Communicated Content – Investments carry risks, and when investors look for viable options, their first concern is evaluating the company they will be funding. Statistics indicate that at least 30% of startups go under within the first year of their establishment. Even if they make it beyond the critical 12 months, around 60% close shop within three years. When putting together a pitch deck for a pre-revenue startup, entrepreneurs must work extra hard to prove that the investment is a viable proposition with low risks and the potential for high returns. So, how to value a startup without revenue? What are the positives to focus on in the pitch deck? Read ahead for some great pointers.
Market Conditions
Highlight the industry where you work with information about its scope and demand for the products and services provided by the startup. Also, add estimates about its projected growth, rising demand, and consumer interest in the coming years. The pitch deck can also stress the limited barriers to entering the industry with only reasonable or minimal competition. Trend-setting and innovative ideas and products that solve problems always have an extra edge. Favorable market conditions and potential for future growth are sure to attract investor interest.
Viable Business Model
A simplistic business model carries low risk, especially when all the critical elements are covered. The pitch deck must indicate a clearly defined target audience, streamlined operating processes, and list the resources the company owns. Who are the business partners, and what do they bring to the table? Answer questions like–How does the startup propose to generate new demand, maintain existing customers, and provide after-sales service? Practical marketing strategies and the potential for high revenues and profits in the future evoke investor interest in the venture.
Interesting Value Proposition
In an intensely competitive world, a startup has a higher chance of success if it has a great value proposition. Investors are likely to support a company with valuable Intellectual Property (IP) and the know-how to monetize it effectively. The pitch deck financials should indicate steady growth in sales and lowered production costs in the last 12 months. This information can be provided in graphs and bars to display metrics and stats. Investors will also want assurance that the company is gaining traction and has a clearly-outlined go-to-market plan.
Execution of the Business Ideas
Although presenting IP, customer acquisition, marketing strategies, and other business plans are essential in a pitch deck, investors would want to know how the startup will actually implement and execute the plans. That’s where the founding team comes in. Entrepreneurs must include details about the people they have hired, their backgrounds and expertise in the industry, resumes, and profiles on professional social media like LinkedIn. If the core team has what it takes to propel the business forward, it might get the funding it needs.
Growth Projections
Since pre-revenue startups don’t have impressive financials like revenues, profits, and cash flows, they can rely on the next best thing–estimates of the profits they can make. While investors understand that the numbers are only estimates, inflating them without real research to back the stats won’t do any good. The pitch simply won’t hold up during the due diligence that every smart investor conducts. Sticking to the facts indicates integrity and builds trust for future funding rounds.
Presenting a pitch deck for a pre-revenue startup can seem daunting when entrepreneurs can’t rely on traditional valuation methods. But, several investors are interested in funding startups that can potentially earn high revenues down the line and are essentially low-risk. Those are investors a great pitch deck can target.
BIO
Alejandro Cremades is a serial entrepreneur and the author of The Art of Startup Fundraising. With a foreword by ‘Shark Tank‘ star Barbara Corcoran and published by John Wiley & Sons, the book was named one of the best books for entrepreneurs. The book offers a step-by-step guide to today‘s way of raising money for entrepreneurs.
Most recently, Alejandro built and exited CoFoundersLab, which is one of the largest communities of founders online.
Prior to CoFoundersLab, Alejandro worked as a lawyer at King & Spalding, where he was involved in one of the biggest investment arbitration cases in history ($113 billion at stake).
Alejandro is an active speaker and has given guest lectures at the Wharton School of Business, Columbia Business School, and NYU Stern School of Business.
Alejandro has been involved with the JOBS Act since its inception and was invited to the White House and the US House of Representatives to provide his stands on the new regulatory changes concerning fundraising online.
