Successfully pitching your app idea to investors and convincing them to fund your startup is not an easy task.
Nevertheless, various strategies exist that can drastically enhance your ability to create a winning pitch deck, effectively establish lines of communication with investors, and deliver persuasive in-person pitches that lead to funding.
In this article, I’ll outline best practices for all three stages of pitching investors and share some hands-on examples from working with startups here at Appster.
Three Stages of Pitching
It’s helpful to conceptualize “pitching”, i.e., delivering or presenting a business idea to an audience (typically comprising one or more investors), as involving three key stages or elements.
First, there’s the pitch deck.
A “pitch deck” is a concise, easy-to-understand, and highly visual presentation of a business idea that’s usually created using PowerPoint-like software and delivered electronically to investors prior to a face-to-face meeting.
Next, there are the attempts to establish communication with investors for the purposes of convincing investors to look at your pitch deck and/or agree to a real-time meeting.
In many cases, this communication starts off “cold”, i.e., you try and open a line of communication with potential investors by sending an unsolicited email (or perhaps by making a cold phone call).
Finally, there’s the face-to-face pitch presentation wherein you deliver your pitch in real-time and converse back-and-forth with potential investors.
Note: not all pitches occur in-person: Internet-enabled pitches (such as video-conferencing via Skype) are becoming more and more popular these days.
Often, the pitch process follows these steps consecutively, i.e., first you design a pitch deck, then you cold email an investor and send over your pitch deck, and finally, you arrange and actually participate in a meeting with the investor in real-time.
It is, however, possible for the stages to sometimes occur “out of order” given the specific circumstances at play.
I’d like to examine each of these three major elements of pitching in detail in order to outline some best practices that will allow you to maximize your chances of securing funding for your app.
Phase 1: The Pitch Deck
In 2015, Harvard Business School Professor Tom Eisenmann and the folks over at DocSend studied the fundraising activities of 200 startups as the companies progressed through their Series Seed and Series A rounds.
In total, the 200 companies had successfully raised more than $360 million in investment.
In addition to investigating a number of fundraising issues, the study also explicitly examined a variety of dynamics regarding pitch decks.
Many of the startups surveyed sent their actual pitch decks to DocSend.
The study uncovered four noteworthy pitch deck-related findings.
First, the average pitch deck was 19.2 pages in length.
Keeping in mind that pitch decks are highly visual documents that contain lots of white space and only minimal amounts of text, this 19.2-page average proves just how concise and to-the-point your deck must be in order to convince investors to fund your startup.
Second, investors spent an average of just 3:44 analyzing each pitch deck.
In other words, an investor will decide whether it’s worth scheduling a face-to-face meeting with you (or actually investing in your company) within a timespan of only a couple of hundred seconds!
Third, the following represents the ten defining of the pitch decks examined:
In terms of specific numbers, DocSend discovered the following data as regards the percentage of companies that included each of the ten categories in their pitch decks:
These results reveal that whereas nearly all startups included slides on their team, product, and problem, only around half of the competitions discussed financials and less than two-thirds addressed competition.
Nevertheless insofar as these ten categories—purpose, problem, solution, why now, market size, product, team, business model, competition, and financials—represent the most important elements of any given pitch deck, it’s crucial that you prepare your deck in line with all ten (where appropriate).
Indeed, venture capital firm Sequoia Capital also recommends that startups structure their pitch decks in accordance with these ten defining elements.
Finally, investors spend different amounts of time on different slides:
It’s evident, then, that investors spend more time on categories like financials, team, competition, and why now than on dynamics like the solution, problem, and market size.
Let’s now explore each of these ten categories one at a time.
Ten Essentials of a Winning Pitch Deck
1. Company purpose/mission statement: a one- or two-sentence compelling answer to the question, “Why does your company exist?”
Your pitch deck should start with your mission statement because it explicitly informs your investors why they should pay any attention to you.
