Insight written by Jason Plant, originally published on October 19th, 2021.
Let’s say you are an entrepreneur with the next big, disruptive idea. How would you go about convincing investors to trust in your vision? Here are some key items to think about when crafting your pitch.
Know Your Audience:
Tailoring pitches to their intended audiences is key to winning over support for a venture. It is essential to know how to adjust a pitch based on location, context, and specific investor preferences.
The two biggest hubs of start-up activity are Silicon Valley and the Greater Boston Area (with New York City coming in at a close third). Each of these areas’ investors have their own distinct expectations for how a pitch should be delivered. While the expectations within the Greater Boston Area and New York City are quite similar, Silicon Valley pitches tend to have a significantly different syntax.
In the Northeast (Boston and NYC), pitching a company requires the utmost professionalism and preparation. An investor in this region will traditionally expect to see a pitch deck at least 15 slides long, supplementary materials to back up claims, and an entrepreneur dressed in business professional attire. In Silicon Valley, pitching is treated as more of an art than a science. The pitch is often quite informal (as informal as shorts and sandals for attire in some cases) and sometimes lacks a pitch deck altogether. The due diligence process in Silicon Valley is also rumored to be less intensive, particularly at the earlier stages of investment when investors are betting more on the founder and the idea than on any performance metrics the company has to show.
It is also essential to research the person you are pitching to and discern what their individual expectations for the pitch might be. One thing worth taking into consideration is the proper dress code when conducting a pitch. The dress code often depends on the audience, and can fluctuate between shorts and flip flops to a suit and tie. In Silicon Valley, many investors believe that founders who dress in business professional attire are not truly invested in their company’s product and customers. Although this opinion is controversial and is most often heard on the West Coast, any investor could have this philosophy. When pitching to these individuals, it is best to wear a company t-shirt or uniform as this will convey the commitment to the product and customers that the investor might be looking for. However, for more traditional investors, business professional attire is undoubtedly the best choice. Looking at an investor’s previous investments and what their founders are wearing in their LinkedIn profile picture can also help discern what the investor’s preference may be.
In terms of what content investors are looking for during the pitch, there are some important cardinal rules to follow depending on the stage of the company and who the audience is. When competing in a pitch competition, there will almost always be guidelines provided to entrepreneurs on what information the judges will be looking for. Often, pitch competitions will pertain to a specific type of business (i.e. social venture, technology, BioTech, etc.). In these cases, it is important to emphasize the company’s strengths in that area. For example, a company competing in a social venture competition should emphasize the impact their business creates outside of financial profit.
Angel investors invest with their own money and typically invest in seed and pre-seed rounds (for this reason, these rounds are sometimes called “angel rounds”). Venture capitalists (VCs) invest other institutions’ money and traditionally invest in companies at the Series A and Series B stages — although there are some early-stage VCs that will invest in seed rounds alongside angel investors. In pre-seed rounds, the company generally will not have a working prototype (unless it is software) or any serious traction, so investors are primarily looking for fundamental qualitative indicators of future success such as a promising vision and team. At this stage, investors will be most concerned by:
- Ideas that appear too difficult to execute from a technological perspective
- Teams that appear incapable of running, scaling, and exiting a company
- Markets that are too small to accommodate billion-dollar companies.
These factors will always be important, no matter what stage the business is at, but they are especially scrutinized in early investment rounds. In seed rounds, investors want to see a working prototype and significant initial traction (early customers & revenue, partnerships, growth of team, etc.). By the end of the seed round — with the exception of a few verticals — there should be overwhelming validation for the functionality of the company’s underlying technologies. In Series A, investors are looking for product-market fit and some early financial growth indicators. Notably, at these early stages of investment the founders’ cash conservation is often scrutinized as well. There is a significant stigma surrounding companies that have raised “bridge rounds,” which are essentially financing rounds raised to get a company to the milestones it promised to reach during its last round of funding. Once the business has money to spend, expect questions about the monthly burn rate (the total cash outflows per month) and how it will evolve over time. Overall, early-stage companies are sold to investors by credibility, vision, and storytelling.
When the company reaches Series B and beyond, pitches should still include qualitative fundamentals (problem, solution, market, team, etc.), but investors will be looking more closely at financial growth metrics. The aforementioned expectations by stage do differ from industry to industry, but generally the older a business gets, the more it is judged quantitatively as opposed to qualitatively. This is an important thing to remember as one’s company evolves over time.
A final note on audience-centric considerations: remember not to overemphasize technical information to non-technical investors. If a founder pitches a biotech company to an investor with a PhD in medicine, this investor might take more interest in the inner workings of the product. However, a non-technical investor will become more confused and less interested the more they are presented with complex technical information. Have the technical information on hand for any pitch, but save most of it for the experts in that field while instead emphasizing key product differentiators to non-technical investors. Explaining key differentiators in simple terms will leave these investors with memorable takeaways, rather than confusion caused by information overload.
The Keys to a Successful Start-up Pitch (Part 2) will be released on October 21, 2021.
Jason Plant is a junior from Sanbornton, NH who is pursuing a degree in Business Administration with an Option in Entrepreneurial Studies at the University of New Hampshire (UNH). Jason’s involvement at UNH includes serving as Principal and Liaison at the Rines Angel Fund, Dean’s Ambassador for the Paul College, Student Consultant at the B-Impact Clinic, Analyst at the Atkins Investment Group, and competing and winning prizes in the Social Venture Innovation Challenge (SVIC), the Maurice Prize Competition, the Holloway Competition, the i2 Passport Program, and the National Draper Competition. Outside of UNH, Jason runs his own online publication (Venture Time), attended Draper University, a prestigious Silicon Valley training program for promising entrepreneurs; works at 10X Venture Partners as an Associate, and interned at Orbit Group, a family office with $200 million assets under management. Jason also leads an R&D-stage start-up called HydroPhos Solutions, a circular economy social venture that aims to address the problems of eutrophication and phosphorus shortage by filtering phosphorus out of wastewater and reselling the phosphorus into the fertilizer industry.