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EAPPREN CAPACITYBULLDING P I T CHI NG FORINTERMED IA RY FOR ORGANISAI TN ION S VESTMENT
Contents 1. Introduction 1.1 Welcome 1.2 Meet everyone 2. Why seek Angel Investment? 2.1 Section Overview 2.2 Types of Investment 2.3. Angel investment 2.4.Benefits of Angel Investment 2.5 Section Summary 3. What Angel Investors want 3.1 What Angel Investors Look for 4. Getting your business investment ready 4.1 Section Overview 4.2 What is entrepreneurship 4.3.Project management 4.4.Writing a business plan for investment 4.5 Writing your Marketing Strategy 4.6 The Executive Summary 4.7.Section Summary 5. Preparing your Pitch 5.1 Section Overview 5.2 Types of Pitchers 5.3 Terms & Stages of a Pitch 5.4 Idea Pitching 5.5 Elevator Pitches 5.6 The Business Plan Pitch Process 5.7 Tips to Craft a Pitch 0
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4 4 5 7 7 9 14 16 18 20 20 21 21 23 29 36 41 48 51 53 53 55 58 63 69 73 81
5.8 Section Summary 6.Pitching with Confidence 6.1 Section Overview 6.2 Skills & Qualities that will contribute to a successful pitch 6.3 Practising your pitch 6.4 Answering Questions 6.5 Section Summary 7. Next Steps 7.1 Action Plan 7.2 Further Resources 7.3 Evaluation
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1. Introduction 1.1 Welcome Lynne Cadenhead, Chair of Women's Enterprise Scotland welcomes you to this course. If you have any issues navigating through the course, please contact us or leave a comment on the relevant page.
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1.2 Meet everyone
Please introduce yourself to the other course participants in the comments box below. You might like to include: •
A bit about you - your name, where you're based, any interests
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About your business - it's name, what you do, links to your website
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Why you're here - anything you'd like to share about what attracted you to this course and what you're hoping to get from it
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Find out more about Women's Enterprise Scotland here and find out more about the SEEWBAN project here.
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2.Why seek Angel Investment? 2.1 Section Overview
In this section, we'll cover: •
the different types of investment and how they differ from angel investment
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the difference between start-up accelerators and incubators
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how angel investors differ from venture capitalists
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the benefits of angel investment and
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•
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when angel investment is appropriate for your business
2.2 Types of Investment Before we look at the different types of investment, it's useful to first look at the start-up funding landscape which has changed significantly over the past few years, especially in Europe. It is interesting reading, because certain types of investors appear at certain fundraising stages which are: Early stage of a start-up: Pre-seed capital - when you have an idea, maybe a working prototype and are looking for funding that will allow you to focus on your project full time. Seed capital - which can be described as the capital necessary to start a company and to try to find product-market fit. Growth stage of a start-up: Series A - usually when start-ups have figured out their product and the size of their market, but need capital to scale and improve distribution systems or establish a business model if they don’t have one yet. Series B - when a start-up is successful with an established user base and a business model that is working, but wants to grow even more. Series C and following stages - when start-ups are fully mature. The business model is working - whether the company is profitable or not, your user base is expanding and acquisitions might be in the thoughts of the executives leading the company. From now on, the company tends to be an IPO (enters the stock market) or gets acquired by a much bigger company.
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When it comes to investors, there are a lot to choose from. It can get a bit overwhelming for start-ups that are totally new to the business game, but choosing the right option will not only better your chances of attracting the best investor for your operation, but may even help you avoid issues in the future. The most traditional types of investors start-ups deal with are the following: Friends and family - It may come as a surprise, but friends and family invest the most money in start-ups in aggregate. Seeking investments from friends and family can be an ideal way to raise pre-seed or seed capital to get your company off the ground. This type of investor base their involvement more on their trust in you as the business owner rather than any type of trust in the business itself. Basically, these investors know you and like you. This group can also be a great resource for very long0
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term investments, motivated more by loyalty and support than by strict return on investment. Documenting the agreement, which will indicate the risks and clarify that they may not be getting their money back is very important. Banks - A bank loan may be available to help with start-up costs. A bank will want to see a detailed business plan and a thorough description of the business and its prospects. Loan-seekers will usually be required to produce proof of collateral or a revenue stream before their loan application is approved. Because of this, banks are often a better option for more established businesses (in start-up cases, during the growth stage). Peer-to-peer lenders - Individuals or groups that offer funding to small business owners. To work with these investors, entrepreneurs must apply to companies that specialise in peer-to-peer lending. Visit the websites of Prosper and Lending Club to see some examples. Once their application is approved, lenders can then choose the businesses they wish to support. This kind of investment usually happens during the growth stages, when the risk is lower. Venture Capitalists (VC’s) - Venture capital firms invest on behalf of their clients and their sums of money are usually higher than every other type of investor. For that reason, they usually show interest after the early stages of a start-up, when the business is growing and the risk is significantly lower. Venture capitalists may invest as much as millions of pounds. They will invest the money needed to help the business grow. They do that by securing equity capital, or a share in your company. They
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are betting that the share will be worth more within time and will wait to get a return on the investment. Giving up that equity capital means giving up some ownership or say in the company (e.g. Board of Directors). They provide their portfolio companies with exposure, connections to customers, and even help to establish partnerships. In addition to the above types of investor, there are several alternative sources of start-up fundraising that you may wish to consider: Start-up accelerators - These organisations offer pre-seed or seed capital in return for equity. Start-ups are admitted in classes and work in groups. They are generally given a deadline to complete an intensive training programme (typically between 1 week to 6 months). Start-ups end an accelerator program with a Demo Day in which they demonstrate (or pitch) to investors. Start-up incubators - These are organisations established to support the development of start-up companies during the early stage. Usually, this includes 1-3 years of access to facilities (office and lab space), resources and development programs, potentially including mentoring. Incubators differ from accelerators in that the latter typically focus on acceleration of growth in a shorter defined period whereas the former is focused on the development of the company and its product over a longer time period. Nevertheless, both incubators and accelerators are great for those who are starting up their first venture. If an entrepreneur is unsure about what to focus on or how to think about rapid growth, this might be a good place to get started. This video explains a bit more about the difference between incubators and accelerators: https://youtu.be/KyTKYtmUl1Y
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Crowdfunding - This is the most unusual type of fundraising and as the word implies these funds come from the crowd. The financial support for a start-up is via smaller amounts from many investors (“the crowd”), rather than the alternative pattern of larger amounts from a smaller number of supporters and, like peer-to-peer lenders, it usually occurs after the early stages of a start-up because the risk is lower. There are two types of crowdfunding: • The “donation-based” or “reward-based” crowdfunding, where sites like Kickstarter and Indiegogo are global leaders. Users can back the projects they like and get something material in return (physical or digital products and services), receiving no equity from the teams or companies providing such goods. • The “equity-based” or “debt-based” crowdfunding, when investors of the start-ups get equity in return, thus becoming shareholders of the companies and being able to participate in the future returns the start-ups might be able to provide to investors. The leading platform in equity crowdfunding is Crowdcube. Bear in mind the investors needs and wants before deciding on which option suits your business best. Their values might not align with yours. There are investors who prefer no risk, less conservative investors and aggressive investors. When it comes to potential investors, an entrepreneur must consider the potential investors’ recent dealings, the services they might provide, the expectations they have for company leaders and how involved they want to be in company operations.
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2.3. Angel investment Angel Investors are individuals or groups with high net worth who invest directly into promising entrepreneurial businesses in return for stock in the companies. Many angels are successful entrepreneurs themselves, as well as corporate leaders and business professionals. Angels can be an ideal fit for start-ups, because their personal interest in the healthy growth of the business, and their own litany of past successes and failures often prompt them to act as mentors. This can include introducing the entrepreneurs to potential customers and investors, identifying and advising on potential problem areas, and generally helping you to gain credibility and recognition in your industry. The majority of the Angel Investors or Business Angels appear during the early stage of a start-up. There are many online platforms which operate as bridges between an entrepreneur and angel investors such as Gust, AngelList and In4Capital. This video de-bunks some of the myths you may have heard about Angel Investors. How many have you heard? https://youtu.be/1b8YLBFQy44 You might be wondering about the difference between Angel Investors and Venture Capitalists. This video explains the key differences: https://youtu.be/Pnvg1Jgh_dk If you still think Angel investment is right for you and your business, enter your reasons for this in the comments. If you're not sure, enter any
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questions or concerns you have in the comments. Have a look at what others are saying here too.
