The Pitch: 2 Elements That Can Make or Break Your Investor Pitch from the Start– June 28, 2019 by Jeff Kovacs

One of the most fun aspects of working with tech start-ups is mentoring them in their quest for investor funding. Each year we see hundreds of pitches. Some of them are very good, and some need some work — a lot of work. Over the years we’ve learned some key lessons about developing and presenting effective investor pitches and hope to share these lessons through this blog series. Whether you’re a company seeking investment, an advisor helping companies create their pitches or investors attempting to find that perfect investment, we hope you find value in “The Pitch.”
 
Today’s post begins at, well, the beginning, diving into how to create an effective and impactful pitch for coveted investor dollars.

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1. Clearly Define Who You Are and What Problem You Can Solve

It seems obvious, but all pitches should start out with a clear, concise statement about what the company does. Often we sit through the first few minutes of a pitch waiting to hear what the company does and, somehow, that basic concept is not clearly communicated. If an investor can’t understand early on in a pitch what the company does and the “Big Problem” it is attempting to solve, they tune out! Once a potential investor stops listening, it’s almost impossible to actively re-engage them in the discussion.
 
The problem you are trying to solve needs to be clearly stated to grab the investor’s attention. The best pitches help an investor grasp the magnitude of the problem and the management team’s passion and talent for solving it. Investors are typically not interested in investing in companies that focus on small or mundane issues. Conversely, tackling some of the world’s biggest problems can seem daunting and unreachable. Attempting to solve big problems with a small team that can identify solutions that can ultimately scale will draw an investor’s interest.
 
A picture is worth a thousand words. Using pictures and graphics in a pitch to illustrate the problem creates a connection between the company, the investor and the problem itself. The emotional connection to solving the problem serves as the catalyst to secure investment capital and focus the company’s efforts.
 
There may be many companies attempting to solve the same problem. Therefore, your company must be able to communicate why it is uniquely qualified to solve it, giving you a better chance to capture an investor’s interest and make them to want to learn more.

2. Know (and Be Able to Explain) Your Market

The actual addressable market (everyone the company wishes to reach with its product or service) is a critical metric that companies must research and understand thoroughly prior to pitching to investors. Demonstrating an understanding of the market and the size of that market helps an investor understand the magnitude of the potential opportunity for the company to create a sufficiently large liquidity event for its investors. The potential to leverage the investment to fund the company’s ability to scale and ultimately an exit for the investor must be communicated early in the pitch to maintain the investor’s interest and further the discussions to a deeper stage.
 
Deep market research and critical evaluation of the company’s market thesis will provide the company with the insights necessary to develop their go-to market strategies. You will need to convey your understanding of the actual addressable market and the market research undertaken early in the pitch. But beware: savvy investors will question the source of the market research and evaluate the company’s ability to execute on its growth strategies and ability to scale. Be careful in the pitch not to seem over confident in your ability to capture market share. Companies that attempt to capture too much of their target market are viewed with skepticism. A better strategy is to scale the company to a point where it can prove it will capture a smaller portion of the market and begin to demonstrate the potential for high growth. Very few companies are able to scale rapidly, achieve significant market share and exit early in their life cycle. A solid pitch pulls together the addressable market, strategies to capture a reasonable percentage of that market, the expected growth rates and time horizons.
 
Look for the next installment of The Pitch, focusing on products, services, marketing and customer acquisition.
 
Please contact a member of your service team, or contact Jeff Kovacs at kkovacs@cohencpa.com for further discussion. 
 

Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.