For the most part, gone are the days of a 60-page document outlining a business plan. However, startups are generally expected to have a handful key pitch assets. A lot of them are built around the same basic content, but presented differently for different situations.
These assets seek to answer key questions about your business. Even if you were to write a full-length business plan, it is likely an investor will only care for the fact that it demonstrates you have done your homework and really covered your bases. The same is true with all of these pitch assets – they serve to show you have done the due diligence to know your business and market from top to bottom. If you cannot demonstrate this, you are in trouble.
Make no mistake, having a business plan is a great asset, and if you have it, be sure to keep it handy for investors should they ask. However, it is incredibly time-consuming to create and not necessarily expected. If you have it available, it is recommended to still lead off with your elevator pitch, executive summary, and pitch deck to pique someone’s interest before handing them your full manifesto.
For the rest of the chapter, we will discuss your key pitch assets to be used for your startup business plan.
Elevator Pitch
Your elevator pitch is a short, consistent summary of your business. It can be hard to boil your business down into just a few sentences, but often that is all the time you have. The term “elevator pitch” comes from the idea of a chance meeting with someone in an elevator – can you pitch your business to that person in that short amount of time?
It may surprise you the amount of work and thought required to put together just a few sentences. But remember, it may be the most important couple of sentences you speak for the next several days, months, and years.
A good elevator pitch answers a few simple elements: the problem you solve, the solution you provide, and the people you do it for. For Under Armour, it may be something like “We provide apparel to keep athletes cool, dry, and light when they need it most.”
Investor Dave McClure of 500 Startups also says the “X for Y” approach can be used effectively.
Take great care in crafting your perfect elevator pitch – you will use it often in emails, presentations, and even on the fly. Keep rehearsing it so you can deliver it effectively and quickly.
Executive Summary
Sitting between your elevator pitch and a full-blown business plan is the executive summary. An executive summary is a more robust sales pitch for your business, distilling each key area of your business down into a paragraph or two to convey your business quickly.
There are two general ways of thinking about writing an executive summary. The first is to take your full business plan and distill it down into a few paragraphs about each key point. This makes sense and is easily done – assuming you have a full business plan written. The problem is, many startup founders do not have a full business plan nor do they intend to write one.
The second way to approach writing an executive summary is to look at the key sections of what would be in a business plan, and write the key points for each one of those (Management Team, Marketing Guide, Financials, etc.).
However you choose to write your executive summary, it is a key asset to have on hand for investors to get a more detailed idea on your business.
Pitch Deck
The pitch deck is the modern version of a business plan. Typically PowerPoint, Keynote, Prezi, or some other presentation software is used to prepare a group of slides that tell the story of your business. Unlike the executive summary, a pitch deck is a much more visual explanation of your business, often taking advantage of graphs and other visual collateral to tell your story and show how your business provides value.
Fred Wilson advises making an effort to condense your pitch deck into just six killer slides.
Pitch decks are frequently presented to investors, and may even be requested ahead of time by the investor in order to get an idea of your business before they listen to you speak. Because of this, it would be wise to have your pitch deck prepared before even contacting potential investors.
Financial Documents
There are a couple of essential financial documents you will be asked to produce, provided your pitch is going well so far. After all, the point of investing in your company is to gain a return. Investors want to have an idea of what this return can be, and at what time.
The complexity of these documents varies. It is becoming harder and harder to project financials as things move more quickly – especially for scalable tech companies. They can vary from a one-page spreadsheet to a complex document of macros and changing outcomes.
Mark Suster advises a monthly projection or the first 24 months, followed by annual projections for the “out years” – years 3-5.
There are three basic financial documents you will be expected to prepare:
1. Revenue Projections: Where your revenue will come from and at what time periods.
2. Operational Expenses: Where will your expenses come from, and how will that correspond with expected growth? Look into staffing, product cost, marketing and overhead.
3. Cash Flow: This information will vary depending on the nature of the business. Seasonal businesses, for example, will have particular cash flow concerns based on time period. Your Cash Flow should detail exactly when you expect cash to come in and out of the business.
It is incredibly difficult to project these numbers, especially just starting out. The key is your assumptions going into the projections, and why you made them.
Website
A website is not critical for all businesses, and therefore may not be one of your key pitch assets. However, it is highly recommended to at least create a sort of landing page for your business telling people how they can instead reach you or find out more. Think of your website as sort of an e-brochure for your business, giving some visuals or just outlining your idea. As we discussed in Chapter 2, it’s a great way to provide validation, gain traction, and even gather contact information for potential customers.
You can even go so far as to host some of your key pitch assets online for download, such as elevator pitch or visuals from your pitch deck. We don’t recommend including the financial information publicly, however, but saving those for private conversations.
The important mission for your website is to provide a professional-looking brand for your business for legitimacy, giving someone a view of who you are and what you do.
Summary
It is entirely possible to raise capital without a startup business plan. However, your chances are significantly slimmer, and often you only get one shot at a deal. Being prepared in showing that you have done your homework and really analyzed the business opportunity will serve you well in a pitch meeting with investors. You can find resources for creating these key pitch assets in our Startup Tools and Resources section.
In the next chapter, we will discuss marketing your startup.
References
[1] http://thenextweb.com/entrepreneur/2011/10/29/dave-mcclures-10-tips-for-the-perfect-investment-pitch/#!qmjo4
[2] http://www.businessinsider.com/keep-your-pitch-deck-to-six-killer-slides-2010-6
[3] http://www.bothsidesofthetable.com/2009/11/03/are-business-plans-still-necessary/
Source Twitter Handles
Fred Wilson – https://twitter.com/fredwilson (@fredwilson)
Mark Suster – https://twitter.com/msuster (@msuster)
Dave McClure – https://twitter.com/davemcclure (@davemcclure)