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2.4.Benefits of Angel Investment According to this article from NI Business Info, there are many advantages and disadvantages of angel investment. Have a look at the list below and note any that are particularly important to you. •
Advantages of business angel financing
Six advantages of business angel investors: •
Business Angels (BAs) are free to make investment decisions quickly
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no need for collateral - i.e. personal assets
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access to your investor's sector knowledge and contacts
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better discipline due to outside scrutiny
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access to BA mentoring or management skills
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no repayments or interest
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Disadvantages of business angel financing
Four disadvantages of business angel investors:
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not suitable for investments below £10,000 or more than £500,000
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takes longer to find a suitable angel investor
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giving up a share of your business
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less structural support available from a BA than from an investing company
Angel investment is not for everyone. In this video, Errin Todd, Founder and Sea-E-O of Todd Fish Tech Ltd, talks about some of the reasons why Angel Investment might not be right.
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2.5 Section Summary
In this section, we covered: •
the different types of investment and how they differ from angel investment
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the difference between start-up accelerators and incubators
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how angel investors differ from venture capitalists
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the benefits of angel investment and
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when angel investment is appropriate for your business
If you have any questions about this section, enter them in the comments below. 0
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If you're still not sure if angel investment is suitable for your business, have a read at this blog by WES Ambassador and Entrepreneur Agony Aunt, Vicky Brock. Ten tips on raising money for your early stage start-up. If you're wondering why this course is aimed specifically at women, you might be interested to know that if women started up in business at the same rate as men, the Scottish economy could benefit from an additional ÂŁ7.6 billion. In her podcast, Vicky Brock discusses equity investment, knowing your value and the importance of raising enough money to fuel your startup for 18 - 24 months of growth. Global Invest Her founder, Anne Ravanona and Vicky Brock urge a high potential female founder to think big and ask for more money. https://vickybrock.podbean.com/mf/web/6n9ymm/anne2fullepisodeversi on2.mp3
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3. What Angel Investors want 3.1 What Angel Investors Look for Watch the videos below to hear what an angel investor looks for. Make some notes as you watch the videos as you'll find these useful later. https://youtu.be/0ONPfJjEjhk https://youtu.be/41yPPkibJqo Use the comments below to discuss anything that stood out for you during these videos.
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4. Getting your business investment ready 4.1 Section Overview
In this section on getting your business investment ready, we'll cover: •
what entrepreneurship is
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what makes a successful entrepreneur
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how a project management approach can help you get investment ready
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•
writing a business plan
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what investors look for in a business plan
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writing a marketing strategy and why it's important to have one
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writing an effective executive summary
During this section, we'll start to talk about creating slides for your pitch. You can start drafting those slides as you go through this section if you like or make notes to refer back to later on. You can use PowerPoint, Keynote, Prezi or many other alternatives. Bear in mind though, that you may need to use the venue's computer at a pitching event, so make sure your presentation will work on it. PowerPoint is still the most commonly used.
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4.2 What is entrepreneurship We've talked a lot so far about entrepreneurship, yet many women, particularly in Europe don't identify themselves as an entrepreneur. Whether you prefer to call yourself an entrepreneur, business owner, selfemployed, or something else, it is worth taking a look at what is meant by entrepreneurship. How would you define an entrepreneur? Make a few notes on your thoughts before watching this short video. https://youtu.be/92ZmzD70sOU Most of us have probably heard the word entrepreneurship. It originates from the old French word, entreprendre, which means "to undertake”. In the business world, entrepreneurship has lots of definitions and it has been a subject of debate several times about its best interpretation. Perhaps the most accurate one is this: “Entrepreneurship is the practice of starting a new business along with any of its risks in order to make a profit. It’s a process of crafting, managing, and running a new business and the people who create new ideas and businesses are called entrepreneurs.” Some of the most famous entrepreneurs are men such as Bill Gates (founder of Microsoft), Steve Jobbs (co-founder of Apple Computers), Mark Zuckerberg (founder of Facebook) and Pierre Omidyar (founder of eBay). Yet, there are many successful female entrepreneurs too, such as
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Anita Roddick (founder of The Body Shop), Arianna Huffington (founder of The Huffington Post), Rashmi Sinha (founder of SlideShare) and Coco Chanel. The media has a huge role to play in addressing this balance. WES PR Manager, Gaynor Simpson talks about the media's role in this short video: https://youtu.be/vppVPvfL_po?list=UUiok60rwV1XqSph2noEYFEA
It's also important to point out that entrepreneurs don't just exist in the technology sector! There are many successful female entrepreneurs who aren't as famous. Visit https://www.wescotland.co.uk/ambassadors-role-mode... to find out about the Women's Enterprise Scotland Ambassadors. Entrepreneurship is a way of thinking and acting. It is about imagining new ways to solve problems and create value, having passion as the engine fuel. An entrepreneur is someone who can take an idea, whether it would be a product or a service, and have the skill set, the will and the courage to take risks and do whatever it takes to turn that concept into reality. Also, an entrepreneur is commonly seen as a business leader and innovator of new ideas and business processes. The business world is volatile with many uncertainties and it requires bravery and many exceptional capabilities to navigate the terrain. Nowadays, nine out of ten new entrepreneur businesses (known as startups) fail. Being a first-time entrepreneur or becoming an entrepreneur can be a daunting task with many seemingly insurmountable challenges. The basic requirements for an entrepreneur to become successful lie on the following four pillars: • a great and solid idea 0
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• a successful business plan which covers all the aspects of your idea • a consistent execution of your business plan • several attributes and capabilities which form your “entrepreneurial DNA” The last pillar is probably the most important one. Ideas may come and go, may be brilliant or not, but the characteristics and skills which you already have or will develop as an individual, will accompany you forever.
There are numerous elements for the key to success, but the most important of those are: • passion, confidence, determination and optimism for what you are doing • risk taking, which indicates that you're not afraid to fail
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• ability to see the bigger picture or think outside of the box which can lead you to innovative ideas • action-oriented approach from day one in order to achieve your idea and make it a reality • communication skills to get other people excited or inspired about your vision (employees, investors, customers etc.) • resilience and perpetual adaptability which help you to overcome potential hardships and solve problems • stress management - because the struggles, setbacks, hard work, sacrifices, disappointments, failures and challenges you're likely to face before becoming successful can be very stressful • willingness to keep learning and being curious every day about the market and the economic state in general • financial & management skills, which will guarantee a well-organised business, good cash-flow monitoring, and savings on time and money Entrepreneurs play a key role in any economy. These are the people who have the skills and initiative necessary to take new ideas to market and make the right decisions to make the idea profitable. The reward for the risks taken is the potential economic profits the entrepreneur could earn. Therefore, entrepreneurship may result in new organisations or revitalise mature organisations in response to a perceived business opportunity. A new business started by an entrepreneur is referred to as a start-up company. In recent years, the term has been extended to include social and political forms of entrepreneurial activity. Entrepreneurship within a firm or large organisation has been referred to as intrapreneurship and may include corporate ventures where large entities spin off subsidiary organisations.
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Entrepreneurship is an important source of employment creation as well. It is also a vehicle for addressing inequalities, particularly across genders, where significant differences remain. In Europe, women constitute 52% of the total European population but only 34.4% of the European Union self-employed and 30% of start-up entrepreneurs. The countries with the highest rates of female participation in employment are Finland, Denmark, Sweden and the Netherlands. Women’s employment rates are increasing from year to year. However, despite the increase, women’s employment rates remain low, the difference in employment rates between men and women account for an average of 20%. The highest differences are presented in Italy, Spain and Greece. In 2016, an estimated 163 million women were starting or running new businesses in 74 economies around the world and around 111 million were running established businesses. This not only shows the impact of women entrepreneurs across the globe, but highlights their contributions to the growth and well-being of their societies. The total entrepreneurial activity of women during the past few years around the globe is increasing at full pace and the gender gap of a once “man’s world” is being narrowed. It’s worth mentioning that according to the Global Entrepreneurship Monitor GEM 2016-2017 Women’s Report, the entrepreneurial intentions increased among women by 16% from 2014 to 2016. In the SEEWBAN partners’ countries, the 2016 ratio of women to men participating in entrepreneurship in Bulgaria is 0.8, in Hungary is 0.5, in
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Cyprus is 0.4, in Greece is 0.7, in Italy is 0.6, in Slovenia is 0.5 and in the UK is 0.5. One other interesting statistic is that women entrepreneurs have a 5% greater likelihood of innovativeness than men. If these trends continue, the gender gap in start-up activity will surely continue to shrink in the future. What would you say are the key characteristics of effective entrepreneurs? Write down as many as you can think of before watching the video: https://youtu.be/sOjeQV5pHh4 https://youtu.be/tnopS4KuHoY
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4.3.Project management Getting your business 'investment ready' can be a fairly large project to take on in itself. You may be used to managing your own projects already, or this might be a new approach for you. Either way, it's useful to consider project management best practice at this point.
