How startups can better articulate the value they have
When investors make the decision to give funding to a startup they are effectively saying ‘I believe that the vision of this business will manifest itself in tangible value in the future.’ Data sometimes back up this belief, but often it isn’t. This means that an investor's decision to invest in a startup is more emotional than rational in the early stages. For this reason, investors must believe in the value that the startups create not just for themselves as ROI, but for everyone that is and will be using the product.
This value has multiple layers which can push a variety of buttons for investors. It all starts with this simple question:
What problem is your startup uniquely positioned to solve?
Where there is a genuine problem to solve, there is value to be created. Add market dynamics to this, and the opportunity and impact can get bigger and bigger. This is why it’s absolutely crucial for founders to be able to articulate the value they create using engaging storytelling that clearly lays out their journey, from the origins of the problem they are trying to solve through to its eventual solution.
The three-step storyline for the pitch
- Describe the problem
Begin by describing the problem that has created the business opportunity. Many founders will think that the product is king, however, investors tend to spend a surprisingly small of time on the product pages of your deck. Make sure you have a clearly defined explanation of the problem at hand to help you articulate the value that you bring to the market without getting into too much of the finer, technical difficulties. The simple process that you can follows is:
- Use a numerical fact that demonstrates the scale of the problem (if such a figure is available)
- Address the problem from different angles
- Be clear, direct and concise in your description
- Present your unique solution
Next, present your product as the unique solution to the problem and explain what makes it stand out amongst competitors. While it is true that investors won’t spend too much time on the product section of the pitch, it is crucial that you articulate what your product is and what value it provides the target audience with. Rather than focusing on the mechanics of your product, zero in on the value as an output that will make your product stand out. When you write your description, make sure to avoid using too much jargon or heavy technical language as much as possible, to keep your investors’ attention.
- Outline the vision
Finally, outline your vision for the business and where you want it to go. This part is the pinnacle of your pitch – it allows you to make an emotional connection with the investors, helping them buy into your vision. You want the investor to be excited about the future of your company, so before you start writing, ask yourself the question ‘what would happen if?...’
As you work, remember that investors are smart, so they won’t have unrealistic expectations of rapid turnarounds. They are also experienced, so they will know how a business can exit. What they don’t know about your business is what your vision for it is, how you see your business’ future and what will help your business give shareholders great returns. I suggest that you focus on how your business could attract exit opportunities, perhaps using examples of other successful exits in your sector.
The three steps described above will become the cornerstones of your pitch, while everything from strategy to finance will be used as supportive information and only if investors feel excited about your startup.