Before you discuss your team or product or revenue model or any other aspect your business, you must first clearly, concisely, and persuasively state the essence of your company: what do you seek to accomplish and why?
Simon Sinek, author of the best-selling book Start With Why: How Great Leaders Inspire Everyone to Take Action, explicitly contends that fantastic leaders and organizations inspire others to take by privileging answers to why questions above answers to what and how questions (sources: 1, 2).
Larry Kim describes your company purpose/mission statement as “Your strategy. Your core. Your vision. Your identity. Your culture.”
In other words, it’s everything expressed in one or two sentences.
Dave Smith advises that effective mission statements are:
“…a blend of realism and optimism, two terms generally at odds with one another, and striking a balance between the two is the ultimate key to writing a great mission statement.
You must be able to convey the value of your company or why your brand exists, inspire and encourage your employees, sound completely reasonable and plausible, and be as specific and relevant as possible.
Your mission statement, at its absolute best, should be able to double as your slogan. So there’s no need to make it overly complicated; just state the purpose of your company, your reason for starting it in the first place.”
Your pitch deck must genuinely captivate your audience as quickly as possible; the key to achieving this is to begin with a solid company purpose.
Here are a few examples of famous mission statements behind some of today’s biggest companies:
- Amazon: “To be earth’s most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online.”
- Blue Apron: “Blue Apron makes incredible home cooking accessible, for everyone.”
- Twitter: “To give everyone the power to create and share ideas and information instantly, without barriers.”
- Uber: “Transportation as reliable as running water, everywhere for everyone.”
Finally, be sure to avoid mission statements that are unnecessarily long, grandiose, confusing, pretentious, unclear, or generic.
2. Problem: a clear answer to the questions, “What problem are you trying to solve?” and “What value will you be adding to the world?”
As I’ve noted in the past:
“The essence of any successful product or service, including an app, resides in its ability to solve a given problem. If your app won’t somehow make people’s lives better, i.e., if it won’t add (even a little bit of) value to the world, then nobody will ever use it nor will any investors ever fund it.”
Your app must solve a specific problem of which people want to rid themselves or it will fail.
You can think of the matter in terms of adding something (e.g., increased happiness, excitement, or human connection) or taking something away (e.g., relief of anxiety, loneliness, or self-doubt).
Either way, your pitch deck must overtly state the particular problem to which your app will respond.
Importantly, this problem needs to be a monetizable customer pain.
Investors want to know that there’s real potential to build a business by attending to the problem outlined in your deck.
I’ve previously described this concept as such:
“Successfully establishing a problem/solution fit requires discovering a customer pain so significant that sufficient numbers of people not only recognize its existence but are willing to pay good money for its solution. On a pain scale of 1-5, a monetizable pain is a 4 or 5, i.e., it needs to be addressed now.”
It’s also important for your pitch deck to explicitly note why current “solutions” to the problem you’ve identified are inadequate.
As an example, here’s AirBnB’s original problem slide from its 2011 pitch deck—note how it both states the problem and lists the reasons why current “solutions” are ineffective:
3. Solution: a direct answer to the questions, “How are you going to solve the problem?” and “How will you make people’s lives better?”
This part of your deck outlines your “unique value proposition”, i.e., a “clear statement that describes the benefit of your offer, how you solve your customer’s needs and what distinguishes you from the competition”.
Colloquially referred to as your “secret sauce”, your unique value proposition outlines why your proposed solution is so special and what separates it from others working in the same space.
Is it more efficient? More effective in certain ways? Cheaper? Easier to source and/or scale? More user-friendly? Etc.
Words are good but visual use cases are even better: show people actually using, and benefitting from, your product.
As Megan Marrs points out, “exciting features and impressive functionality are important, but showing just what users can do with those features, i.e., your value proposition, will win people over long term.”
4. Why now?: an answer to the question, “Why is now the right time to launch this product and company?”
When it comes to launching successful startups, timing is everything.