So, what is project management? Basically, project management is about getting things done. From the tiniest detail to the most important aspects of a project. It’s about knowing exactly what you want to achieve, how you’re going to achieve it, and how long it will take. It’s about ensuring
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that everyone involved shares and understands those aims, before the first steps are taken, and that they continue to as the end of the project draws closer. A successful project needs people with the right skills and knowledge at its heart. Working together, a well-managed, motivated team with clear roles, responsibilities, and reporting lines, will carry a project to its conclusion without compromising on time, cost or quality. The four key elements of project management, known as the 4 P’s, are: 1. Plan: this refers to all activities that involve planning and forecasting. 2. Processes: projects consist largely of a series of predetermined and well-structured processes. 3. People: people are an essential component of the project's dynamics. 4. Power: this describes all lines of authority, decision-makers, organograms and policies for implementation. In project management there are several approaches on how to organise and complete a project (phased, lean, iterative, incremental, product based etc.) but they all have the same consideration to the overall project objectives, timeline, and cost, as well as the roles and responsibilities of all participants. These common variables form the phases of a project which might be renamed or slightly modified, depending on each business’s approach. Generally, the basic phases of project management are: Initiation - which determines the nature and scope of the project. If this stage is not performed well, it is unlikely that the project will be successful 0
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in meeting the business’ needs. The key project controls needed here are an understanding of the business environment and making sure that all necessary controls are incorporated into the project. Any deficiencies should be reported and a recommendation should be made to fix them. There are several tools and documents which are really helpful at the beginning such as the SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis, financial analysis (budget, cost and benefits), word breakdown structure (documents which split the tasks into smaller ones) etc. Planning and design - The main purpose is to plan time, cost and resources adequately to estimate the work needed and to effectively manage risk during project execution. This phase usually starts with identifying the activities needed to complete the project and finishes by considering the conceptual design of the final product. As with the Initiation phase, a failure to adequately plan greatly reduces the project's chances of successfully accomplishing its goals. Execution - This ensures that the project management plan's tasks are executed accordingly. This phase involves proper allocation, co-ordination and management of human resources and any other resources such as material and budgets. The output of this phase is the project deliverables. Monitoring and controlling - This consists of those processes performed to observe project execution so that potential problems can be identified in a timely manner and corrective action can be taken, when necessary, to control the execution of the project. In most cases, documentation is the most successful way to monitor and control the specific phases of a
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project. With the correct documentation, a projects success can be tracked and observed as the project goes on. If performed correctly, documentation can be the backbone to a projects success. Closing - This includes the formal acceptance of the project and its ending. Administrative activities include the archiving of the files and documenting lessons learned. All of these phases are needed for success, thus it takes discipline, determination, persistence and good communication among the partners. If none of the people involved in your business has the skills or the experience to manage all these phases, a professional expert known as project manager may be required.
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Many people assume that start-ups do not need the same level of project management discipline that larger companies do. This couldn’t be further from truth. Delivering a project on time and within the specified budget is a challenge for most businesses. It happens to be especially true for startups which have even less room for error. For start-ups, your success depends heavily on carefully set expectations, proper planning, risk evaluation and above all – delivering value to all stakeholders. So, how do you increase your chances of success when you have so many challenges to deal with, right from the beginning? The answers can be found in basic project management practices, which outline some basic principles that a business must comply with. Moreover, a stable recognised methodology from the inception of an idea until the exit stage must be followed (traditional, agile, critical chain, scrum, adaptive etc.). Some of the most common mistakes start-ups make, which may lead them to problems or even failure are: •
lack of hierarchy within the staff
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lack of risk assessment and evaluation
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ignoring mistakes
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placing less importance on the qualitative features of the product
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failure to create a detailed schedule
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poor financial analysis which might cause lack of necessary resources.
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In order to avoid these mistakes, there are many useful tools which can help you. The more complex a project is, or the more people are involved, the bigger the need for such tool. Especially if low cost is a must, you might find web based tools to be more cost effective. They usually have features like to-do's, discussion, file section, proofing tool etc. Some of the most popular and effective ones are: - Asana. A web & mobile based platform which specializes in managing the workflow by allowing team members to create tasks, set deadlines and track the progress of each task. - 10000ft. A low cost site which offers in depth analytics and plans. - Aha. Specifically designed for companies that are still in their early stages of development and are interested in creating a roadmap for their products. - Podio. A very flexible and customizable platform for complex projects. - ProofHub. One of the easiest and popular online tools. - Kanban Tool. It helps teams visualise their workflow in real time. - Smartsheet. It can share excel sheets, publish data from excel sheets instantly to the web and receive updates on projects via email. - Teamwork. It provides a central file management system, where users can access all of their files, attachments and comments from a central location. - Trello. A free online tool that offers the basic collaboration tools of a project management platform. - Wrike. A platform which can integrate with a range of applications such as Google Drive, SurveyMonkey, Slack and HubSpot. - Slack. A communication tool which can setup different channels to keep the information structured and precise.
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To sum up, successful projects don’t just happen. They’re not just a long list of jobs to be done, they are a masterpiece of planning, management, organisation and communication; a carefully choreographed sequence of events, where progress is smooth and steady, one step leads to the next, and every possible hitch has been considered and countered. https://youtu.be/qkuUBcmmBpk
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4.4.Writing a business plan for investment As we have mentioned in previous units, a good, well thought through business plan is key to success in many ways, not least when it comes to seeking investment. The business plan for a start-up company is the blueprint for its formation, operation, and its success. A business plan exposes a new company's strengths and weaknesses. It reveals ways to capitalise on the strengths and minimise the weaknesses, uncovers every aspect of the business that can be developed, and points to the best method for that development. It provides a structure for the company's pursuit of success. The preparation part might take a significant period of time but as you go through the process, you will develop your knowledge and understanding of your business, improve your chances of success, and diminish your risks of failure as a start-up owner. In order to be ready to write your business plan, it is useful to first ask yourself the following questions: • Have you defined your vision? • Are you prepared to operate a business? • Have you already decided upon your product or service? • Have you set your goals and objectives for the business? • Do you know your customers? Do you know your market? • Is your management team strong enough? • Have you defined your marketing goals and strategy? • Do you know your financial position, your credit rating, your investment costs?
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They might seem a lot but it is crucial for any entrepreneur to build strong foundations to launch the product and to withstand the competition for many years. According to recent studies, 90% of start-ups fail to launch their idea and from the remaining 10% only one out of ten exists after the first five years. This video explains the steps involved in writing a business plan. Note that there are some templates towards the bottom of this page. https://youtu.be/Fqch5OrUPvA Usually a business plan consists of the following elements: • Executive Summary. • The Marketplace. • Company background. • Product or service overview and how your product is beneficial to your customers. • Unique selling proposition & competitive advantages. • Operations. • Professional support. • Leadership. • Risks & threats assessment. • Financial projections including key assumptions. • Relevant appendices.
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If you are seeking financial investment, you must take into account the following advice: -Tailor your business plan to your audience. A potential investor will be looking for a clear explanation of how they will get a good return on their investment. A bank manager will seek proof you can afford to pay back a loan before they provide funding. -Focus on the opportunity your start-up offers to investors. If you're seeking investment, clearly describe the opportunity. Why would somebody invest in your start-up as opposed to another? What is your unique selling proposition - what makes you special? Why will people buy from you? -Be specific about your target market. Investors want to invest in companies that have clearly identified their markets and have a realistic view of their market share. 0
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-Make a convincing executive summary written in simple language. Many investors look through dozens of business plans each day. Most of them skip the detailed sections and judge a business based on the one or two paged executive summary. This makes it the most important part of your business plan. If your executive summary doesn't engage them, the battle is lost. An executive summary provides headline figures and condenses your strategy into key points. Although it appears at the front of the document, leave writing it until last. By all means, make it engaging and impressive - but keep it simple and realistic. -Give a detailed description of your management team. This might give you a competitive advantage among other entrepreneurs with the same or almost the same idea. -Get your financial projections right and realistic. Your business plan's financial information will face particular scrutiny. Cash flow should be documented in full, and your sales predictions need to be well founded and realistic. Showing Microsoft-like numbers will give a wrong impression about your approach to the potential investor. While costs are easier to predict than sales, both must be included. If figures really aren't your thing, seek assistance when producing your business plan, perhaps from an accountant or other trusted advisor. -Don't leave out important facts. If you miss out key facts, it will not reflect well on you when you present your plan to potential investors. -Use visual elements to hook them. Make your business plan engaging to read. You can stay professional and still make your business sound exciting. People respond well to visuals, so don’t use only text to lay out
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your plan. Instead, intersperse visual elements – charts, graphs, pictures, infographics – that help tell, and sell, your story and your business. A business plan should be a tool you use to judge performance and guide your strategy and the development of your business. It should contain specific goals, deadlines and responsibilities. It must be reviewed and updated regularly. A winning business plan will help ensure your business stays focused on what it needs to do to achieve its key goals. Business Gateway has a free Business Plan template that you can download here. If you'd prefer to take a more visual approach to business planning, have a look at the Business Model Canvas here. The Business Model Canvas is a great tool to help you with your business planning, but after you've worked through it, you might like to convert it into a more traditional plan to present to your potential investors. This video highlights the 3 most important things investors look for in a business plan. Watch the video and make some notes about anything you need to change / be sure to include in your own business plan. https://youtu.be/hludN2e33TY If you've got any questions about your business plan or would like to share an experience of writing your business plan, please use the comments box below.
