbers than revenue generation numbers. That said, other “value” components or drivers – like improving process speed and reducing risk – can contribute to the client value proposition.
For investors, hard proof of value most often arises from evidence of “product market fit.” This is best evidenced by marketplace traction: customers are using and paying for your product/solution and there is both growth and stability to that customer usage. The other side of the value equation for investors is the price they pay the startup to capture value. This is why investors focus on the “MVP” (Minimum Viable Product) and evidence of market traction.
Thinking about KPIs that will illustrate value/traction – for customers and investors -- as you start your business and tracking those KPIs monthly will help ensure that you have the quantitative proof of value delivered or traction obtained in your client and investor conversations.
4. Convey the uniqueness and defensibility (the “moat” or “unfair advantage”) you have
What gives you an advantage in the marketplace? What makes your business/business model difficult to be copied or acquired? Unfair advantage can be achieved in many ways, e.g. through: patented or unique technology; proprietary access to data/information, resources, channels, partners or expertise capitalizing on network effects; and possessing differentiated talent or capabilities. Think critically and honestly about your business model and assess what unfair advantages you have or are working to achieve.
5. Address: “Why now?”
While timing may not be “everything,” it certainly ranks as an important consideration. Timing can be expressed in a number of ways:
How revolutionary is the product? Are you trying to sell a new, disruptive process or product into a traditional industry? Revolutionary products are usually harder or more time-consuming to sell than products that build off of something that is familiar. This is especially true in industries that traditionally are slow to change
What market trends or “waves” bode well for the product? It’s almost always easier to launch a product or solution with a tailwind of some sort behind it. What demographic, industry, customer, purchase or other trends bode well for introducing your product at this particular time?
Are other technologies in place or emerging that will contribute to the value and/or acceptance of your product?
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Successfully raising funds from investors derives from multiple factors, and often includes a little bit of luck (like being in the right place at the right time with the right investor). That said, creating a compelling investor deck is critical for honing, clarifying and conveying your business story and increasing your odds of raising funds. Paying attention to the five characteristics outlined in this article should help you not only build a better investor story but also a better business.
Sage Partner John Hansen contributed this Sage Advice