A pitch has basically one purpose: to get a potential investor to show enough interest and to say, “tell me more” until they write the check.
Many entrepreneurs, particularly those in the medical profession are sometimes ill-prepared to make a pitch. They get enamored with a new discovery, process, or technology. Many in the corporate world have that same fixation.
As part of Tech Coast Angels (TCA), I participate in pre-screens and screenings (shark tanks), mentoring teams who have new ideas they want to pitch and judging fast pitch competitions. Before I became an angel investor I worked in the corporate world as an intrapreneur.
I have found that what I learned in both the corporate world and the angel world can be shared with future visionaries and these ideas can potentially help them to get funded and be more successful. Here’s some of what I’ve learned:
In the first few minutes of the presentation, the entrepreneur must state the problem that is being solved so that the investors listening to the pitch “get it.” We call this ‘context’ and it is especially important for highly technical and medical professionals to get their points across to an angel investor or VC who may not have the same depth of understanding as the entrepreneur.
The key is to tell the unique story of the business or product AND to ensure that the listener understands it.
Let’s look at a couple of options for setting context: If you have a strong team, start with the team.
Let’s say I put together a team of experts in artificial intelligence (AI) with people like Dr. Anthony Chang (Children’s Hospital OC and Director, Medical Information and Intelligence Institute (MI3)) and Dr. Shantanu Nundy (Physician Mary’s Center in Washington, DC and Director, Human Diagnosis Project). With this expertise on my startup I would lead with the team.
For example, your pitch might be: “I have been the founder of two other successful startups using AI and deep learning, delivered more than 10X returns to the investors and we did this in less than 5 years. Included on my team are Joe Watson, the expert in his field from IBM’s Watson group, and Drs. Chang and Nundy, both of whom lead AI initiatives for their respective hospitals. We have the opportunity to build a new AI-centric business treating autism which shows significant benefit from the use of AI.”
Now, if your team is not world renowned but your idea is exceptional, you can start with the idea and tell the story behind the idea. For example, one of the best pitches I heard was from an entrepreneur whose family was touched by cancer.
He said something like: “My brother, sister, and mother all had cancer. My goal is to help them and others fight this disease and I will not stop until I am successful. I developed a diagnostic test based on X that is unique in the market. We integrate the results of this test with an analysis of data from thousands of prior results to come up with the optimal diagnosis and treatments. And the cost is less than $Y.”
It got my attention because I could relate to it and I heard the problem, the passion and the drive to see it to a successful conclusion.
These two points – team and problem – are the anchors for the context of the pitch. During the time remaining the presenter should be prepared to answer the following:
NOTE: Not all the points below need to be answered in detail and some may not be answered at all. Yet, each of these 10 elements must be covered in some manner to tell a solid story of why the product/service or business is unique, sustainable, and a good investment with the potential to increase revenue and value for the investor or company if it is internally funded.
- Why your company/product/service is different
- Problem customers face. Maybe there is a lead user (a potential customer that kludges a solution that can serve as the initial customer).
- What you do relative to alternatives and why your solution is better.
- The entrepreneur or intrapreneur can state the vision for a product/company/service which may be much broader but he or she must specify the initial target.
- Market Size (Answering the questions of: what is the market, its size and growth potential)
- Your specific target market in the short term.
- Some mechanism to determine the size of the market.
- What does that market look like? i.e. what is the “ideal” customer and how do you find them?
- Can you leverage existing partners, channels, relationships?
- The company/product/service (Answers the question of how do you make the product/service or put the business together)
- What is the technology to be used?
- What is the “architecture” of the company and the product/service?
- How do the pieces fit together?
- What is the IP behind the company or the product?
- Is this an execution play, i.e. land grab or land and expand?
- What is the unique differentiation of the product?
- What are the strategic control points, i.e. where do you have strength and why in distribution, unique customers, brand, IP?
- Is the product scalable and to what markets and with what resources?
- The Team (Answers the question of who will be responsible for execution of the plan if approved)
- Executive team and past experiences and accomplishments. If you lead with the team to set the context of the business, expanding on how they will help you be successful is the optimal approach.
- Advisory or Board of Directors (BoD) that supplements exec team and how you can use the team to help your business get off the ground or grow or to obtain access to resources or other experts.
- Setting up the RACI (responsible, accountable, consulted and informed) of how you will get information, make decisions, and share those decisions with your constituents.
- The Financial plan. (Answers the question relative to the goodness of the product/service or business and whether you can make money and have adequate margin)
- Growth path, i.e. product plan, partnership plan, channel plan over time.
- Business model including pricing for different markets.
- Metrics for determining success.
- 5-year revenue growth path, EBITDA (Earnings before interest, taxes, depreciation, and amortization).
- Different revenue paths over a five-year planning horizon.
- Risk impact and contingency plans.
- Competitive analysis
- What is the brand, and can you sustain it?
- The basis for your idea being different.
- Feature differences.
- Sustaining the differences.
- The Deal (if it is an externally funded deal)
- Pre-money or current valuation if known.
- Convertible note v. equity.
- Prior investments/cap table.
- Capital and expense requirements (Required even if internally funded).
- Use of Funds (What will you use the money for and over what period?)
- How will you spend the money on sales and marketing, operations, distribution, partnerships, and development?
- What milestones will you achieve with the funding gained?
- Will you need more funding, how much and in what time frame?
- The Exit or Integration
- What is your plan going forward?
- Will you sell and to whom?
- The five-major take-aways from the pitch and a recap of why this makes sense to pursue.
These questions make sense and are easy to ask. Yet it takes significant strategic and tactical thinking to build an executable plan regardless if it for your own startup or as part of an innovation within a company funded by the company.
David Friedman is a tech-savvy marketing and operations executive with more than 30 years’ expertise in bringing to market new technology. He plays at the intersection of technology and the customer; his real love is innovation and commercializing technology to meet the needs of customers. A member of the TechCoastAngels of Orange County since 2009, he serves as head of the screening committee.
His specialties include:
- product roadmaps
- ideation and feasibility analysis
- building partnership ecosystems
- developing risk management mitigation strategies
- team building and management.
During his career he has introduced more than $1.5 billion in new products. In his corporate career, he has helped companies build top line revenue growth and EBITDA while mentoring the next generation of business leaders. David has been executive vice president and Chief Marketing Officer for ATX Group (now Sirius Connected Car) which provides telematics and information services to automobile manufacturers and its clients.
Previously, he was Vice President, Marketing and Direct Sales at Connexion by Boeing, and commercialized the first Wi-Fi services available to passengers onboard commercial airplanes. He also held executive positions with US Cellular, Covia Technologies, Ameritech Services and RCA, and has engineering and product development and management experience with the Bell Labs, MCI, and the federal government.
Friedman holds an MBA (economics) from George Washington University, a master’s degree in electrical engineering from Columbia University, and a bachelor’s degree in electrical engineering (summa cum laude) from City College of New York. A member of the TechCoastAngels of Orange County since 2009, he serves as head of the screening committee.