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4.5 Writing your Marketing Strategy One of the key things an Angel Investor will want to know is that you have carefully considered who your target market is. Marketing your start-up in today's competitive business economy is undoubtedly difficult, but there are steps you can take to make sure your start-up gets a fighting chance at success. One of the first things you will realise as an entrepreneur is that you will need to be absolutely clear about your customer’s problems and how your product effectively solves their most important pain point. Watch this short video on how to use market segmentation: https://youtu.be/pCLQkgcjMjY So, what is customer segmentation? Customer segmentation is the practice of dividing a company’s customers into groups that reflect similarity among customers in each group. The goal of segmenting customers is to decide how to relate to customers in each segment in order to maximise the value of each customer to the business. The output of this practice will 1. give you a way to make it easier to identify your customers via a known name or persona, 2. be a means to target them more effectively 3. provide a bank of words and phrases to explain their problems / pain points and
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4. be a tool to express your solution to help them solve the problem. Furthermore, its results will reveal the factors that will help you focus on those customers who have the highest pain (problem), and hence the most propensity to buy, or the most desire to solve the pain and eliminate (during that period) than those that don’t have the need immediately. At that point, you would start to be able to document these outputs and set an initial marketing strategy, as well as defining the value proposition of your product/service.
There are several methods on how to make a proper customer segmentation. Perhaps the easiest and most popular way is: 1. Select a segmentation method based on underlying issues. These segments can be either: 0
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Demographical (age, gender, income etc.). The simplest segmentation of all. Behavioral or attitudinal. This is known as the psychographic segmentation in which the separation of customers is based on their lifestyle choices, values, and attitudes. Groups might include customers that strive for "clean" or "green" living, religious customers, or customers that support a certain cause or charity, for example. Needs-based. This segmentation depends on the customer’s purchasing history; which products they buy, how often, and how they purchase each product. Beneficial. This segment considers the ways in which a product is beneficial to the customer. The more benefits a product has, the more places and ways an advertiser can place the product. As a result, the marketing efforts for one product will gain a better response than a single position in the market. Benefits might include a low price, specific features of the product, customer service, or product quality. 2. Choose target segments based on their attractiveness and on the startup’s ability to serve them in a differentiated way. Identify those groups that provide the highest volume of sales and quantify the total volumes for those groups. These are your high-value segments. 3. Develop a value proposition for each segment. Understanding your most important segments can allow you to change your marketing efforts to reach those segments more directly. You can edit your advertising language and message to appeal more clearly to them.
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4. Determine profit potential, meaning the revenue and cost impact of offering the value proposition to the target segments. Segmentation can help you see which customer groups are the most profitable for you. You can more easily see which groups go on to do the most business with you and buy the more expensive items or service packages. You can then compare this to the money you spend advertising to them or serving them to assess which are the most profitable. This information will allow you to reassess your customer prioritisation and, by doing so, increase your profit margin. Once you develop your customer segments you need to build a process for testing them allowing you hone in on who your primary customer segment is. The most effective way to do this is through value propositions. Now that you have a clearer picture of who your customers are, you can move to the pitch deck and the target market slide. As you’ve implemented these actions you won’t have to say that everyone in the world is potentially your market, even if it could be true one day. You will be realistic, specific and confident of what your target market really is. Remember, that investors will appreciate realistic numbers and will value you as a trustworthy person. One of the most effective ways to present market is the TAM, SAM and SOM graphic.
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TAM stands for Total Available Market, SAM for Served Available Market and SOM for your Share Of the Market (or Target Market in the above diagram). This will not only impress your audience, but it will help you think more strategically about your roll-out plan. Now that you have identified your market size, it’s time to assess the environment in which the start-up operates; to recognise your competitive landscape. This term refers to an analysis of the competition in the environment in which your start-up exists. This analysis should include all of your competitors, who are divided in two categories: direct and indirect.
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Direct competitors are the ones who are doing something very similar to you and targeting the same audience. Indirect competitors are the ones who touch on your target audience but solve their problem in a different way. Once you have identified them, it’s time to research their strengths and weaknesses, their products and services, and the growth models you assume they are currently trying to implement. Quantity-wise, it’s worth estimating their revenues, net value and market share. In Scotland, your local Business Gateway office should be able to help you with this. Your competitive landscape should also include what the industry leaders are currently working on. There is so much information available online, that this shouldn't be too difficult to find. Try some of these tools: • Google Alerts with the suitable key word settings. • The SimilarWeb competitors tool. • Crunchbase, in which you can find valuable information. • Quora, in which you can search relative Q&A’s. • Wonder, an analysts’ site which make competitive analysis in 24 hours in exchange for a low fee. Having gathered the necessary data and made your landscape assessment, you should move on to display this information in your pitch deck specifically on the competition slide. https://youtu.be/2v32e5yElO4 You could also do this by using this model, the Gartner Magic Quadrant whose axis are affordability and online transaction. The video below explains the Gartner Magic Quadrant. https://youtu.be/q5oYuoSMGx4 0
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If the variables you want to demonstrate are more than two, you can use Steve Blank’s Petal Diagram. Use the comments box below for any questions you have on this. You could also upload an image of your slides for this section to ask for feedback from other participants.
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4.6 The Executive Summary As we have mentioned in previous units, an executive summary is the brief introduction to a business plan. It summarises the key points of your business plan (the problem that it solves, your target market, the financial highlights etc.) with a focus on obtaining investor interest, for potential investment. The goal of the executive summary is to grab the attention of the investor, such that they desire to learn more about the opportunity. This video explains how to write a winning executive summary. https://youtu.be/R9zRapFoHV0 An executive summary should include the following key elements:
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Who you are Start-up name, location, and contact information.
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What you offer and the problem your business solves. Explain clearly the pain point (could be current or emerging) you are proposing to solve. Include a brief description of the product or service you offer and why it’s necessary. In this way you will establish your value proposition.
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Your target market. Explain the market (segmentation, size in value, growth, drivers and influences, how many customers and competitors). Targeting a reasonable percentage of a well-defined growing market will be more compelling than a micro-percentage of a very large mature market. Try to justify the differentiation your product or service will bring to the market.
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Business model. State how you are going to generate revenue and from whom. You need to demonstrate how your model is scalable
and how the business will be assessed. Most entrepreneurs have a 5-year timetable for their financial projections. •
The team. Make sure you name your key players and advisers, and include any prior start-up experience and prior experience in the relevant business domain. Current and past titles don’t convey this information. Professional investors look for the right people more than the right product.
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The investment requirements and investors’ rewards. State how much you are raising now. This should be enough money to enable you to reach the next significant milestone. Outline the potential investor return, and payback process by sharing your exit strategy (IPO, merge etc.);
Some useful tips before you start drafting an executive summary: •
Write it last. Even though the executive summary is at the beginning of a finished business plan, many experienced entrepreneurs choose to write the executive summary after they’ve written everything else.
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Keep it short. Less is more. Keep it as short as you can without missing any essentials.
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Keep it simple. Most executive summaries are short texts, often with bullets, broken into subheadings. Illustrations such as a picture of a product, or a bar chart showing financial highlights, are usually welcome.
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Lead with what you want to get the most attention, and follow with items in the order of importance. Start with a story stating a problem, because that can add drama and urgency.
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Once it’s finished, repurpose it for various other uses. It might be sent as an attachment to an email, or simply a summary in an email. You can also use it again to fill in start-up profiles on investment platforms such as Gust and AngelList or to apply for an incubator or a business plan competition.
Remember, some investors will only look at the summary of your business plan. A great executive summary shows the true depth of your character and your plan. As the famous venture capitalist and author Guy Kawasaki has said: “In an executive summary you need to convey the business’s essence and energy.” You could type your executive summary into the comments below to ask for feedback. Please remember to also provide supportive and constructive feedback to a few other participants too.
