I assist startups via training and mentoring to pitch for early stage investment to include enterprise agency supports such as New Frontiers and Competitive Start Fund in Ireland. I was delighted to find a superb book by Chris Lipp called ‘The Startup Pitch : A proven formula to win funding’. At 160 pages, it is a very readable book that matches up to its promise as “the single most complete reference source for pitch skills used in today’s startup world”. The book’s UVP is spelt out on the back cover:
This blogpost will now pick out some salient points from ‘The Startup Pitch: A Proven Formula to win Funding’ which I bought from Amazon.co.uk for £20.
Layout of The Startup Pitch
The four point pitch formula is outlined in Chapter 2 of six chapters as illustrated in graphic below adapted from the Contents section of The Startup Pitch.
The introduction stresses that there is a formula for how to pitch successfully. You don’t need to be a master presenter or persuader to win funding, it simply takes the right techniques applied consciously to capture capital.
The Four Point Pitch Formula
Raising money is the second hardest part of starting a startup – Paul Graham.
On page 21, the author Chris Lipp explains that he has identified four critical points of information that must be communicated to investors – after watching many of the best and brightest around Silicon Valley. These are Problem-Solution-Market-Business.
One begins with the problem, or the need being addressed. Then proceed to product or service that fulfills the need. The market is the target customer to whom you will offer your solution. Finally, business is all about the ways you’re going to capture that market. The book includes effective summaries on the final page. On page 55 a breakdown of Problem-Solution-Market-Business is provided in worksheet format – this can be downloaded at speakvalue.com (on provision of an email address).
Here is my summary of each subheading:
Description … set high level context for the subject and then start your pitch with a simple problem description to capture investor attention. Starting with a clear problem orients your audience towards the solution by engaging their natural problem solution thought process. You introduce a ‘knowledge gap’ when you start by outlining a problem.
Pains … problem pains are the consequences to people or businesses with the problem. They may be high cost, inconvenience, or inability to achieve certain goals. The greater the consequences the more strongly people want a solution. The more people want a solution, the less appear you present as an investment opportunity.
Trends – page 27 social, economic and technology trends open up markets. Trends help to transition from problem to solution.
USP … single sentence UVP of what you do and why you’re unique. Avoid verbose language preferring simplicity and clarity via brevity. Be concise.
Demo … your product through the experience of a hypothetical customer
Benefits … translate product features into explicit customer benefits
Target – the market is the customer base you can reach today. Use customer personas.
Size – cite market research reports
Advantages – explain your competitive advantage over other solutions on the market
Go to Market – business is how you bring your solution to market and make money. Introduce go-to-market strategy to explain how you get, keep and grow your customer base
Revenue Model – to show how you monetize from going to market
Milestones – List out past and future milestones to show accomplishments and where you’re heading.
The point is made that not all pitches are the same, and not all points are equally important to your pitch – so you don’t necessarily have to allocate equal time to each. But they all have to be addressed as these are the areas where investors will have questions so answers need to be prepared.
The formula presented in the book is very persuasive. But it does seem to omit one key element which is the Team. But that concern is resolved in Chapter 3:-
Four Elements of Influence (chapter 3)
To win funding you need more than a Pitch formula. You must prove what you Pitch is True
The author explains that the Four Point Pitch Formula is only the foundation. It’s not enough to simply describe the problem and share your solution, market, and business. You need to prove there’s a problem, prove your solution solves the problem, prove there’s a market, and prove the efficacy of your business model. He adds that the key ingredients of persuasion are credibility, audience value, data and story as per image below:
Unlike the 4 Point Pitch which flows in a linear progression, the Elements of Influence can be applied in any order to Problem, Solution, Market and Business. The book goes into sufficient detail in chapter 3 to explain each of the four elements as they apply to each of the Four Pitch Points. Here is my quick synopsis.
Credibility is your perceived knowledge and expertise regarding the topic of discussion. Show you are an expert or share expert opinions to add clarity to the Problem, the solution, the market and business.
Audience Value means tailoring your message to fit potential benefits to the listeners. Investors want to hear how your startup provides low risk high return. For instance, detailing the number of people suffering from a stated problem represents opportunity.
Data are the facts, the research, the statistics. What’s the evidence that your solution or business plan works? Data make the problem real – not just an entrepreneur’s opinion.
Story is the emotional component, the customer anecdotes, your own experience. Emotions motivate action. Make the problem real (with data), and then bring the problem to life.
The author concludes that adding credibility, audience value, data and story into the points of your pitch proves to investors that you’re worth the investment.
Make it Clear. Make it Interesting. Make it Real. Make it Meaningful #TheStartupPitch
So the Team factor particularly the credibility of the founding team is measured by your knowledge, experience, and clarity when pitching.
Other Areas Addressed in The Startup Pitch
The section on Pitch Delivery is very good – a key point being that all investor pitches are conversations.
The point is made (page 115) that practice isn’t just knowing what to say, it’s saying it out LOUD. There is no need to memorize the pitch – just make it your own.
Chapter 5 addresses how to design and create effective Slide decks.
The advice is to keep slides simple by showing only one message per slide. BTW, if anyone is looking for help with Pitch Slide preparation I highly recommend Ed Fidgeon-Kavanagh of Clearpreso.com – he has a superb track record of helping startups to raise funding. The portfolio of case studies is worth checking out.
Conclusion – Recommended Read
I highly recommend The Startup Pitch to startup entrepreneurs who are in the words of the author serious about raising funding. I will conclude by referring to a passage on page 119 about the goal of a pitch deck
Good meetings end with follow up meetings. There’s a process to winning investment, and the goal of your pitch is to proceed through this process.
Hope you found this blogpost of interest. Comments and shares on Social Media welcomed and appreciated.
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[images sourced from Pixabay.com – a great source of royalty free images]