Starting a company can be both an exciting and daunting experience. It requires dedication, hard work, and the ability to effectively communicate with potential investors. The reality is that the startup environment is competitive; it’s not enough to have a great product or service—you also need to know how to pitch your company in a way that resonates with investors. To help make pitching your company easier, Michael Seibel, CEO of Y Combinator, has identified seven essential questions you should ask yourself when preparing for investor pitches. Let’s take a look at each one.
Question 1: What do you do?
The first question any investor will ask is “What do you do?” While this may seem like an easy answer at first glance, it’s important that you are able to explain your product/service in a simple and clear way. A great way to achieve this is by using a user path—a visual representation of the steps your users take while using your product or service—to explain what you do in an effective and concise manner. This approach has been used successfully by companies such as Airbnb, Slack, and Instagram when pitching their products to investors.
Question 2: How big is the market?
The size of the market for your product or service will be another key question asked by potential investors. To estimate market size accurately there are two approaches—top-down and bottom-up. The top-down approach uses existing industry data (such as total revenue) as a basis for estimating market size, while the bottom-up approach takes into account factors such as customer segments and usage rates to determine market size estimates from scratch. While both methods can provide accurate results, many companies prefer the bottom-up approach because it provides more granular data on specific customer segments and usage rates which can be useful when making decisions about product development strategies. Companies such as Microsoft have leveraged this approach successfully when pitching their products/services to investors.
Pitching your company to potential investors can be intimidating but with some careful planning and preparation it doesn’t have to be overwhelming! By asking yourself these seven essential questions posed by Michael Seibel – What do you do? How big is the market? etc – you will be well on your way towards creating an effective investor pitch that resonates with potential investors! With some solid research and practice, you’ll soon find yourself confidently delivering investor pitches like a pro! Good luck!