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4.7.Section Summary
In this section, we covered: •
what entrepreneurship is
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what makes a successful entrepreneur
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how a project management approach can help you get investment ready
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writing a business plan
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what investors look for in a business plan
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writing a marketing strategy and why it's important to have one
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writing an effective executive summary
You may have even started creating your slides for your pitch! If you need any help with your business plan, have a look at some of these additional resources: Business Model Canvas Business Plan Template from Business Gateway If you're one of the many women who don't consider your business to be a 'unicorn', you might like to listen to this podcast from Vicky Brock. https://vickybrock.podbean.com/mf/web/35dh2p/anne1fullepisodev4.mp 3
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5. Preparing your Pitch 5.1 Section Overview
In this section, we'll help you prepare for your pitch. We'll look at: •
types of pitchers, so you can identify which one most suits you
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what is a pitch and what should be included
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how to explain your idea to potential investors
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why you need an elevator pitch and how to craft one
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what to include in your pitch and on your slides
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tips to increase your chances of success when pitching to investors
Take your time working through this section as there is a lot of content here. You might like to start by looking at a couple of examples first. These are also included at the end of the last unit, 'Tips to craft a pitch'. AirBnB OneMind
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5.2 Types of Pitchers There are several types of pitchers in the ecosystem which depend on the following three factors: • The type of start-up an entrepreneur builds. • To whom an entrepreneur pitches. • Entrepreneur’s personal style/personality.
The six most common pitcher types you might meet in a pitch event are:
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The Disruptor This is probably the most popular pitcher style. Disruptors seek to totally change industries. They do so by creating completely new business models to solve old problems. Uber and Lyft are well known examples. Using the model of the “sharing economy,” they have turned the transportation industry on its head by providing a unique solution to the age-old problem of getting from point A to point B. We worked with a company that was seeking funding to introduce a shopping app designed to “kill” the online shopping cart by enabling shoppers to upload a photo, send a message, or use their voice to find any good that could be bought online, for the very best price available — using human shopping assistants. In this case, we used storytelling to demonstrate how disjointed and unsatisfying the current online shopping experience is for most consumers to make a case for the need for disruption by this human shopping assistant app. The Founder These entrepreneurs are usually well known in their industry. Investors are often attracted to these start-ups because the founder has a proven track record or name recognition. Jack Dorsey, who founded Twitter and went on to start Square, is a great example of the Founder as story archetype. When an entrepreneur works on this type of pitch, the founder’s resume, experience, and brand name can seemingly give them instant credibility in ensuring the sustainability or fundability of a startup. Demonstrating that the new company was founded by someone who has done something similar in another relevant industry can lower the perceived risk of investment for investors. With this particular entrepreneur’s brand name and industry track record, you can introduce her at the very beginning of the pitch to say, “Here’s another success from this well-known woman who created this well-known, highly capitalised company you already know…” 0
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The Dream Team The focus of a pitch based upon the Dream Team is to demonstrate the complimentary nature of the founders’ skill sets and experiences. Basically, the storytelling angle here is “this is the ONLY team that could ever bring this idea to market.” In telling this story, entrepreneurs focus on the fact that other companies have tried this and failed, because they didn’t have the team it will take to make it succeed. The legendary “PayPal Mafia” of Elon Musk is perhaps the best known example of the Dream Team archetype. The Detective Some start-ups have the goal of solving complex and mysterious business processes and answer vexing business questions, usually using data. Through gathering and assembling user data, you can accelerate the sales cycle by following up on more highly qualified sales leads. This is a trending archetype, with so many start-ups using data as the key to unlocking a mystery. The Liberator These start-ups are trying to make an existing process easier or more fun. They are presenting themselves as the breaker of chains because they offer solutions to liberate people by automating tasks in existing products or services which will free up valuable time. The Perfect World Many entrepreneurs and companies set out to make the world a better place. These companies often focus on what the world looks like when a massive problem is solved. Start-up founders that identify as social
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entrepreneurs fall into this category, because they are launching a product or service to deal with a problem most people face; to make the world a better place. Do you know which type of pitch you'll choose? Share your thoughts in the comments below.
5.3 Terms & Stages of a Pitch The use of phrases such as ‘business pitch’, ‘elevator pitch’ and ‘video pitch’ have grown in popularity in recent months. But what are these terms and what do they mean for entrepreneurs? To begin with, pitch is a presentation in which a start-up founder attempts to persuade an investor of the viability of their company by providing an overview of their idea, business model and marketing strategy. The presentation spectrum varies based on the specific purpose of the pitch and its audience. A pitch, for instance, may be targeted for the finding of a co-founder, an investor or winning a start-up contest. Most of the time, a pitch is used to attract potential investors (investment pitch). Depending on the audience, there is the crowd pitch where along with an investors’ panel, the audience too are empowered to rate start-up pitches through their laptops and other mobile devices. The pitch’s duration is less than ten minutes, because there are many participants. There is also the closed-door pitch, where the audience consists of investors only, as well as other start-up influencers, invited by the organisers to listen to pitches. In this format, the pitchers are usually given more time to present themselves, and usually with the goal of trying to have investment deals signed sooner. Creative pitches are customised for corporate partners so they can generate interest among their users within a short time frame. The 0
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formats here are quite flexible and open to creative ideas like pitching while on a taxi ride, at airports, during cruises, and other unconventional places one may think of. These pitches are further categorised to elevator pitches which are typically a 30–60 second pitch, the two-sentence pitch and the high-concept pitch which is basically a one sentence slogan describing the start-up (e.g. YouTube’s high concept pitch is “YouTube: Flickr for video”). Finally, we have the conference pitches which occur in annual or semiannual showcase events and typically attract the best of start-up talent from around the world. Because of the high number of participants, these pitches also last less than ten minutes. Most pitches for investment last up to 10 minutes and need to be very well prepared. Investors usually see several hundred pitches a year, so it is important that you can summarise your growth target briefly and in a manner tempting to investors.
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The outcome of this preparation is your pitch deck. A pitch deck is a presentation created by entrepreneurs that details the attributes of a start-up opportunity in order to help the entrepreneurs communicate it with investors, in their efforts to raise money to fund their venture. The presentation, which typically includes approximately a dozen PowerPoint type slides, provides a summary of the start-up’s business plan, and helps investors determine if they have a continued interest in evaluating the company. Whether open or closed (intended for the investors only), a pitch event will usually be your first contact with investors. A pitch may not ensure an investment, but it can buy time from investors to continue discussions. Under no circumstances should you attend a pitch without preparing – you can give a first impression only once.
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Therefore, before pitching for investment, an entrepreneur must follow these steps for a proper pitch deck structure: • Present the problem and who it affects. • Explain what other solutions exist that fail to tackle the problem. • Introduce your team, explaining why they are the right people for the job and how they will deliver the solution. • Show evidence and validation that the technology works, through examples. • Explain as brief as possible your business model. • State what you need to do next to ensure success, and how much money you need to do it. After the presentation ends, usually there is time for questions, where investors or people from the audience ask questions about your start-up. When the time allocated for the pitch ends, the presentation must also be brought to a close, regardless of how much you still have to say. Materials have usually to be submitted to the organiser or investors in advance. In public pitching, entrepreneurs typically go to their stand, where they have time to continue discussions with potential investors. Entrepreneurs can bring a prototype, brochures, a laptop and business cards to the stand. The number of participants at a pitch event is frequently restricted, so that only one or two persons from a company may participate. Presentations at pitch events are generally in the language of the country concerned, but materials are in English. Entrepreneurs should, however, be prepared to present their pitch in English, as international investors may be present.
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You might like to attend some pitching events as a member of the audience before it's your turn. Visit Scottish EDGE to find out when their events are.
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5.4 Idea Pitching A great start-up comes from a great idea. So how can you come up with a great idea and pitch it to potential investors? The way to get start-up ideas is not to try to think of start-up ideas. It's to look for problems, preferably problems you have yourself. https://youtu.be/2nlybhGJqy0 The very best start-up ideas tend to have three things in common: they're something the founders themselves want, that they themselves can build, and that few others realise are worth doing. Microsoft, Apple, Yahoo, Google, and Facebook all began this way. The most important questions you have to ask yourself are: • Does your idea solve a problem that people actually have? • Is it possible for you to actually build the solution? • Is the opportunity big enough to justify the necessary investment? • Is there a plausible revenue model and path to profitability? • Is the cost of acquiring customers lower than the profit you expect you will ultimately make? Idea pitching is presenting your idea to others. They can be your friends, a potential partner or potential investors, the media etc.
