How to Analyze the Feasibility of your Business and Translate Your Ideas Into a Great Pitch for Investors

In recent weeks I have been attending several start-up sessions around the Toronto area. In general I would have to say that entrepreneurs are still struggling with their pitches. Ask them basic questions about competition, market size and you are met with puzzled faces or a lack of understanding of their markets.

As a result, I'm offering the following links and information to new founders who are struggling with these questions. The goal of this post is to simply provide you with tools and starting points to determine the viability of your idea. In subsequent postings I will explain each in more detail.

Start with the basics, I personally love the simplicity of Dave McClure's Start-up Metrics for Pirates or AARRR. This isn't a replacement of a business plan, but it's a great way of forcing founders to think about how their business will grow and sustain itself. Although the title is a bit cheesy, I believe the idea itself is a great 1st step for new start-ups.

AARRR stands for;

• Acquisition - how will you acquire your customers?
  
• Activation - how will you get them to sign-up, download, buy?
  
• Retention - how will you keep your customers?
  
• Referral - how will you get your customers to refer you to their friends?
  
• Revenue - what is your revenue model?
  

These are the building blocks of any good business plan, but can be completed easily. I suggest you read the full presentation to understand the metrics behind the above points. If you can't answer these questions stop here and give it some thought.

If you have progressed to answering the above questions effectively, I offer the following requirements in order to pitch your business successfully to investors. Note some of this comes from a presentation I attended run by Daniel Mothersill - President of the National Angel Capital Organization and the rest comes from my own personal experience.

What is the purpose of a pitch? It is not to impart how great your technology is. It is to sell investors on how unique your business idea is and how it will make money for the investor.

In order to successfully pitch to investors your pitch must include;

1. Customer Pain or Unfulfilled Demand - what it is and how your solution will solve it
   
2. The Market - What is size of your market? What niche are you playing in? What cross markets can you sell to? Is the market growing?
3. Market Share - What size of the market are you targeting to capture?
4. Product / Service - What is it? Is it scalable? Why is it unique or why is it better than what's out there today? Why would people switch? What is proprietary?
5. Go-to-Market Strategy - Who are you targeting? How long is your sales cycle? Are you using a direct or channel approach to selling? How much will it cost for your sales team / strategy?
6. The Team - Who is on your team? What expertise to they bring to the team? Domain expertise? What is their past start-up history? Who is on your advisory board or board of directors? Dave M suggests that this makes up 60% of the investment decision!
   
7. How you Got Here - A slide which indicates how you got to where you are. How much did you spend? What did you produce with that investment? Patents filed? Team built? Major accomplishments?
8. Strategic Alliances - Who have you aligned with? What key customers have you already landed?
9. Milestones - Where are you going? Revenue projections? How long to positive cash flow?
   
10. Competition - Who solves this need today? How are you better? Who are the 800lb gorillas? How can you switch existing competitor customers? How will your competitor react to your product/service? What is the barrier to entry for your product/service?
    
11. Financials - 5 year projection of financials, simple Revenue, Expenses and Net Income. How much investment are you looking for and how will you use it?
12. Conclusion - restate the Pain and how you will solve it, highlight team strengths, why you are better than the competition, and how your key customers will help you grow.

In the following posts, I will go into more depth on each of the above 12 points.

Enjoy.