Entrepreneurial Masterclass
Chapter 8 - Fundraising Documents

Lesson 6: 2 Types of Pitches

Complete & Continue Next Lesson Learn More

IN THIS LESSON

PLAY LESSON

The Two Types of Pitches

1. Short Form Pitch, aka Elevator Pitch 

Typical Time for Short Form Pitch: 30 seconds minimum to 3 minutes maximum

Typical Use Case for Short Form Pitch: Everyday interactions 

The short form pitch is intended to explain clearly what it is you do, why you do it and how it works. Give them enough information to understand the big picture but keep it high level enough that they will want to know more and continue the conversation. 

The Format

1. Intro – should be conversational. Common openings are a personal story or questions. 

2. Problem – Explain the main overarching problem you are trying to solve and describe some of the pain points associated with this problem for the target demographic. 

i.e. – most small businesses can’t afford to hire a CFO. However, their businesses suffer because they are unable to build the financial models that are needed to make important and informed decisions on their own. 

3. Solution – state clearly what your solution is (i.e., if it’s SaaS say it’s SaaS, if it’s a marketplace say it’s a marketplace…). Describe briefly how it works and the results it creates. This should be at the fundamental level now is not the time to get into any technical details. 

i.e. – We’ve created a simple easy to use software that allows anyone to build custom financial models in under 5 minutes. The user simply creates their business profile, then answer a series of basic questions and our data engine produces financial models that they can use to analyse any part of their business like never before for 10% of the cost of hiring a CFO. 

4. Business Items – discuss relative business items here. This will vary widely based on the type of business, the stage you are at and the situation you may be in. Generally, you should pick two or three related business items. It is very important that you state clearly where in the business lifecycle you are here (ideation, mvp, beta, post launch, traction, revenue generating…) Below are just a few examples of things you can discuss here. Pick your most impressive, now is the time to brag. 

  • MRR/ARR

  • DAU/MAU

  • # of downloads / web hits / signups

  • Awards or recognitions won. 

  • Product milestones

i.e. – we completed our beta at the beginning of the year and are now selling the live version.  We have almost 500 small businesses using it every month generating $25,000 in MRR. 100% of our beta customers converted to paid really showing how much people love this product. 

5. Team – If you haven’t done so already, you should now discuss your experience and why you are the one(s) to make this business successful. If you have teammates, you should mention them here as well. 

i.e. – I was an accountant at Deloitte and ran CFO consulting business for 5 years before starting this company. My cofounder is a tech founder with two previous successful apps. She built the software after we were discussing at lunch one day how time consuming it is to have to have to analyse and model all business decisions, you’re thinking about making as a founder. 

6. Call to Action – If appropriate, you can close with a call to action letting the listener know what it is you’re currently most focused on such as hiring a CTO, meeting with investors, looking for intros to your target client etc…

Common Mistakes to Avoid with Your Short Form Pitch

1. Memorizing the entire pitch. Because elevator pitches vary so widely based on the situation the best way to learn these is to practice and memorize the individual pieces. If you memorize the entire speech, you run the risk of not being able to use the appropriate pieces in the appropriate situation well.

i.e., in front of an investor you might use Intro>Problem>Solution>MRR>Fundraising where whereas in front of a potential customer you shouldn’t talk about MRR and Fundraising so you might use Intro>Problem>Solution>How it Works>Awards Won>#of Users>Call to Action

If you memorize the entire pitch, you also run the risk of sounding rehearsed and robotic. The goal is to have your elevator pitch sounds natural the way you would normally speak. Since this will be used often in situations where the listener didn’t sign up to be pitched to, you don’t want to make them feel that way. 

2. Talking too much about the product. It is very common to see founders talk about the product for 90% of the time. This is a big mistake. You should give equal time to each of the parts above and then let the listener ask for more details on whatever aspect they find most interesting. 

2. Long Form Pitch

Typical Time for Long Form Pitch: 5 to 10 minutes 

Typical Use Case for Long Form Pitch: Formal scenarios where the person expects to be pitched to such as a meeting that has been scheduled or a demo day. This pitch is usually accompanied by a pitch deck. 

The goal with your long form pitch is to clearly explain the main aspects of the business and demonstrate your expertise in this field. Explain clearly what it is you do, why you do it and how it works. Teach them new and interesting information. Show opportunities for profit based on this information.  

The Format:

1. Intro – should be conversational. Common openings are a story or questions. (See Intro’s resource sheet for more)

2. Problem – Explain the main overarching problem you are trying to solve and describe some of the pain points associated with this problem for the target demographic. 

i.e. – most small businesses can’t afford to hire a CFO. However, their businesses suffer because they are unable to build the financial models that are needed to make important and informed decisions on their own. 