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In order to create a successful idea pitch and share your innovative vision with the audience, consider the following: One: Idea Refinement & Audience Create and refine the idea. The classic mistake of would-be idea pitchers, is to pitch the idea well before it’s ready. When most people find an interesting idea, it can be tempting to tell everyone you come into contact with how amazing your new idea is. When you have a great idea, it's easy to forget that there are 100 interesting ideas for every single truly good idea. By definition, an interesting idea takes a novel or creative approach to doing something, whereas a good idea is not just creative, but actually improves on a meaningful quality or attribute, in a way that can be practically applied to the world (or the project). So until the concepts and hard parts are fleshed out enough to demonstrate that the spirit of an idea is matched with specifics, the idea doesn’t have much of a 0
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foundation. People can dismiss it quickly just by asking 2 or 3 basic questions. Always remember that moving from an interesting but vague idea, to specific and actionable is the difficult part of creation and invention. What is the scope of the idea? The bigger the idea, the more involved the pitch. Big ideas require more change to take place on someone’s part, and all things being equal, this means the pitch must be more thorough (or your approach more bold & risky). The stakes are higher. To convince a CEO to start a new million pound project will take more effort than convincing your best friend to loan you her pen. When you’ve identified the scope of your idea, do some research on how others pitching ideas of similar scope went about it. You’re probably not the first person to pitch something of the scope you’re pitching, so go and find out what other people did, and what kind of success they had. Learn from their mistakes. There are books on pitching business plans, movie scripts, and of course pitching yourself (job interviewing). Do your homework: know some of the basic strategies, or industry expectations for the kind of pitch your doing. Who has the power to approve the idea? Make a list of the people that are potential recipients of your pitch. This could be your boss, another company, a bank, a publisher, or someone else. Base this list on two criteria: who has the power needed to implement the idea, and who you might have access to. If you have no idea who to pitch your idea to, ask around. There’s no sense developing your pitch if there’s no one to listen. If you don’t have access to the person with the power you need, make a list of who has access to them, working backwards until you can list people you actually know.
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Start with their perspective. Put your pitch aside. Step into the shoes of the person you are pitching to. How do they think about the world? What kinds of things are they probably interested in? What is their typical day like? How many unsolicited pitches do they receive a day? Consider how the person you’re trying to pitch to views the world, and keep it in mind while developing your pitch. The better your pitch fits into their needs, perspectives, and desires, the greater your odds of being successful (or even being listened to). This may help you decide who to bring your pitch to: The most powerful person in the organisation might share none of your philosophy, but the 3rd or 4th most powerful person might. The latter is going to be a better place to start. Two: Preparing the pitch The structure of the pitch. It's good practice to have three different versions of your pitch: 5 seconds, 30 seconds, 5-10 minutes). The 5 second version, also known as the elevator pitch, is the most concise single sentence formulation of whatever your idea is. Refine, refine, refine your thinking until you can say something intelligent and interesting in a short sentence. “My idea? It’s a way to make car engines twice as efficient, and 5 times as powerful.” This can be done for any idea: never allow yourself to believe your thing is so complicated and amazing that it’s impossible to explain in a sentence. Practice it on friends, peers, anyone, by doing the 5 second version, then answering their questions, and then asking them to help you refine the 5 second version again. The 30 second and 5-10 minute versions should grow naturally out of the 5 second version. In 30 seconds, there’s enough time to talk about how you’ll achieve what you described in 5 seconds, or provide specifics of the 2 or 3 most significant things about how the effect described in the 5 second pitch will be achieved. Provide the next level of detail down, 0
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adding in just enough interesting detail that the listener can get a clearer picture of your idea, and gain a deeper and more nuanced understanding of what you’re proposing. Test the pitch. The longer you spend with an idea, the more you understand it and think it's perfect. Get out of your office / house, and go and find smart people you know to give you feedback. Ask them to pretend they are whoever it is you plan to pitch to. Then go through your pitch, responding to their questions. You won’t always get the feedback you want, but you’ll sharpen both your idea, and the way you talk about it. If the idea is amazing and ground-breaking and you’re afraid to run it by other people, find a close friend or family member and use them. From your pitch tests, develop a list of questions you expect to be asked during the pitch, and be prepared to answer them. Three: Delivering the Pitch The presentation. If you’ve prepared well, have a good idea that you truly believe in, and manage not to get too nervous, most of the work is in the hands of whoever is listening to you. Be calm, be direct, state your case, and then listen. Like any kind of public speaking, the more often you do it, the more comfortable it will become. But there isn’t much magic to the actual pitch. The only people that need to resort to tricks and manipulations are those that haven’t worked to understand their audience well, or don’t truly believe in what they are pitching. The best delivery advice I can offer is to make sure you spend some time preparing for a positive response. What happens if they say “That’s an interesting idea. What do you want from me?” Do you want money? Other
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resources? A change in the project plan? A feature added to the feature list? Know what the sequence of steps are after they agree you have a good idea and be ready to ask for them. If there are other people involved whose approval you’ll need, ask them to set up a meeting for you. If there is a form that needs to be filled out, make sure you have one with you. What to do when the pitch fails. When things don’t go well, your job is to harvest as much value from the attempt as possible. Always leave failed pitches with an understanding of what went wrong. Which points didn’t they agree with? Which of your assumptions did they refute? In short, get as much learning out of completed pitches as you can. Recoup your investment in the failed pitch by mining any lessons out of it that you can apply next time. https://youtu.be/byW6l5T4mxs
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5.5 Elevator Pitches An elevator pitch or elevator speech is a short overview of your business, products or services, and is typically used in business settings such as faceto-face networking. An elevator pitch can be one of the simplest yet most powerful tools for a small business owner. The purpose of an elevator pitch to an investor for instance, is to excite her about the business case of the start-up’s concept and book a follow-up meeting. It is meant to be short, and as the name implies, delivered in the time it takes to complete your average elevator ride. The length may vary, but you typically want to be able to present your elevator pitch comfortably without rushing in under two minutes, ideally in under one minute. You never know where and when you are going to need it. Opportunities often emerge unexpectedly, which is why you must be ready to present your businesses in a concise and engaging way at all times. Here’s an example of an elevator pitch conversation: Entrepreneur: Hi, I am the co-founder of Tune Patrol, an online platform for independent musicians to upload, share and sell their music. We are in beta stage. The results look very good. We are now seeking £100,000 in funding to go to a million users mark. We are currently funded through friends and family, including my ex-boss who invested £5,000 in my venture Investor: Looks good. Tell me more. Entrepreneur: Thanks. My name is Gemma. We launched the platform a month ago. I have two co-founders, one of whom is a techie, the other a music promotion professional. I have 3 years of experience as a marketing
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professional. The ex-CEO of one of the largest music channels in England is an adviser to us. We have what we think is a good business plan, and a strong business case. Apart from funding we need mentoring and insights to help us convert our dream into a very large company. Investor: Good. How can I help? Entrepreneur: Could we come over and meet you someday? We have a presentation and would really appreciate your advice, and of course seek your investment. Investor: Sure, we could meet. Here’s my card. Drop me an email with the link to your platform. I will put you on to someone from our office to set up a meeting. All the best.
In order to create an effective elevator pitch you need to follow these steps:
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Say in one sentence who you are and what you do. Not your vision, not how you're going to change the world. Just what are you doing in one simple sentence using plain language that everybody can understand.
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Explain how this is going to change the world and why. What is the market you’re targeting? What is the value you create? What are the implications of the simple thing you do? What impact is that thing going to have?
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Explain what's unique and different about you and your business.
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Create an attention-getting hook. Write 1-2 sentences that pulls in your audience and gets them engaged in what you're about to say.
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End with a strong call-to-action. What do you want an investor to do? What response do you want? Do you want them to invest x amount of pounds at y terms within z timeline?
This video explains how to create a great elevator pitch: https://youtu.be/Lb0Yz_5ZYzI Practice until it's almost automatic. Here's a great way to practice: •
Write it down. Create a script for your elevator pitch.
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Read it out loud, edit it if necessary and memorise it. Do it while you look yourself in the mirror. It works.
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Repeat the previous steps several times.
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Read it to your entire team and have them suggest changes.
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Write and edit until you have perfected the whole thing.
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Pitch it: in front of people, in front of a camera, watch the recording and see what you can improve. Then practice and practice and practice some more.
Once your pitch rolls off your tongue like your first name, you can actually let go and be spontaneous about it, smile, have positive energy, make a powerful impression and you’ll be rewarded. All in all, an effective elevator pitch can help you introduce yourself and break the ice in networking situations. You can also use your elevator pitch to clarify your target audience and business goals for your own use, and become more confident and self-assured in business settings. This video explains how to make your pitch perfect: https://youtu.be/bZTWx2bftaw
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5.6 The Business Plan Pitch Process Let's have a look at the ingredients of a successful pitch deck. Always remember that a pitch deck’s goal is to get a follow-up meeting with investors or even better secure funding from potential investors directly. As we have mentioned, a pitch deck is a brief presentation that details the attributes of a start-up opportunity in order to help you communicate with investors and raise money to fund your venture. The presentation, which typically includes approximately a dozen PowerPoint slides, provides a summary of your business plan and helps investors determine if they have a continued interest in evaluating the opportunity and completing due diligence on your company. Usually, an entrepreneur uses an elevator pitch before the business pitch slideshow, meaning that the entrepreneur makes a 30-60 second catchy introduction in order to capture the attention of the listener in a manner that compels them to learn more about the opportunity (see the earlier unit on elevator pitches if you missed it). A pitch deck may also include an executive summary, which is a 1 to 2 page document that provides an overview of a start-up entrepreneur’s business opportunity. The goal of the executive summary is to grab the attention of the investor in a way that heightens the desire to engage further with the opportunity. There's also a unit on executive summaries.
