Presenting your idea to investors can be intimidating, especially when it comes to large amounts. What do they look for when evaluating your company? This article discusses the key elements of the pitch that should be considered when preparing.
Before preparing for the pitch, you need to determine which investors should be contacted and at what points to focus on. To do this, indicate for yourself the stage at which your project is located.
Depending on the stages at which your project is located, a startup should test different hypotheses:
- Idea hypothesis validation;
- Value hypothesis validation;
- Monetization hypothesis validation;
- Growth hypothesis validation.
Many startup founders rely on their own or family savings at the very beginning of their activities. This is called the pre-seed round or investment “Friends and Family”. Then, the founders get an investment to test them go during seed rounds. In the next phase the founders receive funds to test the hypothesis of value, motivation and growth in the following rounds: A, B and C.
Depending on the stage at which your project is located, things that investors want to hear will vary.
At the stage when you are only testing the idea, the most common option is the initial stage of financing received from angel investors. There are exceptions to venture capital funds and accelerators that focus on the initial rounds.
The moments that should be consecrated in his speech:
Team. At the initial stage, much attention is paid to the team promoting the product. The success of the project is largely determined by the availability of competent specialists, each of which has a clearly defined area of responsibility. Investors are looking forward to seeing the CEO, CTO, Sales Manager and Product Manager.
Understanding of the market. Your idea is built in accordance with the requirements and capabilities of the market, and your team has a clear understanding of the needs of consumers for whom the company’s product is manufactured.
Having a solution to the problem. At the “Idea” stage, it is extremely important to prove that the problem you have found is serious enough and either has an unsatisfactory solution or does not have one at all. And therefore, despite all the risks, your product, which is designed to solve it, is worth it to pay for it.
A little more than the Minimum Viable Product. Although the MVP approach is universally recognized, this may not be enough in the modern world. The product should be carefully worked out, add an individual design, details or tools that you can catch on and which will distinguish you from potential competitors.
Success in rounds A, B, and C is entirely dependent on Value, Monetization and Growth hypothesis validation.
- Value hypothesis validation, It is very important to show investors the Retention rate or the number of customers who will stay with you. Find out your daily / weekly / monthly indicators
- Monetization hypothesis validation. Investors should be told in detail about the monetization model: working principle, sources where clients come from, its elasticity.
- Testing the growth hypothesis. Show unit economics, as well as LTV, CAC and their ratio. A unit of the economy is a significant competitive advantage, showing a viable model for your startup.
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