3. Solution & Product– state clearly what your solution is (i.e., if it’s SaaS say it’s SaaS, if it’s a marketplace say it’s a marketplace…). Describe briefly how it works and the results it creates. This should be mostly at the fundamental level with some technical details that may be relevant. It is important to highlight how the end user(s) interacts with the product. For Deeptech and science companies you will explain how the technology will work, the results it will create and the science behind it.  Accompany this section with screen shots, demo videos, product pictures etc…

i.e. – We’ve created a simple easy to use software that allows anyone to build custom financial models in under 5 minutes. The user simply creates their business profile, then answer a series of prepopulated basic questions and our data engine produces financial models that they can use to analyse any part of their business like never before for 10% of the cost of hiring a CFO. 

4. Business Items – discuss relative business items here. This will vary widely based on the type of business, the stage you are at and the situation you may be in. The more you can educate the listener and demonstrate your expertise in the is section the better. New and interesting facts should be presented as much as possible. Below is a list of most common items to include in no order. Not all these necessarily need to be included.  

  • Market Size – the market size should be presented in a way that is logical to your business and the sector that it operates in. Using bottom-up math and a top-down approach is generally best. 

    • i.e., We sell for $100/m, so we have a market potential of up to $120M in annual revenue because there are 100,000 small business owners who make less than $5M in ARR which is our target demographic. Will we start with the ones who are 20 – 45 years old because they are more tech savvy and easier to target. There are 50,000 for an addressable market of $60M ARR. Based on our strategy we can obtain half of that in market in the 4 years for $30M ARR.  

  • Competition – the competition should be well researched. You need to know who else is in your space and the spaces nearby. You should be able to articulate clearly what they do well, what they don’t do well, who they service, how you compare and where you will have to compete versus where you won’t have to compete. 

    • i.e., QuickBooks is the largest competitor with 60% of the small and mid-size business market but they only do account and don’t have financial modelling capabilities. We will be able to integrate with them to get access to their customers. Quantrix is a powerful tool but is mostly for large enterprise clients because it is technical and complicated to use and costs thousands of dollars per month.

  • Why Now – tell us about what has changed to make now the perfect time for your product. The following are the general buckets that your Why Now will fall into. The more combinations of these factors are present the more compelling your Why Now will be. 

    • Changes can be societal (i.e., shifting interests towards sustainability especially in younger demographics), economic (i.e., the cost of lumber is $X for the first time), technology (i.e., availability of no-code software), political (i.e., signing the Paris Agreement)

  • Roadmap – your Roadmap should be presented in a sequential way that gives us the impression that there are large important things coming soon. Do not get too detailed here and tell us your whole calendar. This should be milestone achievements for the next few months. As a rule of thumb, we generally advise not to make your roadmap more than 18 months long since investors typically invest on 18-month horizons. 

    • i.e., our beta will close two months from now in March. We will then roll out the live version in April. We will close the current fundraising round in June. September is when we will begin the partnership with ACME and roll out version two of the platform with x, y, z added features. 

  • Traction – your traction can be presented in several ways and will vary based on your stage. If you’re early focus on the product, market research, customer development, awards. If you’re later focus on your most important KPI’s. You can present your traction sequentially looking backwards like the roadmap or as a current snapshot of where you are today. 

    • i.e., currently we have over 23,500 downloads. Our 6-month retention rate is 82% and our daily active users is 4,200. Last month’s recurring revenue was $18,250. 

  • Business Model – this is where you explain how you make money. Your business model should be straight forward and easy to understand focusing on the core way you make money. Any small additional streams of revenue should not be focused on here only the primary ones. Some typical revenue models are B2B, B2C, D2C, B2B2C. 

    • i.e., we sell B2B with a monthly SaaS subscription model of $50 per month for basic or $100 per month for premium. 

  • Revenue projections – this is where you will show us how you are thinking about the future growth of the company. Even though this part may be detailed on your slides you should present this section by highlighting only a few of the important numbers and explaining the assumptions behind them. 

    • i.e., as you can see here, we expect to reach $12M in ARR in 2024 based off our customer acquisitions cost staying between $9 and $11 allowing for a continued CAGR of 45% year over year. This is the year which we will become profitable with an EBITDA of $1.7M.

  • Go-To-Market Strategy – for companies who have less than 2 years selling in the market this is an important slide. You should educate us on your plan for how you will get your business into the users’ hands. This plan should be well thought out, tested, and backed up with data. 

    • i.e., our original assumption was that new start-up founders would want our product more than existing small business owners but when we ran two test campaigns to sign up 100 businesses the small business owners, we targeted had a $9 CAC compared to the start-up founders who had an $11 CAC. Based off this data we will continue with our original SEO strategies but change our Facebook ads strategy to start with the small business owner’s demographic. 