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Now let’s focus on the business plan pitch and what it needs initially to be successfully created. Unlike most business plans, the pitch is not a physical document. A pitch should, however, contain the same content as a business plan, with the main differences being the breadth of material covered and the delivery method. Therein lies one critical problem. For some entrepreneurs, business planning is ‘difficult’ and pitching is assumed to be a slightly easier means to secure funding. This perception results in shortcuts and a dangerously blinkered perspective. Preparation tends to be more limited and the results are all too predictable - the entrepreneur is thrown when the prospective investor asks the most rudimentary of questions. The lesson is clear- a pitch is not a substitute for a business plan; it is simply a different, more concise, delivery method. The best way to create an effective pitch is to start with a thorough business plan. Once this is written, the key elements of the executive 0
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summary can be distilled into a pitch. One major benefit of this method is that while the process of creating a business plan can be difficult, it is also rigorous and usually an exhaustive process. Hence it serves to equip the author with the answers to typical questions they should expect from prospective investors. Creating a pitch without the discipline of following the business plan process is fraught with danger. While the presenter can describe the product or service in detail, those that pitch without a business plan tend to fall down when asked to describe the market opportunity or their sales forecasts in more detail. Once you have finished your business plan and executive summary, you can start turning all the business plan’s key elements into a PowerPoint presentation. As we have mentioned, the pitch deck usually consists of 1014 slides covering the key pieces of information of the start-up and the product/service. You might see different pitch deck templates on the internet but don’t worry. The only thing that changes is the order or layout, not the information. Slide 1: The title slide. Who are you and why you're here? Keep it short and clear. You can use your elevator pitch or a high concept pitch to save time. Either way, you will try to make a value proposition in order to catch the investor’s attention from the very beginning. A great way to think about this slide is to imagine it as a tweet: describe your business in 140 characters in a way your parents would understand. Slide 2: The problem or pain slide. What problem are you trying to solve? Is it really a problem? Use this slide to talk about the problem you are solving and who has the problem. Is this problem time consuming? Does it
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cost money? Does it increase vulnerability? You can talk about the current solutions in the market, but don’t spend too much time on the competitive landscape on this slide - you’ll have a chance to do that on a later slide. Slide 3: The solution slide. Describe how you are planning to solve the problem. Finally, you get to dive into describing your product or service. Describe how customers will use your product and how it addresses the problems that you outlined on slide two. This is classic storytelling where you build up the problem and describe how bad it is for lots of people. Now your product or service is coming to the rescue to help solve that problem. Most entrepreneurs are very focused on their product when instead they need to be focused on their customers and the problems those customers face. Try and keep your pitch deck focused with this format and you’ll tell a better story. If possible, use pictures and stories when you describe your solution. Showing is nearly always better than telling. Ideally, try and tell a relatable story when you are defining the problem. The more you can make the problem as real as possible, the more your investors will understand your business and your goals. Slide 4: The target market slide. Know, or at least attempt to predict, the size of your target market. Use this slide to expand on who your ideal customer is and how many of them there are. What is the total market size and how do you position your company within the market? If you can find the data, investors will want to know how much people or businesses currently spend in the market to get a sense of the total market size. If it makes sense for your business, you’ll want to divide your market into segments that you will address with different types of marketing and perhaps different types of product offerings. Be careful with this slide, though. It’s tempting to try and define your market to be as large as possible. Instead, investors will want to see that you have a very specific 0
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and reachable market. The more specific you are, the more realistic your pitch will be. If you skipped the unit on Marketing Strategy, you might like to revisit it now. Slide 5: The business model slide. How are you planning to make money? What is your go-to-market strategy? Now that you’ve described your product or service, you need to talk about how it makes money. What do you charge and who pays the bills? Are you selling with a direct sales force, online, through partners, through distributors? Where are these customers and how can you locate them, talk to them, and bring them on board cost-effectively? What is the customer acquisition cost going to be relative to the life-time value? You can also reference the competitive landscape here and discuss how your pricing fits into the larger market. Are you a premium, high-price offering or a budget offering that undercuts existing solutions on the market? Slide 6: The traction slide. If you already have sales or early adopters using your product, talk about that here. Investors want to see that you have proven some aspect of your business model as that reduces risk, so any proof you have that validates that your solution works to solve the problem you have identified is extremely powerful. You can also use this slide to talk about your milestones. What major goals have you achieved so far and what are the major next steps you plan on taking? A product or company roadmap that outlines key milestones is helpful here. Slide 7: The marketing and sales strategy slide. How are you planning on getting customers’ attention and what will your sales process look like? Use this slide to outline your marketing and sales plan. You’ll want to
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detail the key tactics that you intend to use to get your product in front of prospective customers. Finding and winning customers can sometimes be the biggest challenge for a startup, so it’s important to show that you have a solid grasp of how you will reach your target market and what sales channels you plan on using. If your marketing and sales process is different from your competitors, it’s important to highlight that here. Slide 8: The team slide. Show the people behind the idea and briefly describe their role. Perhaps it is one of the most important slides of the pitch deck. Investors take into serious account the people working in a start-up. Highlight the key team members, their successes at other companies, and the key expertise that they bring to the table. Even if you don’t have a complete team yet, identify the key positions that you still need to fill and why those positions are critical to company growth. It’s the easiest slide to build and the easiest to ruin. Keep it simple in a vertical direction with photos and bullets with their main accomplishments. Slide 9: The financial projections slide. Investors will expect to see your sales forecast, profit and loss statement, and cash flow forecast for at least three years. Don’t demonstrate in-depth spreadsheets that will be difficult to read and consume in a presentation format. Limit yourself to charts that show sales, total customers, total expenses, and profits. You should be prepared to discuss during the following Q&A stage, the underlying assumptions that you’ve made to arrive at your sales goals and what your key expense drivers are. Remember to try and be realistic. Investors see “wishful thinking” projections all the time and will mentally be cutting your projections in half. Slide 10: The competition slide. What are the alternative solutions to the problem you are trying to solve? Every business has competition in one form or another. Even if you are opening up an entirely new market, your 0
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potential customers are using alternative solutions to solve their problems today. Describe how you fit into the competitive landscape and how you’re different than the competitors and alternatives that are on the market today. The key here is explaining how you are different from the other players on the market and why customers will choose you instead of one of the other players on the market. Slide 11: The investing slide. What is your planned budget? How much money are you looking for? This is your chance to ask for it. More importantly, you need to be able to explain why you need the amount of money you are asking for and how you plan on using the money. Investors will want to know how their money is being used and how it is going to help you achieve the goals you are setting for your business. If you already have some investors on board, now is when you should be talking about those other investors and why they chose to invest. Slide 12: The exit strategy slide. If you are raising money from investors, you’ll need to show them how you plan on giving them a return. You do this in the form of an “exit strategy” slide that outlines who your potential acquirers might be if you manage to grow your company and be successful (IPO, Mergers & Acquisitions etc.). Slide 13: The contact slide. Simply display the logo of your company and your contact details. If you have distributed brochures of your company to the investors prior to the presentation, this slide is not necessary. This formula allows you to take an enormous amount of detail and weave it into a narrative that hooks the listener immediately with a human interest story about a customer and their problem, and starts an
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interesting discussion about solving it. The result has flow. Flow is key to telling a good story and is key to organising your company's information into a cohesive investment proposal. Of course this is not the only way to do it, but it's a tried and tested template that works well and has had proven success. Watch the video below which explains how to create a perfect pitch deck, then share your thoughts in the comments. https://youtu.be/S3n5YRZD4Cw
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5.7 Tips to Craft a Pitch This unit will provide you with some useful tips to craft your pitch and engage the audience. After a business plan has been written, it's time to work on your ability to deliver a presentation in a clear manner, in order to convince an investor to invest in your business. These prospective investors are not investing in a physical document but in an idea and in the people proposing to deliver the idea.
