What Investors Look For in a Pitch

ENTREPRENEURSHIP
MAR 11 2020
Today we are helping you through the hurdles in creating the perfect pitch
deck, with true advice from actual Nordic investors from Innoventure, FinBan,
Galora, and Katapult.
At the end of this post, you will find thehub.io’s custom made pitch deck
template ready for you to download and adjust to your own business!
Always keep in mind that investors receive loads of pitch decks every day and
go through a lot of pitches. Through constant outreaches on email, social
media, and even to the extent of being physically stopped on the streets. So,
you do want to stand out from the crowd. In a good way.
To be realistic, the perfect pitch deck doesn’t exist since different investors
look for different things when investing. Depending on the stage of your
company (early-stage, seed-stage, etc.) the focus changes in many aspects. Are
you in the idea-phase, do you have an MVP version, have you shown promising
sales yet? Also, investors have different backgrounds and their expertise
varies a lot. This generally means that you want to make sure to have done
your homework before pitching to an investor. Make an in-depth due diligence
to better understand your investors and their previous investments. Is the
investor the best match for your start-up? Will the investor be able to provide
the advice your company needs? This will help you design your pitch deck to
the individual investor and help steal some of the attention.

Quick Tip:

An investor pitch deck is the deck you use to present your startup to the
investor. According to the majority of investors, approximately 10 slides is an
optimal length for a pitch deck. They also enjoy seeing a good balance of
written text with imagery that communicates your product idea and business
model concisely.
On the other hand, you can send it out to the investors to read for themselves
beforehand. This deck can be a little longer, even up to 20 slides, as long as you
make sure the investor can skim the main points through in a few minutes.
Either way, the rule of thumb is to not make your deck into a novel. The
important part is not the number of slides but how intuitive and cohesive your
content is.
It is important to balance your visual content with your written content: find
the best ways to communicate different aspects of your pitch and always have
your elevator pitch in mind. The short concise presentation of your business.
And if you need a good elevator pitch example, you’ll find a run-through we’re
quite fond of here.
In this blog post we introduce the top 3 things investors look for in a pitch, and
their best tips to compiling your next deck pitch deck.

1st Base: Feature the strengths of your team

members
Often in early-stage start-up companies, you don’t have all the numbers yet to
show exact estimates/projections for profitable growth. This means the
investor is more likely to invest in the people behind the project. Does the
team have what it takes to meet the required milestones?

A start-up is as strong as its core team. This is no secret when looking at the
ex-Google Founder of Pinterest or ex-Oracle founder of SalesForce, and is
important to keep in mind for your pitch presentation.
According to the investors, the key is not to only have the right skills and
experience within the team – but complementary ones. It is very much a
chemistry thing. Coachability is something all investors look for when
investing in a start-up. A team needs to have sufficient experience and
competencies in their domain so that all key bases are covered to ensure a
maximized collective efficiency.
Some of the most important things to cover are how mission-driven and
passionate the team is, how their personalities and their competencies fit
together as well as their ability to attract more talent.
No great idea ever succeeded without an amazing
team backing it.
The team is everything in start-ups, especially in the seed-stage. As earlier
mentioned, very early investments are almost fully team investments. When
investors speak to founders, they seek to understand their background, their
work ethic, their motivation, and ambition level.
One of the investors we spoke to also noted that having the core tech
development or intellectual development outsourced would be a huge red flag.
It is a great strength to have the most important competencies in-house. So if
you want to create the next big digital company based on software
development with a heavy focus on AI – make sure at least one of you is an
experienced software developer who is able to carry the load. Investors do not
invest in words and dreams. But what hopefully could give a
satisfactory internal rate of return (IRR) of 25% over 5 years.
Furthermore, the investors encourage you to list not only your founding team
or employees in your deck but also the possible advisors, mentors or investors
you already have onboard.
Not yet sure how you build a great startup team for investment?

2nd Base: Define a real, clear problem – and a

unique solution.
This is the thing all investors we talked to emphasized: it is not enough to have
a cool idea. You need to have a real, clear problem you’ve identified and a
unique way to solve it. A product or service can look and sound great! But it is
no secret that it makes it way easier if it actually solves a real urging problem.
This also means doing your market research right, and knowing what is it that
makes you unique in relation to your competition. And do not even bother
thinking you have no competition. There is always competition. You just have
to know who and where. Do the work required in market research.
Understanding your market is fundamental in building a business idea from
the bottom. Is there really a need & demand?

Resources for market research

As the lean start-up life goes. Resources are scarce pre-funding. But thankfully
the digital age has brought a long list of cheap, if not even free, tools to help us
do market research. Even on a more in-depth level. Here are two great tools
that every start-up should consider utilizing:

1. A great tool that is actually free of charge is Google’s Think with

Google that provides quality market insights and multiple tools to
analyze consumer behavior, competitive analysis, etc.
2. One of the most proven methods in market research is questionnaires.
Often underestimated, the questionnaire gives you a response directly
from the consumer. With digital tools such as SurveyMonkey, you can
access a global group of consumers with your questionnaires with
multiple solutions that fit your need to gain better market
understanding.

3rd base: Get Your Specs Right

We cannot emphasize this enough: the figures matter. Really think through
how much you ask and what is your argumentation for it – what are you going
to use it for and what is your valuation? Investors are looking to understand
what stage you are in and the minimum amount of capital that will help get
you to the next. Too big investments result in comfortability and overspending
which the investors are not looking for – they want you to be focused on
growing as fast as possible without any unnecessary distractions. So to be
clear, seek only the capital needed to get you to the next stage or inflection
point.
Investors take a high risk on every pre-profit start-up, so you want to make
sure that you clarify what the requested capital will be invested in. And of
course how it will help the company get to that next stage to eventually
become a sustainable business. Some investors are even interested in seeing
your considerations regarding a future exit strategy to see your thoughts on
how you’ve planned on getting the investors their money back plus some.
Know what you’re worth!

When evaluating your business don’t evaluate the potential and don’t
overestimate. You need to evaluate your business where it is right now. You
might think that your idea is a bulletproof, right-in-the-bullseye business that
without a doubt will be the next big thing. But that potential hasn’t been
unlocked yet. And for that to happen you are very much dependent on
investors to get you there.
If you haven’t shown promising sales yet and haven’t put in the effort to get
deal agreements on the board, don’t come asking for two million dollars for
2,5% of the business despite the idea and potential sounding cool. Business
has always been about relationships. Be humble, realistic, and professional
when engaging with investors.

Key Takeaways To Create The Perfect Pitch

Clear, concise communication is key. Gather feedback and optimize. In some
cases, the first pitch will lead to an investment. But in most cases, you will have
to do your pitch quite a few times. That is why it is important that you seek
feedback and implement changes to align with what the investors are looking
for. Remember that some focal points can subjectively vary from investor to
investor.
When you step into a pitch for the first time, remember to have some excerpts
of your deck ready: e.g. Go to Market strategy, financial model, business model.
Not having the documents ready can reflect poorly on you. And remember,
there is no need to be deadly nervous. Most investors were once
entrepreneurs, so they have literally been where you stand.
Remember, it’s usually a lot of money you are asking for. So your aim for the
pitch is not only to catch the attention and interest but to make the investor
feel comfortable investing in you when handing over the pile of cash.