How to Pitch Your Startup and Get Investment CapitalJune 7, 2016 - 12 minutes read
In a recent episode of This American Life, first-time startup founder Alex Blumberg found himself in a situation most iPhone app developers would kill for: meeting one-on-one with investor Chris Sacca (of Twitter, Instagram, etc.) to pitch his app idea.
Unfortunately, the meeting didn’t go as planned — to put it lightly, Blumberg crashed and burned. Tripping over his words, failing to cite statistics, prefacing virtually every statement with insecure words like “I think” and “maybe.”
Fortunately, this personal failure for Blumberg became an invaluable lesson for all of us in the tech community to learn from.
As his pitch fell apart, Sacca dropped the pretense of investing and began critiquing his pitching technique. At the end, he stepped into Blumberg’s shoes and pitched the app himself — including every detail he as an investor would want to hear. (If you haven’t heard it already, go check it out on NPR.)
In this post, we’re taking a close look at what makes pitches like Sacca’s so successful. We’ll start with the basic concepts and structures for startup pitch decks, then move on to look at the psychology that drives investors to pull out their wallets. At the end, we’ll offer some additional pointers based on our years of experience mentoring startups here at Dogtown Media.
What is a pitch deck?
A pitch deck is a presentation, usually in the form of slides and a prototype demonstration, that conveys everything an investor needs to know to decide they want to invest in a mobile app developer’s startup.
While slideshow presentations are the go-to method for accomplishing this (hence the term “deck”), the vast majority of startup slideshows go on far longer than the average investor’s attention span. Therefore, it’s important to fine-tune the flow until a person with no prior exposure to your app idea can understand and believe it.
A good pitch deck doesn’t just make your startup seem smart. It makes your startup feel inevitable.
The anatomy of a pitch
The elements of a pitch deck are similar to that of any other story. There should be a clear beginning that hooks the listener’s interest, a middle that fills in the details, and a conclusion that drives the listener to action.
Being formulaic may be bad for business, but it’s great for your pitch. Investors shouldn’t be left trying to put the pieces together. They expect mobile app developers to come to them with a clear, established structure.
1. Establish credibility
Establish your team’s credentials in your target industry. Management in a related business? Success with another digital product? This should take up no more than a few sentences.
2. Explain the problem
Successful mobile apps solve problems for their users. Uber solves the problem of getting places. Facebook solves the problem of staying in touch with friends.
Brevity is especially important here; any problem that requires a lot of backstory and circumstance will erode investor confidence. A problem that is simple and meaningful, on the other hand, will pique their interest.
3. Introduce your solution
They know who you are. They know what you’re fixing. Now it’s time to show them how you’re fixing it.
Be sure to highlight how your solution improves upon the current solution. For example, if you were pitching Uber, you wouldn’t just say it’s “an app that helps user get taxi rides.” Instead, you would highlight the pain the old solution causes millions of eager users: standing around in the rain, hoping a cab happens to drive by eventually.
If you have a functional prototype, this is a great time to include a demo — or at the very least screenshots.
4. Validate your competitive advantage
Now comes the tricky part: explaining why you’re uniquely qualified to implement a solution.
There’s a saying in Silicon Valley that “ideas are worthless and execution is everything.” While we’d argue that a good idea is far from worthless, in the case of investor relations the saying holds true. They don’t care how smart your idea is — they just want to believe that you, and you alone, can make it happen.
Competitive advantage doesn’t have to be years of experience serving your target demographic, or even years of experience in tech. Deep research, traction with a prototype, and strong existing partnerships can all convey a clear reason to invest in your team rather than someone else’s.
5. Validate your market
Building products for problems that don’t exist is, unfortunately, a big problem in mobile tech. Many startups build tools to scratch their own itches, only to discover that there isn’t a sufficiently large market to support their idea.
That’s why it’s important to prove a market exists for your product. Investors will expect to see some form of traction: excited beta users, web-based signups, convincing user interviews, etc. Beyond proving that people will use your product, you then have to prove that enough of them will pay for it in some form or another and drive revenue.
6. Monetization plan
Most apps are free. How will yours make money? This can be trickier to validate with only a limited prototype to draw beta users.
Were beta users willing to hand over payment information? How much are users spending on existing solutions? How is the competition faring? These are all questions you should be prepared to answer.
Completely new app ideas do exist, but the vast majority will have competition in some form right out of the gate. Remember, competition is good — it indicates that a market exists for your service, even if the competitors aren’t on mobile. From an investor’s standpoint, it’s important to see a clear plan for leveraging your competitive advantage — whatever that may be — and staying a step ahead of other teams.
8. Describe what you need to make it happen
Explain how the money will be used in detail, and ask for a specific amount based on actual needs. Investors want to see that you’ve done your homework and aren’t just looking for “padding cash” to keep you safe. Round figures like “two million” sound goofy because, honestly, they are. So, crunch the numbers, get an estimate of your actual business costs per round, and make sure it’s more in-depth than “half on development and half on growth hacking.”
9. Are you in?
Mobile is a time-sensitive world. Chances are you needed to launch yesterday to make the desired impact. An ideal pitch deck gets that urgency across to investors; they should feel like the time is now or never.
Psychology 101: What investors want to hear
Investors are, in many ways, the perfect audience for Los Angeles iPhone app developers.
They want to be there. They live and breath startups, just like you. They want to get out their wallets and invest, or else they wouldn’t be listening to you in the first place.
That said, investor’s have good reason to be risk-averse. Industry reports consistently cite only a 5–1% success rate for mobile startups.
Here are three psychological trump cards that can push your pitch deck a cut above:
1. Adapt to your audience
Whether or not they admit it, people like to invest in people that remind them of themselves. Every investor is different, so it’s important to be prepared to match their energy level and meet them halfway when it’s time to talk details. Business guy? Stick to the figures. Eccentric creative? Have fun with an energetic demo.
2. Brevity above all else
Most pitch decks are simply too long. There’s a saying in show business that you should “always leave them wanting more.” The same applies here — trimming down a mountain of data and background into a pint-size serving is no easy feat, but the payoff is worth it.
3. Connect emotionally
Startup founders tend to be a passionate crowd. That’s a good thing, and the structure of your pitch should convey what’s unique and important about your story. The problem you’re solving matters to you. Put the listener in your shoes and help them share that feeling.
Discouraging results aren’t defeat. They’re feedback.
Pitching is an art. Like any art, it takes practice and persistence. Only a tiny fraction of your contacts will convert into investors.
Be prepared to meet with as little as one in thirty investors you contact, and don’t get discouraged when an even slimmer percentage of those meetings turn into seed funding.
The rewards are endless for iPhone app developers who buckle down and make it happen.Tags: Alex Blumberg, android app developer, angel investors, apple app store, Chris Sacca, elevator pitch, entrepreneur, instagram, investment capital, iPhone app developer, mobile app developers, monetization, pitch deck, pitching, psychology, startup statistics, startup strategy, startups, statistics, tech, technology, twitter