Noga Edelstein will never forget the day a startup founder opened her funding pitch with a blank screen and asked Edelstein and her colleagues whether they liked the photos of the hotel she had stayed at on a recent holiday.
"We were suitably confused," recalls Edelstein, Venture Partner at Sydney-based Black Nova Venture Capital.
"She went on to explain that this is what vision-impaired people experience when attempting to research a holiday destination online, and that’s why she had founded a travel platform for blind people called Vacayit. She got her point across perfectly and memorably."
Vacayit mastermind Hayley Brown had nailed one of the pillars of a successful startup pitch: weaving a compelling narrative. "The most memorable pitches are ones that include an interesting or personal story," Edelstein says.
"You want your business to appear interesting and exciting with lots of potential, but you shouldn’t provide every last detail so that the investor feels they already know everything about you." – Noga Edelstein
"Storytelling significantly improves recall and the likelihood of an investor remembering your pitch from the hundreds of others they saw that month."
After sitting through countless pitches as a venture capitalist and an angel investor in both the US and Australia, Blackbird Ventures Principal Tom Humphrey agrees that a captivating founder story is essential.
"At Blackbird, we look for people who are doing their life’s work," he explains. "Building a company is a long and hard journey. We want to know what your drive is to do this."
Beyond telling an unforgettable story, Edelstein and Humphrey share some insightful tips with The CEO Magazine to help startups craft winning pitches and secure early stage funding.
Keep it Simple
"The aim is to secure a first date, not a marriage proposal," Edelstein says. "You want your business to appear interesting and exciting with lots of potential, but you shouldn’t provide every last detail so that the investor feels they already know everything about you.
"You’re the best advocate for your company, so securing that first date and the opportunity to pitch in person is crucial."
"Explain your idea in a way that can be understood by people who know nothing about your business," Edelstein advises.
"Avoid jargon or words that are only understood or used in your industry. You want any investor to ‘get it’ instantly, and then be able to explain it easily to others."
"Demonstrate that you truly understand your customer and are solving a real problem," Humphrey suggests. "We often say that we love founders who are customer-obsessed and products that are ‘painkillers’ for customers rather than just ‘vitamins’."
"Paint a clear and realistic road map for the product you’ll build, the team you’ll hire, the milestones this funding will enable you to achieve and when you’ll achieve them," Humphrey says.
"The venture model seeks big outcomes in big markets, so don’t hold back on your ambition. Articulate a big vision."
"My most recent investment, which will be announced soon, was for a consumer e-commerce product," Humphrey reveals. "Several elements of the pitch stood out to me, including the passion of the founding team, their resourcefulness and rapid progress to build an MVP, and the clarity with which they articulated the pain point they were solving and the scale of the market opportunity.
"But above all, I loved that they gave us a live demo to clearly walk us through the user experience. Product demos always trump slides!
"The importance of highlighting the founding team can’t be overstated," Edelstein says.
"Explain your connection to the problem and what makes you so passionate about solving it. Highlight any relevant experience that gives you an unfair advantage, such as having domain expertise or being a second-time founder.
According to Edelstein, there are four crucial elements in any startup funding pitch:
- What is your ‘why’? Understanding your personal connection or lived experience with the problem you’re trying to solve is crucial.
- How painful is the problem you’re trying to solve and how many people feel this pain? Will they care enough to switch from their existing solution and pay money to solve it in a different way?
- What is your unfair advantage for this business? What is your ‘moat’ to keep competitors at bay?
- What is the overall storyline for your company’s fundraise, including your vision, how you’re going to achieve it and how this fundraise will enable you to hit milestones on the road to achieving that vision?
"It seems obvious, but investors are looking for an ROI on their capital, so tell them how you’re going to make them bucketloads of money," Edelstein points out. "How big is the market? How does your company generate revenue? How do you scale to become a US$100 million company?
"You won’t believe the number of pitches I see that don’t even explain what the business model is."
"The best way to tell your business story is through numbers and metrics," Edelstein confirms. "It’s a common language that investors understand and it avoids subjective judgements around the merit of the idea.
"If your business is doubling month on month, then there is clearly a market for your solution. Focusing on the core metrics also shows you have a good grasp on the growth levers for your business."