1.4 billion Indians encounter different problems. Some enterprising individuals are bold enough to come up with multiple solutions to address these issues. Even if one in a thousand acts on these solutions, that amounts to more than a million ideas.
According to a Razorpay blog, India had about 72,000 start-ups as of 2022. These numbers imply that only 5 per cent of all ideas become an enterprise.
While investors love innovative ideas, many are hard-pressed for time and might be unable to dive deep into every concept in their inbox or desk. The onus is on the founder to be astute in disseminating all necessary information considering the investor's time constraints while ensuring they can grab their undivided attention.
So how do founders ensure that their idea gets funded and they can effect a change for the masses? The answer lies in effective pitching.
A good pitch has verbal and non-verbal components and the ability to make a lasting impression within the shortest time.
Instead of a personal meeting, the initial interaction between a founder and a potential investor is most likely via a presentation deck. Presenting relevant information through good visual representation goes a long way in establishing a great first impression.
Hence, the pitch deck must be in proper fonts with pictures and graphics that highlight the critical pointers clearly. Since pictures speak a thousand words, they can communicate the founder's message more intelligibly while facilitating an easier visualisation of trends and patterns. Above all, brevity is the key.
Here are some essential elements that the pitch deck should cover:
1. Introduce The Problem
Highlight the problem, how you wish to solve it, whether others are trying to resolve it some way, and if yes, what is the start-up's moat or unique way of approaching it. Communicating these essential points invites necessary feedback, which signals whether the founder is in the ballpark or not.
2. Highlight The Company's Purpose
While 'What' and 'How' are pertinent questions, 'Why' should be the centre of a business. The' Why' guides the company's vision and mission, providing a sense of community to employees and a reason for its existence. It lays down the company's values, which define its culture and is essential for attracting and retaining employees.
3. Understand The Market And Opportunities
Analysing the external environment can define the net attractiveness of any industry, given its opportunities and threats. The market size is also a significant consideration, with the size of the pie being more important than the share of the pie.
One should be well-versed with and incorporate rightly calculated key metrics like the total addressable market (TAM), serviceable available market (SAM) and serviceable obtainable market (SOM). These metrics are vital to clearly presenting the scope of opportunity and defining the target audience.
4. Highlight The USP
To ensure the start-up's viability, it is vital to ensure a product-market fit. One could test the same via pilot programs, surveying customers, or using prototypes.
One is strongly advised to emphasise the distinctive competency or the unique selling proposition (USP). This is how the company differs and why consumers choose it. It is also what makes investors bet on a company. This is what drives traction and is what investors look to assess in a pitch deck from a start-up.
5. Demonstrate The Financials
Any business needs to turn cash flow positive and generate long-term profits for sustainability. While negative cash flows are acceptable in the initial months and for a short duration, a strategy must be implemented to make it buoyant.
There should be a comparative analysis of competition and high costs must be backed with logic with a plan to mitigate them in future. All these should be clearly outlined so that the investor knows that the start-up is treading upwards on profitability metrics.
6. Fund Raise And Ask
Investors are eager to understand if the start-up has raised funds earlier, how it utilised the capital and what the current shareholding structure looks like. They also need to know the current fundraise plans and progress.
Founders must propose a fair valuation that is adjusted upwards for growth and discounted to reflect uncertainties. They must also share their progress and action plan to mitigate and conquer challenges. It is important to mention where one lacks and how investors can add value.
A Word From The Wise
While building a start-up, one should remember that they need not select a revolutionary path to resolve a problem but one that is evolutionary one. Standing out requires standing apart, which means being different in at least one aspect.
Ultimately, while the business matters a lot for any investor, the founders matter more. Motivated visionaries make for ideal founders.
While founders may not have all the answers to an investor's questions, their hunger to find them is crucial. Investors are keen to collaborate with entrepreneurs who are motivated even after funding rather than just before raising capital.
While interacting with investors, founders should supplement their verbal speech with a coherent pitch deck that covers the 'why' of their venture and how it solves problems differently. This should cover market analysis, growth potential, competence analysis and financials compared to the industry.
Finally, it showcases how the investors can add value and a proposed valuation. The importance of soft skills should not be discounted because most venture capitalists bet on the founder more than the enterprise.
Mitesh Shah, Partner, Physis Capital