As we’ve discussed previously on the Appster blog, Friendster, Myspace, Prius, Couchsurfing, and Netscape all existed before Facebook, Tesla, AirBnB, and Google were founded but whereas the former are now virtually dead the latter are hugely successful industry leaders.
This section of your pitch deck needs to convince investors that the market is now ready for the particular solution you intend to create with your app.
Typically, in order to accomplish this, you must provide and discuss various important data and analytics on your market and/or product.
As an example, here are three slides from Uber’s original pitch deck that collectively point to the categories of problem, solution, and why now?:
5. Market size: a straightforward description of market size, shape, characteristics, and trends.
In a number of past articles, I’ve stressed that:
“The significance (i.e., value) of a problem depends on the size and growth of the market to which it belongs. In order to be successful, an app requires a big problem within a big market for which there is a big consumer demand for a fix.”
This section of your pitch deck must, therefore, demonstrate to investors that your target market is “hungry” for a new solution to the problem you’ve described earlier.
The market must be large and/or rapidly expanding; niche markets with little consumer demand cannot sustain new businesses and investors know this.
You should present accurate, reputable, and up-to-date data on:
- The size of the entire market in which your specific niche is based;
- The growth of your niche over the past few years;
- The number of people you expect to be able to reach through your marketing efforts; and
- The number of people most likely to purchase your product.
You can use the following resources to research statistics on your total available market, serviceable available market, and target market: Forrester, Gartner, IBISWorld, Ovum, and filings by the SEC.
Here’s a practical word of advice: don’t try and bite off more than you can chew, so-to-speak, by going after a market that’s simply too massive.
Remember that Facebook began by targeting university students at specific schools and Uber started by operating only in select states before expanding into larger domains.
(Note: whereas very little, if any, variability exists with respect to the ordering of categories 1-5, there does seem to be some variability concerning the ordering of elements 6-10. I will follow the results of the DocSend study, which are based on the habits of the actual companies surveyed, but I suggest taking a glance at Sequoia Capital’s slightly different ordering here).
6. Product: a clear overview of the details of your product in terms of functionality, architecture, design, and development.
This section of your pitch deck should outline what your app does and how it does it.
You should indicate your current stage of development, whether you’re currently in alpha or beta testing, and when you plan to release the app to the public.
Be sure to use visuals of your app design and interface where appropriate.
However, a pitch deck is not the proper place to include dozens of schematics, wireframes, mock-ups, etc.
After seeing this component of your deck investors should not be left with any questions regarding the basics of what your app does or how it functions.
As AirBnB’s product slide demonstrates, there’s no need to make this section of your deck overly complicated or difficult to grasp:
7. Team: a concise, relevant, and straightforward overview of the members of your team, their qualifications and experiences, and how they know each other.
It’s crucial to remember that, when all is said and done, investors invest in people, i.e., the real-life individuals behind impressive ideas and earnings.
I’ve pointed this out before, stressing that:
“Ideas on their own are basically useless; it’s people who execute ideas and thus it’s people who allow great companies to emerge.
It’s important to show the investor that your startup team is solid through and through, i.e., comprising members who are hard working, intelligent, committed to success, and action-oriented.
Prove your team’s ability to get things done by discussing past successes and triumphs.”
This last suggestion is important: be sure to briefly outline the key achievements of each of your team members, including any companies started, bought, and/or solid in the past.
Here’s what the team section of Shift’s deck looks like (Shift is one of the companies included in the above-described DocSend study):
8. Business model: an overview of how you will monetize your product and build a scalable business.
Steve Blank provides the following rather expansive definition of “business model”:
“A business model describes how your company creates, delivers and captures value (or depending on your metrics for success, gets users, grows traffic, etc.).
A business model is a drawing that shows all the flows between the different parts of your company including how the product gets distributed to your customers and how money flows back into your company.
And it shows your company’s cost structures, how each department interacts with the others, and where your company fits with other companies or partners.”
Now, you certainly don’t need to provide all this information in your pitch deck. Indeed, you shouldn’t do so.
