The previous topics I have covered in this six part article series have largely spoken about where your company is today:
- What does it do / what pain point is it addressing
- What is its revenue potential
- Who are its competitors
- Who are the people involved in management
These areas collectively form the basis of what you are pitching and why you feel your company is a good investment candidate. To round out your investment pitch you now need to provide details on what is the company’s execution strategy to take the company forward. Namely, investors are putting money into the company at a valuation based on the progress the company has made to date and its potential for the future. They will want to know how the new money coming in will be used to grow the company and increase the company’s value.
The stage your company is at will determine what the next tactical step is to focus on. Working our way up from the earliest stage:
Concept - if you have pitched a concept, you are probably looking for funds to develop the concept & prove it works. You would want to discuss how funds will be used to complete the research & development, find early pilot customers, and secure your IP.
Go to market - after proving the pilot, you now want to take it to market. You would want to discuss how funds will be used to take the product from alpha/beta stage to version 1.0. This means lining up suppliers and manufacturing partners to support your product for real world production & usage. You would also want to discuss your sales & marketing strategy. How are you going to sell to customers? Are you going to build up your own sales force or go via an existing distribution channel? How are you going to get the message out about your product? Are you going to do the trade show circuit, on-line/offline advertising, or PR?
Expansion – after you have established traction in one market you may want funds to expand to new markets (either via different geographies or new product lines). What is your strategy around this?
In addition to laying out your execution strategy you should also give approximate allocations of how much of the investment raise you are planning for each major area of the execution strategy (use of proceeds). As with all your projections, this should be built from a ground up basis. This will allow investors to make a judgment if they feel you are seeking a realistic amount of money for what you need to accomplish.
Seasoned investors will have run into many ventures they have gotten involved with where the initial projections of how much money is required to take the company to be profitable have been way off. So they will want to know what the current investment is being used for, how far will it take the company, what potential future funding rounds will be required. As I will discuss in my next article on valuation, this will have a big impact on what valuation investors are willing to accept for this round of financing.
In talking about your future plans for the company, you should also frame it in terms of past accomplishments. In getting the company to its current state, what were your previous investment rounds and sweat equity used for, what milestones did you have for the company when you first started out & how have you met or exceeded them in getting the company to where it is today?
So that wraps up the main areas I would feel angel investors look at when evaluating a company. You would use these areas as a guide when going through all aspects of the pitch process (i.e. initial elevator pitch, the full investment pitch, the due diligence process). The main thing that would differ across the pitch process is the level of detail you can get into for each area.
In my next article in January I will cover valuation. To view an organized index of all angel financing articles as well as see a roadmap of future articles, click here. If you have any comments or suggestions for future articles feel free to contact me: craig at mapleleafangels.com