Part One: How to Pitch to Investors as an Early Stage Startup
Several members of our team attended a workshop geared towards raising funding as an early stage startup. The panel discussion included several notable members who all had great contributions to the topic. In this post, we cover Matt McKinlay's advice. Matt is a partner at Advanced CFO Solutions, where he helps grow, renew, or restructure medium-sized businesses through operational and financial consulting.
Matt McKinlay's tips on fundraising as an early stage startup:
How do you know when you're ready to start raising funding?
- Your product is at least at the MVP stage
- You have real customers - somebody that would actually pay for what you're offering
- You have a sales pipeline - the contracts are signed or ready
- You have a team - the key members are on board
- You have a clear vision - you know your go to market strategy, what does your exit look like? How are you planning to grow and scale?
What do investors look for in a pitch?
1.) The problem
- What is the problem your potential customers are experiencing? How are you solving that problem? If you can visually represent the problem, even better.
- A lot of entrepreneurs say that there is not a known problem - if that is the case, find a way to demonstrate how you'll allow potential customers to recognize that there is, in fact a problem.
2.) Management team (and quality of the team)
- Your team is by far the MOST important part of your product or idea; more important than your idea or product (investors know that those can change easily.)
- If you can't afford a team, get creative - you can "hire" customers or vendors to become advisory members. This is generally free, and gives you additional valuable insights.
3.) Market size & opportunity
- TAM, SAM and SOM - you should have a clear understanding of you total available market, serviceable available market, and serviceable obtainable market. We found this resource that can help you get started.
- Who are they? What are the threats? How will you protect your space?
- It's easy to make this slide overwhelming, so try to make it visual. One easy-to-read portrait of your competitive landscape and your position in the marketplace can be just a simple chart. In the left column, you list the main features and benefits of your product or service. On the top row, you list your company and the names of your competitors.
5.) Go to market strategy
- What is your pricing model? What does your growth look like? What are the assumptions?
- Some ways people have done this is by identifying the channels from which to penetrate their market. From there, they go into their proposed revenue model. Lastly, they show the total market share opportunity.
6.) Vision and exit
- How big do you expect to grow? What does the financial model look like?
- This is usually a slide with financial model and projections.
- Show the best case, most likely case, and worst case scenarios. Investors are thinking about the range of outcomes, show that you are as well.
- Lastly, you need to show that you have thought about your exit strategy.
- Raising money takes time and energy. 70% of your time over a 6 month period will be focused on raising capital when you decide to do so.
- It’s easy to get caught up in thinking of raising capital as the end. It’s the means to an end.
- Plug into the start-up ecosystem. You’ll find angel investors will not only share money, they’ll also share advice. When you present yourself to an angel investor, don’t present as someone looking for money, present yourself as someone that wants to learn from them.
- You should plan to invest 20% of your net worth – investors want to see that you're vested.
- Lastly, know that you will always pivot.
Thank you Matt McKinlay for presenting, Boise Startup Week for organizing the event, and Trailhead for hosting it! We hope other startups will value this advice as much as we did.