  • KPI’s – these will vary based on what your stage, industry and business model is. Make sure you take the time to research what KPI’s you should be tracking for your business. If everyone in your sector measures success by daily active users but you’re only talking about number of downloads, it doesn’t land well. Present these as data points and choose the most impressive and important ones. Below are just a few examples of KPI’s. 

    • Customer acquisition cost (CAC), lifetime value (LTV), monthly recurring revenue (MRR), annual recurring revenue (ARR), gross merchandise value (GMV), daily active users (DAU), monthly active users (MAU), paid conversion rate (PCR), gross margins, net margins, retentions rates

  • IP & Patents– typically for deeptech, science and consumer product companies only. If you hold patents and IP that are important to the success and protection of your business let us know what they are for, what countries they’re issued in and the status of their issuance. 

    • i.e., we have 7 different patents, 4 covering the drug manufacturing process and 3 on the delivery system. They’re issued in the US, UK, France, and Brazil. They’re pending in Spain, Germany, China, and Japan. 

  • Grants and Awards – If you have certain grants or awards that particularly notable, they can have their own section. If not just include them in the Traction section. 

    • i.e., we won first place at the National Science Foundation annual pitch competition. We were selected for the finals from more than 10,000 applications and beat out the other 49 participants in the finals to take first place winning a non-dilutive grant of $100,000.

  • Exit Strategy – the only goal investors have is to get an exit on their investment so if you have some idea of how an exit might occur you can share it. This should only be included if you have a well thought out and realistic exit scenario. Just saying “we plan to get acquired or IPO” is not productive. 

    • i.e., Merck and Pfizer each recently acquired competitors that were developing a similar drug and delivery process as ours so we feel very confident that Johnson & Johnson or Abbvie will buy us to stay competitive in this space. 

5. Team – Team can be discussed in the beginning or end. You should discuss your experience and why you are the ones to make this business successful. Don’t go too deep on everyone’s backgrounds, this section has a habit of running too long. Highlight the knowledge and experience that is relevant and notable of the key people involved to demonstrate why you are the right team. The earlier the stage the more important this section becomes. If you have notable advisors, you can mention them here as well. 

i.e. – we now have a team of 10 full time employees. I was an accountant at Deliotte and ran a CFO consulting business for 5 years before starting this company. My cofounder Amanda is a tech founder and UI/UX genius with two previous successful apps. One sold to Microsoft for $10M. Our COO Greg is a Harvard alumnus and has more than 20 years’ experience in COO roles at several different companies from start-ups to fortune 500s. Jes Staley the CEO of Barclays is on our advisory board. 

6. Funding – The amount of funds you are raising should be presented in the format we’re raising $X to get to (insert business and revenue KPI’s). Most founders say we’re raising $X and will spend 30% on marketing 40% on product dev and 30% on hiring. Simply telling us what you will spend the money on isn’t sufficient. Every investor already knows you will spend the money on growing the company. Learn the difference between closed, hard committed and soft committed (also referred to as hard circled and soft circled). If you raised previous money, tell us how much and the source of it. 

i.e., we are raising $1,000,000 to get to 10,000 daily active users and $2M in ARR. We have $200k already committed from our previous angel investors. We are soft circling another $300k from two interested VC firms. Previously we raised $250k from friends, family, and angels to help build the product to its current version and make our first two hires. 

7. Close – Ask for their thoughts and feedback and if there are any items, they need further clarification on. 

Common Mistakes to Avoid with Your Long Form Pitch

1. Timing. Don’t talk for the entire 30 minutes because that is how long the meeting is scheduled for. Very often we see presenters who think they have unlimited time because they feel they have a captive audience. This is not the case. You should not be talking in one direction for long stretches of time. We as humans can only pay attention for so long. 10 minutes should be the absolute maximum. If you need more time, make sure you are doing things to break up the presentation and keep the listeners engaged. 

2. Delivery. Because we currently live in a Zoom world, we see many founders reading their presentation scripts. This leads to many issues most commonly a monotone presentation that is unengaging. Make sure you practice your presentation in a natural speaking way. If you are going to use a script, make sure you incorporate speaking devices like pitch, tone, and speed into the script to make it sound natural. 

3. Wild Assumptions. Many of the items mentioned above are assumptions but they must be grounded and have logic backing them up. Take your time to do thorough research and educate yourself on start-ups and your industry.  Saying things like “our TAM is $1.5T because that’s how large the sports equipment industry is” when your business is selling surfboards is incorrect. Forecasting that you’ll do $10M in sales your first year or $1B in year 3 etc… are also big mistakes. Things take time to ramp up and catch on.