Hook Investors In 3 Minutes
If you want to know how to hook investors in 3 minutes, read on.
Startup Founders need to prepare more than one presentation.
They need to perfect a one-sentence elevator pitch. A one-minute pitch. A 3-4 minute "demo-day" pitch. And finally, a conventional 10-15 minutes investor pitch, if they want to hook investors in 3 minutes.
Knowing which one to deploy in any given situation can take time, however, a Founder must always be pitching, even in family and social settings. You never know whether the person you’re talking to will become your next investor. The point is to be prepared. You never know when you’ll get the chance to hook investors in 3 minutes or less!
The One-Sentence Elevator Pitch Format
The defined offering needs to be short, simple, and capable of being understood by everyone, like “a website”, “a mobile application”, “hardware” or “desktop software.”
The defined audience is the initial group of people that you will market your offering to. In the case of consumer applications, it is usually a demographic, such as “women age 25 to 35 years old.” In the case of business applications, it is usually a job function at a type of corporation, such as “system administrators at medium-sized technology businesses.”
Now that you have an offering helping an audience, you need to solve a problem. The problem needs to be something that everyone understands, such as “reduce the time collecting bill payments” or “engage in an immersive entertainment experience.”
The final component, the secret sauce, adds your unique approach to solving the problem and demonstrates a mastery of the market. Two examples are “by sending automated email alerts based on analysis of highest response times” or “with virtual worlds constructed in reaction to the movements of the players.”
Example: My company, [name of company], is developing [a defined offering], to help [a defined audience], [insert what problem they have that you solve], with [your secret sauce].
The One-Minute Pitch Format
There is no shortage of startup contests where competitors have one minute to pitch their companies. Yet there are just a few resources for learning how to put that minute to best use.
The formula below was developed over time by Founder Institute.
Did you know that [CUSTOMER CATEGORY] experiences [MASSIVE PAIN]?
This is a [MARKET SIZE] billion-dollar opportunity in the US alone.
[PRODUCT NAME] is a [PRODUCT CATEGORY] that [VALUE PROPOSITION].
Unlike other alternatives we, [KEY DIFFERENTIATOR].
The team includes [CREDIBLE TEAM BIOS] and we make money by [BUSINESS MODEL].
In essence, we are the [WELL-KNOWN ANALOGUE] for [ANALOGUE PRODUCT CATEGORY] and our vision is to [HOW WILL THE WORLD BE DIFFERENT? WHY DO WE CARE?].
We have already [EXECUTED MILESTONES] and you must be involved because [INVITE!].
The Demo Day or 3-Minute Pitch Format
Demo-day presentations tend to follow a consistent structure, but there is also plenty of room for variation, especially for experienced presenters. Here is an outline of the usual components, though the order in how you present them is up to you.
In most cases, the introduction will come first and the conclusion at the end. Sometimes, we advise companies to show impressive traction on the very first slide, and that is all it will take to grab the audience’s attention and hold it. Justin Kan was known to yell, “Don’t bury the lead,” when a founder finishes with the fact that they have $5mm in revenue and are profitable, rather than starting with that fact.
The Introduction
This is not much different from the so-called elevator pitch. Briefly say what you are doing and why. It is especially helpful to start off by saying as clearly as you can what you are in terms that the audience is likely to understand.
For example, “We deliver groceries to customers in their homes,” is clearer than “we are a next-generation, AI-based resolver of grocery needs.” This is sometimes called a mission statement, but regardless, strive for conciseness and clarity. A common error is to avoid describing what you do until far into the presentation. That is always a mistake.
The Problem You Are Solving
In almost every case, a simple description of the problem your product solves should be a part of your presentation. However, beware of the caveat above, and do not spend too much time describing your problem leading up to your fantastic solution, and leave the listener wondering what, exactly, you do until half your pitch is done.
The Product and the Customer
Explain in more detail what you are building and for whom. This used to be where you would show a demo, but ironically, demos seldom work in modern demo-day presentations. Explaining rapidly and clearly what your product does can be the most challenging, and rewarding part of getting ready for a demo day.
The Opportunity
This is usually expressed as a total addressable market (TAM). It is vastly better to be concrete and bottom-up (e.g., “We can sell for $X, and we have Y potential customers, leading to an addressable market of $X * Y”). As opposed to being nebulous and top-down (e.g., “The software market is a $15 trillion dollar market…and if we can capture just 1% of that market…”).
Your goal is to persuade the audience that the opportunity is real. That you are not making up data out of thin air. And that your company has a real shot at the dollars you describe.
The Traction
By demo day – thanks to the current era of shareware, frameworks, and AWS – most companies are up and running, accepting customers, and, hopefully, growing like weeds.
Here is where you get to show your weed-like growth. Bring out your hockey sticks and show us your startup growth curves. Sure you have a great story – but now is the chance to persuade listeners that it is non-fiction.
What happens if you have no traction or have not launched? This is not the end of the world. Many startups have successfully presented their companies pre-traction, but you must keep in mind that in that case, your success rests on the power of your story to persuade. You will be forced to lean more heavily on your personality and credentials, your story, and your dream.
The Team
How you integrate your team into the presentation is up to you. However, it is important to keep in mind that investors are investing in you and your team above all. Therefore, take the time to generate interest in the team by selling their virtues.
However, realistically you cannot do much during this brief presentation, so only spend time here on truly notable aspects of the team, eg., (“Jill has a Ph.D. in rocket science and holds the patent on the core technology upon which this market is built.”).
The Takeaway
It’s possible to hook an investor in 3 minutes. It requires detailed planning and execution. Do not conclude with a whimper but rather with a bang. Insist that your audience remembers you. Tell them as directly as possible what to remember about your company and opportunity. It is often effective to list explicitly the 3 or 4 vertebrae you would like them to retain.
Although I did not explicitly include a section on the business model above, it is important that by the end of your presentation, investors believe you have one. Sometimes the model is obvious and it is unnecessary to belabor it (“we are a new kind of retail store”), but even in these cases, it may be necessary to explain why you will be profitable. Few in the audience will believe a model where the unit economics seem impossible. You do not have time to elaborate and explain your model in detail, therefore you must find a way to describe it in simple and easy-to-retain terms.
About the author:
James Spurway is an Angel Investor, Mentor, Advisor, Speaker, former Commercial Pilot, and Author who specialises in raising debt and equity capital. He strives to model diversity, equity, and inclusion in the founders he agrees to invest and work with. He has paused his angel investing activity to focus on raising his first US$ 50M venture capital fund, which will invest in startups that can accelerate the achievement of net zero emissions. James spent the past 33 years living in Hong Kong, Vietnam, Germany, Switzerland, Monaco, the USA, Thailand, the Philippines, Singapore, and Australia, his country of birth. In that time, he started 10 businesses, exited from seven, shut down two, and kept one. He has invested in a total of 50 startups since 2001 and had six successful exits.