Entrepreneurs that are interested in attracting investors must build a business plan- preferably written- that will answer any question from potential investors about your startup even before it is asked. You may have quick answers to any question, but if investors need to ask them, you may seem like you have something to hide, or not smart enough to know what’s important.
You must do your homework, know what you are about to say and how to eloquently say it. We recommend on a 15-slide investors pitch deck backed with a 30-page written business plan, both of which will contain answer to following key questions:
1. What is the business problem you aim to solve?
It may seem obvious, but there are too many “solutions that are looking for a problem”. Just because you have a service or a product, does not mean you have a business opportunity. Investors want to hear about paying customers who have hurtful problem that you can solve with your product.
2. What is your basic solution and what is its value?
Investors look for a summarized description of your product or service without a technical or marketing jargon. This is the place to mention at the beginning of the pitch, all your key differentiators.
3. How big is the market and your targeted share in it?
The investors will look to invest in big and wide markets that can return their investment. They like billion dollar markets with a double-digit growth rates, as well as they look for focus and evidence that your data is based on experience and market expertise.
4. How do you make money?
Good deeds such as feeding the hungry are worthy causes, but not always sustainable financially. The business model should clearly define who is your client, expected market penetration, how many customers pay proportionally to their acquisition costs.
5. Who are your competitors and how do you beat them?
Every business or new startup have competition and other alternatives, so there is no such claim as “I don’t have competitors”. Mention the top 3 competitors and present your sustainable advantage, as well as barriers to entry for new startups. Do not underestimate these competitors, but rather, use their specifications to highlight your advantages.
6. What are your marketing and sales strategies?
Here, investors look for a timeline with specific milestones. You must map and show pricing details, sales channels, strategic partners, and a customized marketing plan that is consistent with your industry and target segment.
7. How your team is uniquely qualified for this venture?
Investors invest in people more than they invest in their ideas and they want to see if your team is qualified and owns the necessary skills required for the execution of the idea.
8. How much money do you need to get to a significant milestone?
Since investors buy part of your company (and not your product), this is the most important question which often left unanswered. Explain the financing requirements, the use of funds, and explain your valuation.
9. What are your revenue, expenses, and cash flow forecasts?
The forecasts are estimated in terms of targets and are a measure of your business wisdom. The numbers should be aggressive, but also rational, based on the market size and its conditions.
10. How much and when do you expect your investors to get paid?
Technically, this is your exit strategy, usually M&A or IPO. If you don’t plan on either exit or an IPO, you will struggle to find investors who are willing to invest in your project. Find a similar company that will show a potential sale value and ROI.
The best answers are not the longest or most sophisticated ones. Serious investors that listened to 1,000 pitches and read hundreds of plan, are mostly impressed by founders who present the right points in the shortest time. The only question you want to hear is- “when can we sign?”.