Some of our companies started financing processes in earlier this quarter. At a strategy session with one of our companies, the team and I crafted the outline of the pitch deck. They asked me what questions a venture investor might ask in the initial meeting.
Distilling the investment analysis into a small number of general questions is challenging because of the diversity of businesses we see but, I gave it a try and came up with the following questions I might ask a startup to answer in an initial meeting.
- [Value prop] What is the problem and is it worth solving? Why is now the right time to solve it?
- [Team] Does the team have the vision and the wherewithal to build this company?
- [Go to market] What is the competitive angle (competitive barrier to entry and/or go-to-market) that will enable this company to succeed where others have tried and failed?
- [Sales effectiveness & product validation] Who does the startup sell to? Which customers have used the product and how have they received it? How much is each customer worth?
- [Product distribution] How does the company acquire customers cost effectively? What are the unit economics (customer acquisition cost, contribution revenue, and churn rates)?
- [Revenue model] Does the company have the revenue model to build a big (>$100M annual revenue) business with good margins (gross ~ 50 to 60% / net ~15 to 25%) under reasonable assumptions?
- [Market size] Can the market enable or bear a $100M revenue Alternatively, is this product in a quickly growing market or riding a disruptive wave?
Other risks including legal risks, technology development risks, value chain implications and so on may also be important. But when building a generic fund-raising deck, answering these questions in your pitch deck will serve as a solid starting point.
It’s important to unite these points with a single theme or story to sell the dream.