The point of this section is to straightforwardly demonstrate to investors how you will make money, i.e., how your company can survive and thrive over time.
You should discuss your price point and provide justification for that specific figure.
If you don’t yet have values for these metrics, which is entirely possible if you’re an early-stage startup, then try and amass data on similar companies working in your industry to get a rough estimate of what your data will eventually look like.
Here’s the business model slide from DocSend’s own pitch deck:
9. Competition: an overview of your competitors alongside a statement of your competitive advantage.
LinkedIn co-founder Reid Hoffman explicitly instructs founders to not shy away from discussing their competitors within their pitch decks:
“Experienced investors know there are always risks. If they ask you about your risk factors and you can’t answer, you lose credibility because they assume you are either dishonest or dumb.
Entrepreneurs often say they have no competition, assuming that’s an impressive claim. But if you claim that you don’t have competition, you either believe the market is completely inefficient or no one else thinks your space is valuable. Both are folly.
To build credibility with investors, you want to show that you understand the competitive risks and show why you’re going to win.
Express your competitive advantage this way: Why are you going to break out of the pack? What is your advantage? If you aren’t clear and decisive, investors won’t believe you have an edge that can lead to success.”
To Hoffman’s points, then, preparing your pitch deck without overtly acknowledging that there are others already operating in the same space that you intend to launch (which is very likely to be true) will almost certainly backfire on you.
Investors want to see that you are aware of the “state of affairs”, so-to-speak, within your market.
One of the most effective and common ways of addressing competition within a deck is to utilize a 4-box grid like the following:
As an example, here’s DocSend’s own competition slide:
10. Financials: a statement of your projected earnings and various other related outcomes (e.g., market share).
The financials section of a pitch deck can be a bit tricky/complicated for two reasons.
First, it may be very difficult to accurately provide financial information about your company or product if you’re still an early-stage startup.
Indeed, many investors will be sceptical of your cash flow projection, regardless of the amount you cite.
Second, DocSend’s study of 200 companies’ pitch decks uncovered the following:
“Although the financial category takes first place in terms of how much time investors dedicate to each section, only 57 percent of successful decks have this section.
Almost all of the seed decks, and many of the A decks, don’t contain any significant financials to discuss.
One other thing that’s important to note is that almost no decks listed the amount they were raising and the terms of their fundraise.”
This suggests that specific terms of fundraising and amounts being sought should be left out of a pitch deck and instead communicated to investors in person at a later date.
In order to offer some valuable financial data that investors will want to see, it’s important to familiarize yourself with and collect data on metrics such as burn rate, cash flow, growth vs. profit, runway, and zero cash date (see our recent publications here: 1, 2, 3).
Here’s what Uber’s original financials slide looked like:
Now that we’ve traced through best practices for pitch deck preparation, let’s turn to the two remaining aspects of pitching, i.e., establishing communication with investors and delivering a real-time, face-to-face pitch.
Phase 2: Establishing Communication
The second major stage of pitching your app involves establishing communication with investors to “get the ball rolling”, so-to-speak.
Before trying to contact an investor, it’s crucial to understand the different needs, wants, expectations, and abilities that are often associated with different kinds of investors.
Not all investors work in the same way or want the same things, of course.
As I’ve pointed out before:
“Not only are different types of investors more and less appropriate sources of funding at different stages of your startup’s lifecycle but the amounts and types of money the former can provide as well as the intensity of their involvement in your company will all vary depending on the investors’ specific interests, demands, and capacities.”
Thus, before sending your pitch deck off to investors, be sure to familiarize yourself with Murray Newlands’ helpful description of the 6 main types of investors that exist, i.e., friends/family, angels, super angles, VCs, investment bankers, and crowdfunders.
Another key aspect of familiarizing yourself with the different needs, abilities, and expectations of distinctive types of investors involves performing your due diligence well in advance of trying to contact an investor.
