If you want to raise money for your startup, your pitch deck needs to answer these 10 important questions. This is something that will help you to hit it out of the part when you are wondering how to value a startup also.
Many new entrepreneurs see their pitch deck as the opportunity to show off their business idea, and how smart, innovative, and fantastic they and their technology is. What a pitch deck is really about is answering the key questions that investors have. So that they can quickly make a decision to fund you.
Investors are bombarded with more pitches than they could ever fund. They don’t have time to go to extra lengths to extract this basic data from you. So, if you want to get funding for your startup, make sure your deck answers these key questions.
1. What Is The Problem You Are Solving?
The problem your startup is setting out to solve is the very basis for your business. It is the foundation of everything else.
If you don’t have a good problem, not much else is going to matter. While if you have a strong problem, investors will often stick with you as you continue to iterate to find the right product, marketing, and team to solve it.
State your problem simply and clearly. Be ready to explain how you’ve verified and quantified the problem after your pitch.
2. How Big Is The Market?
One of the top questions investors have is how big your market is.
This is vital for determining whether your startup can ever reach the size that is needed to deliver the level of returns that they need to justify this investment.
You may need to zoom out even further to demonstrate the full potential. Or reference credible data on how large this market is expected to grow over the next few years.
Of course, experienced investors also know that it is going to take great focus to get traction, score early wins, and to make the most of the capital you are given. So, also show the size of the niche group that you will begin selling to first.
3. Who Are Your Target Customers?
Investors want to know who your target customers are. There are multiple reasons for this.
Firstly, it tells them that you have really done the work, and know your market. It shows if your business idea really makes sense.
This information also allows investors to gauge the fit for them and their portfolios. If they have experience, contacts, or complimentary verticals, they can add a lot of value to your company beyond their capital. They may be able to easily plug it in and make it a far larger success in a very short period of time.
4. Do You Have A Finished Product?
There are certainly investors who may invest just based upon the idea, or a prototype. What’s most important is that you are clear about the stage of business that you are at.
The further along you are, the lower the risk for potential investors.
How much you’ve invested or raised to get to this stage also tells them a lot about you and your capabilities. If you’ve bootstrapped your way all the way through to getting some users for your first MVP or beta test, then they can hope you’ll accomplish a lot more with some real money in the bank.
That’s in contrast to someone that has been working on a product for four years, only has a prototype, and no sales. Even worse, if they’ve spent tens of thousands of dollars on a prototype that could have been made in a garage for a couple hundred dollars in a week.
5. How Many Units Have You Sold?
Like the stage of your product this tells investors a lot about how far you’ve gotten with your previous resources. As well as your ability to sell. If you can’t sell any customers, then you probably aren’t going to be able to preserve their capital, much less generate positive returns.
Even having pre-sold a handful of units, or having amassed a few thousand freemium users is better than nothing.
The data you present here will also show them whether or not you have really hit product market fit yet, or not.
Is your capital going to be used to keep tweaking and exploring the market, or simply scaling what you have already done successfully?
6. How Are You Marketing & Selling Your Product?
This is another very revealing factor that investors are interested to learn about during pitches.
It is another factor which quickly differentiates those dreamers with no real business experience from those that really know what they are doing, and have found their groove already.
Your marketing and sales channels can also provide a valuable moat around your business, staving off the competition, and reducing risk for investors.
7. What Are Your Profit Margins?
Profit margins are important for three main reasons.
First, and most importantly, it shows if you truly have a viable business. One which can make enough to survive, and sustain itself. Even under pressure from competitors.
Secondly, it shows how scalable the company is. Is there enough profit to grow and forge partnerships and engage in new distribution methods?
Thirdly, it shows the types of returns investors can expect you to generate per dollar invested in the company.
Of course, you should have already researched industry benchmarks and know where you are in relation to those.
8. How Fast Has Your Company Been Growing?
Growth is one of the top reasons that investors choose to allocate their capital to startups. Your traction and rate of growth is more important than size.
The younger your startup is, the faster investors usually expect you to be growing.
9. Who Are Your Competitors?
Your competition is not always a threat. They can actually be validation for you being in business, your valuation, and how much you are asking to raise in this round.
10. Who Is The Team?
Show off your cofounding team, advisors, and other key talent. They are one of your most valuable assets.
Alejandro Cremades is a serial entrepreneur and the author of The Art of Startup Fundraising. With a foreword by ‘Shark Tank‘ star Barbara Corcoran and published by John Wiley & Sons, the book was named one of the best books for entrepreneurs. The book offers a step-by-step guide to today‘s way of raising money for entrepreneurs.
Most recently, Alejandro built and exited CoFoundersLab, which is one of the largest communities of founders online.
Prior to CoFoundersLab, Alejandro worked as a lawyer at King & Spalding, where he was involved in one of the biggest investment arbitration cases in history ($113 billion at stake).
Alejandro is an active speaker and has given guest lectures at the Wharton School of Business, Columbia Business School, and NYU Stern School of Business.
Alejandro has been involved with the JOBS Act since its inception and was invited to the White House and the US House of Representatives to provide his stands on the new regulatory changes concerning fundraising online.