The following is a list of tips to maximise your chances of success when pitching to investors:
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Know your audience. All presenters are taught about the importance of knowing their audience and engaging with them on a personal level where possible. The Internet has enabled us to research more effectively than we were able to in previous years, so it is important to use this resource to your advantage. Investors have a range of asset classes to choose from as they decide on the composition of their investment portfolio. So, it's necessary to understand the backgrounds of the prospective investors and their motivations prior to presenting. Once you have done extensive research on the investors it is then possible to tailor your pitch accordingly. Tell a story. One of the most effective ways to pitch is to place the investment opportunity in the context of a story. Ideally, the story will focus on a problem encountered and the fact that the new idea being pitched solves this particular problem. If the investors can relate to the problem, they are more likely to invest in your business. After that they will be assessing how many people are affected by ‘the problem’ and whether the proposed idea satisfactorily resolves the problem. Prepare thoroughly before the pitch. Pitching to an investor is not a lastminute afterthought – it is the culmination of weeks, if not months, of planning. All too often, entrepreneurs do not plan accordingly and then find that the preparation of their business pitch suffers. For many investors, the executive summary of the business plan is what opens the door for a presentation, and the full business plan may only be read after a successful presentation has been delivered. Get the numbers right. Investors tend to be very focused on numbers, so all facts must be accurate. The numbers should be realistic and defensible and at least one of those pitching the plan needs to be prepared for indepth questions relating to the projected financials. If performance has
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been poor, you will need to articulate clearly why this has been the case and also elaborate on why investment will solve the performance gap. The PowerPoint slides. PowerPoint is still the tool of choice for presentations. The number of slides should be kept to the bare minimum, the content must be rigorously analysed to ensure relevance and clarity and time must be managed carefully. You must have a balance so that your slides look professional and not boring at the same time. Keep to short bullet points (ideally up to 4 per slide), flow charts and pictures to give them a brief but clear understanding. More words should come out of your mouth than the slide. Many entrepreneurs use some elements of the 10/20/30 Kawasaki Power Point Rule. Additionally, you can take inspiration from "corporate presentation themes" have a look at Google or SlideShare to find some good pitch deck examples (e.g. the AirBnB pitch deck). Practice, practice and practice the presentation. It is clear that many entrepreneurs have not practised their pitches in front of impartial observers prior to pitching. This dry run should be arranged well in advance of the presentation date with a panel of 'critical friends' to critique the plan and pitch. Practice your word flow and memorise some words as “checkpoints”, in case you’re stressed and you’re feeling that you’re forgetting the “script”. Anytime you use qualifiers like “very”, you’re overstating your point, which shows that you’re nervous about it. Time yourself, most competitions have time limits and you don't want to exceed it. Give out brochures, business cards etc. for the added bonus.
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The video below sums up the top tips for successful pitching. Would you agree with their list? https://youtu.be/BUgA7q1zzOU The 2008 Airbnb pitch deck. Probably the most searched pitch deck in the Internet. In your opinion, what makes it so successful visually? Can you identify the key elements of the content, based on what you have learned from this course? Do the same for another successful pitch deck of OneMind, which is an entrepreneur-investor bridging platform. Answer these questions, along with any other comments below.
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5.8 Section Summary
In this section, we covered: •
types of pitchers, so you can identify which one most suits you
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what is a pitch and what should be included
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how to explain your idea to potential investors
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why you need an elevator pitch and how to craft one
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what to include in your pitch and on your slides
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tips to increase your chances of success when pitching to investors
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What were your main challenges as you worked through this section? Sharing your experiences here will help others.
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6.Pitching with Confidence 6.1 Section Overview
In this section, we'll discuss how to pitch with confidence. We'll cover: •
the skills and qualities of successful pitchers
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the skills and qualities investors will look for
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the importance of practising your pitch (with an opportunity to do so)
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how to handle investors questions
6.2 Skills & Qualities that will contribute to a successful pitch In this unit we will elaborate on some skills and qualities you should develop so that you can win the audience during a pitch. Before you decide that you have the perfect pitch, make sure that you are able to present it in the right way. Invest in yourself as an entrepreneur and through practice and hard work try to improve your skills. Skills for a successful pitch: Non-verbal communication: clear communication with body language. Your body movements, gestures, posture, and facial expressions speak louder than your words. Its a good idea to video yourself practising your pitch to check what your body language is saying. Verbal communication: use of great words. The way you speak-can carry an audience: your tone, inflection, and volume, and how you pace, pause, and enunciate. Speak to your audience - using the most suitable conversation style for them, but also be yourself. Animated: full of life and energy. Be positive! Assertive: being strong and forceful (but not overbearing). This is in between the extremes of aggressive and passive. Astute: keen ability to accurately assess a situation or person and turn it into an advantage during the question stage of a pitch.
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Clear: easy to perceive, leaving no doubt. Attain clarity by testing your message beforehand and checking that your practice audience have understood what you meant. Confident: being self-assured. Show that you believe in your idea, your business and yourself. Credible: convincing and believable. Give examples of past successes. Don't make up answers if you don't know! Dynamic: stimulating. Make your audience think. Engaging: attracting and occupying interest. Another key quality: connect individually with both large and small audiences. You can do this by maintaining eye contact, smiling at the audience and using their names where appropriate. Focused: paying particular attention to the topic at hand. Keep on point; don’t waffle. Knowledgeable: intelligent and well-informed. Know your concept well enough to explain it to the uninitiated. Logical: clear, sound reasoning. What you present must make immediate sense and must follow some kind of logical order. Memorable: easily remembered; worth remembering. Make sure your audience remembers who you are and what you do - for the right reasons. Passionate: show that you care. Use your energy while presenting to show that you are invested in your business and are excited by it. You may already have some of these skills and you might not even know it. Whether you want to develop or improve these skills, the magic word is practice - over and over again. 0
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During an investor pitch, you have the opportunity to show some of your qualities as a professional and as a person in general. In particular, investors will be looking for: Flexibility. Make sure that you show in your pitch that you have strong values and a well-thought through strategy, but also that you are able to take flexible decisions when the situation requires it. Investors like to work with people who are not afraid to pivot when the time has come, who are brave to take major steps ahead and who are able to thrive in any changing circumstances. Passion. Make sure that they understand how much you value the position you are in at the moment, the position of building a start-up,
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based on the idea that you believe in. Passionate entrepreneurs are investor’s favourites. Experience. Investors tend to trust more experienced entrepreneurs, who have many or at least some projects behind their backs. If you have ever worked in another start-up or have founded another company yourself, but the venture finished as a complete failure, don’t be afraid to share it with your investors. Every failure teaches a lesson and lessons learned through personal experience are much valued. Leadership. Investors look for great team players and people with strong leadership skills, who are able not only tо fit in any team, but also have the capabilities to lead this team to success. Investors value entrepreneurs with strong interpersonal skills and the ability to communicate with other professionals in a memorable and highly-impactful way. Ambition. Being ambitious is an important part of being an entrepreneur. It proves that you know where you are going, and you have the ability to set clear goals and to achieve these goals. Make sure that you don’t cross the very thin line between confidence and arrogance in your pitch. Be realistic. In this video, TedX speech coach, David Beckett explains how to give the perfect pitch. https://youtu.be/Njh3rKoGKBo After reading through this unit and watching the video, make a note of any areas you need to work on and how you'll practice.
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6.3 Practising your pitch Now that you know what to include in your pitch, it's time to create it and practice. After practising your pitch out loud, you might find that you need to make some changes.
Why not record yourself pitching (use your phone, a video camera or something like Zoom on your computer), then upload it to YouTube (set it as unlisted if you don't want everyone to see it) and paste the link to the video below. Try to be specific with your request for feedback - is there something in particular you're worried about (such as your tone or pace for example)? Please also make sure to give some feedback to a few of the others.
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6.4 Answering Questions Whilst you can't possibly know what the investors might ask you on the day, it's useful to practise answering some typical questions. In this video, Errin Todd, Founder and Sea-E-O of Todd Fish Tech Ltd, gives her top tips on how to prepare for this crucial part of your pitch. Listen to this podcast, where WES Ambassador, Vicky Brock shares her tips on the Q&A part of your pitch.
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6.5 Section Summary
In this section, we covered: •
the skills and qualities of successful pitchers
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the skills and qualities investors will look for
•
the importance of practising your pitch (with an opportunity to do so)
•
how to handle investors questions
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7. Next Steps Thank you 7.1 Action Plan Download the action plan below to keep track of the things you have to do and the skills you want to develop.
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7.2 Further Resources
If you would like to explore further resources, we recommend the following: The Entrepreneur Agony Aunt - Additional podcasts and blogs from WES Ambassador, Vicky Brock Women's Enterprise Scotland SEEWBAN Project Scottish EDGE
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Keep in touch
Please keep in touch to hear about any upcoming pitching events as well as all the latest news from Women's Enterprise Scotland. Register your interest here to find out more about pitching events near you. You can also subscribe to our newsletter here and please connect with us on social media too: Facebook Twitter LinkedIn
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7.3 Evaluation We really hope you've enjoyed this eLearning and hope that you've found it useful. We'd really appreciate your feedback as it will help us improve the experience for others. See Images of questions used
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