As I’ve stressed before, “since you’re the one seeking to convince another individual or firm to invest in your company, the onus is clearly on you to learn as much as possible about that person or business before pitching your startup.”
Fortunately, I’ve put together a list of recommendations that founders can follow in order to learn and gather helpful information about an investor prior to contacting or meeting with him/her.
Feel free to take a look at these strategies here, listed under the heading, “The Need to Perform Investor Due Diligence”.
As with the mission statement in your pitch deck, it’s crucial that your initial communications with investors contain a one- or two-sentence summary of the essence of your company—otherwise known as your one-sentence pitch.
Having already compiled your pitch deck, you should have no problem coming up with (or merely re-stating) your one sentence pitch in your communications with investors.
However, if you still need a bit of help nailing this down then I suggest letting Adeo Ressi’s template guide you:
Now that you’re ready to start contacting investors and sending over your pitch deck, how can you go about finding qualified individuals who might fund your company?
The Muse suggests employing the following three strategies for locating and connecting with potential investors:
First, track down investors online by:
- Creating an AngelList profile, describing your company, team members, and product(s), so that investors can find and learn about you; and
- Using Crunchbase to find startups similar to yours operating in your specific industry. Crunchbase allows you to look up a specific company, person, or investor and see who has invested what, when, and for how much, thus giving you insights into the specific companies and people with whom you should try and connect.
Second, create a strategic list of potential investors by:
- Compiling a list of 30-50 professionals who could conceivably represent a solid fit for your company from an investment standpoint;
- Researching investors on AngelList who invest in companies operating in your industry; and
- Storing names and contact details (preferably email addresses) in a basic spreadsheet or a simple Customer Relationship Management (CRM) software.
Third, leverage your professional and personal networks by:
- Combing your list of investors person-by-person to determine if you share any mutual acquaintances; and
- Asking a mutual friend or colleague to refer and introduce you to the investor, being sure to professionally and convincingly present your pitch when you finally meet with the investor.
It can also be quite helpful to attend meetups and industry events to chat with potential investors in person.
Meetup.com is an excellent resource that’s worth utilizing in this context.
If, for whatever reason, you’re unable to connect with a potential investor through online social networking sites, a mutual acquaintance, or in-person meetups then you’ll likely have no choice but to try and establish contact via a “cold email” (or, less probably, a “cold phone call”).
Here’s a list of time-tested dos and don’ts for cold emailing an investor, which, to be clear, refers to the process of contacting somebody without having spoken to him/her before:
- DO personalize your emails by using the investor’s first name, referring to one or more key elements of his/her investing history, and demonstrating that you’ve put some thought into the reasons why he/she is a great fit for you, your company, and your major objectives;
- DO restrict your cold email to 5-7 sentences total;
- DO experiment with different subject headlines and variations of your one-sentence pitch; be sure to use analytics software to determine the differences, if any, between email open and/or response rates;
- DO politely follow-up and ask for feedback if you don’t hear back from an investor within 7-10 days;
- DON’T send out generic pitches to many different investors without any regard as to why these particular Angels, VCs, etc. might be a strong fit for your business;
- DON’T write extremely long, ultra-detailed emails; and
- DON’T harass investors by sending numerous follow-up messages and/or begging for re-consideration.
If you’re looking for even more cold email tactics that you can use to contact investors then check out this video here by author and entrepreneur Jason Calacanis.
Let’s now move onto the final element of pitching, i.e., giving a presentation to investors in real-time.
Phase 3: Live Presenting
The final defining stage of pitching your app is delivering a live, real-time presentation about your product and company to investors.
Much of the time this takes place face-to-face in person but live pitches via conference calls and video-chats are becoming increasingly common.
To be perfectly clear, yes, you should always tailor your pitch to the specific investor(s) with whom you’ll be meeting and, yes, you’ll likely need to practice and modify your live pitch many times before you feel entirely comfortable delivering it and can do so effectively.
Summarizing the ideas we’ve been discussing so far, Darren Dahl suggests that founders should try and answer the following four key questions whenever giving a live pitch because investors will be waiting to hear responses to these important queries:
- Does the company’s product or service address a large and growing market need?
- Can the company scale quickly enough to take advantage of that market opportunity?
- Does the company have a defensible competitive advantage?
- Can the management team execute on the potential outlined in the first three criteria?
In the vast majority of circumstances, your pitch deck should serve as a guide to your live pitch.
This doesn’t mean that you merely display and discuss the exact same slides that your potential investors have (likely) already seen but it does mean that the essential ideas captured by the ten major categories of your deck should rest at the heart of your real-time pitch.
Although there are exceptions, pitch decks on their own usually aren’t sufficient to convince an investor to fund your app, which is precisely why live pitches are given.
Investors are looking for more information than what’s presented in your pitch; they also want a chance to interact with you face-to-face to get a sense of your personality in “real life”.
Be confident, assertive, passionate, and enthusiastic but not cocky, arrogant, or presumptuous.
Fight any urge to respond sarcastically to what you might perceive to be a “silly” question and keep telling yourself that such questions are being posed simply because investors want to know more about your, your company, and your app.
In terms of specifics, here are seven best practices you should utilize whilst giving a live pitch:
1. Hook your audience
Try and “shake” bored investors out of their familiar routines by “hooking” them with the use of something that grabs their attention and forces them to listen to you. Example: an interesting industry fact, a soon-to-arrive important market shift, or a unique personal (but short) story. Avoid cliché statements, such as promises about trillion dollar markets or industry-disrupting technologies.
2. Describe the problem
As we’ve discussed, you need to make your investors truly understand and “feel” the customer pain that you intend to solve. A bigger problem means greater success for a company that can solve it. Provide examples of the pain, and unambiguously explain the implications of not solving the problem.
3. Stress your unique value proposition
You need to clearly demonstrate how your proposed solution differs from all the other currently available fixes for the problem you’ve just identified. Be very specific: how, exactly, is your “secret sauce” better than what your competitors are doing? Why should investors care?
4. Emphasize market dynamics
Time and again, the world’s most successful entrepreneurs and investors have underlined just how crucial the size and demand of a given market are to a startup’s chances of success. You need to convince investors that your market niche can support your business. Use visuals, e.g., statistics and graphs, to prove that your domain is vast and/or quickly expanding. Again, focus on the particulars by discussing the exact kinds of customers you’ll be targeting (rather than merely saying something like, “American women aged 25-40”).
5. Demonstrate traction
Traction—i.e., proof that your company is gaining users/customers, generating buzz, and bringing in revenue—is very important when it comes to fundraising. If you have traction then you should demonstrate it via the use of data and graphics; if you haven’t yet collected enough metrics to make your traction evident then you must otherwise convince investors that your operations are solid and moving along at an impressive pace. Metaphorically, your goal should be to convince the investor that your startup is a fast-moving train that he/she would be wise to jump onto as soon as possible.
6. Play up your team
Remember that, at the end of the day, investors ultimately invest in the real-life people who reside behind “sexy” ideas and earnings. Do whatever you can to show investors that your startup team is solid, i.e., full of intelligent, qualified, experienced, and dedicated people who are passionate about making a meaningful impact on the world. Give concrete indications of team members’ past performances and success.
7. Close the deal; setup the next steps
Let the famous “ABC rule” from the 1992 film Glengarry Glen Ross, Always Be Closing, motivate you. Once you complete your live pitch, take the next step to move closer to a deal. Exchange business cards, try and arrange a date and time for the next meeting, and/or schedule a follow-up phone call. In other words, manage your “pipeline” and keep the momentum going. Here’s the crucial takeaway: never willingly leave a meeting without having the next point of contact confirmed in advance.
If you follow these seven strategies then you’re well on your way to delivering a memorable, enticing, and effective live pitch for your app.
If you enjoyed reading this article then be sure to check out our highly detailed, expert white paper on raising capital for your startup.