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Getting Your Startup Ready for the Angels/VCs Pitch and Due Diligence: Part 1

Getting Your Startup Ready for the Angels/VCs Pitch and Due Diligence: Part 1

TEASER: The impression made by the Founder during the funding pitch to the Angel Investors/VCs is one of the most significant moments in the entrepreneur’s funding journey. This week we explore 7 essential questions that the founder must answer before stepping up to the pitch deck challenge.

Get Ready! Get Ready! Get Ready! Does this public announcement sound familiar? Sure it does! Whether it is in our personal lives, as we prepare for significant moments such as the first day of school, a special family gathering, a job interview, a competitive event, or a long awaited trip; the imperative to be prepared is an expectation that is non-negotiable. It is a known, but often neglected fact that intentional readiness that is both credible and engaging, is essential for a favorable review of the founder’s pitch by the Angel Investors/VCs. Specifically, as it pertains to your startup, it is through neglect and careless assumptions that first impressions with potential Angel Investors/VCs are compromised, funding opportunities are lost, and vulnerabilities for the success of your company are seeded. As it pertains to your pitch, the expression that you cannot correct a first impression is exceedingly relevant.

Keep in mind that the primary objective for the pitch is that the entrepreneur stimulates irresistible excitement in the heart of the Angel Investor/VC so that they leave the meeting salivating with their interest and curiosity peaked at the top of Mount Everest. It is your objective to deliver such a compelling pitch deck that they begin to visualize and become convinced that the potential of mutual profitability through this proposed partnership will actually be realized. Given this significance, it is absolutely essential that the founder fully understands that throughout the pitch, the potential investor is intensely looking for both success indicators and red flags specific to the credibility and scalability of your startup.

Therefore, today’s SIMBA Global Startups Success Essentials is the first in a two part series during which we will focus on 7 important questions that the startup founder should answer to help ensure maximum ”readiness”’ for the pitch deck. As you answer these questions, you will be increasing your appeal such that the invitation to partner with you will be experienced in a manner that creates a favorable impression in the minds of the Angel Investor/VC as they conduct their due diligence. And now, are you ready? Let’s go!

Question #1: Are the “housekeeping” essentials for your startup organized in a credible and comprehensive manner?

As you prepare for your pitch deck before the Angel Investors/VCs, you can be sure that they would have conducted a thorough investigation of your company. Therefore, at SIMBA Global Startups, we invite you to feel encouraged by the fact that you have passed the first level of initial scrutiny. It is for this reason that we strongly encourage you to come to the pitch deck prepared to bring evidence that you have implemented in-house systems that confirm the fundamental integrity of your company. Accordingly, it is important that before you stand at the pitch deck, your startup has settled the following five housekeeping tasks: 1) Your startup’s legal name has been established and registered by the appropriate governmental authority (e.g., LLC, S Corporation, C Corporation, etc.); 2) You have retained external legal counsel to represent you during the negotiations with the Angel Investors/VCs’ legal counsel; 3) You have identified an external accounting service, preferably with a CPA (Certified Public Accountant, and a CFO (Chief Financial Officer), who will independently audit your financial statements; 4) You have setup your startup bank account; 5) You have setup in-house accounting systems by which daily, weekly, monthly, quarterly and annual financial reconciliation is conducted.

Question #2: Have you created your business plan the right way?

As you prepare for your pitch deck before the Angel Investors/VCs, you must create and present a financially sound business plan. At SIMBA Global Startups, we have observed that quite often, entrepreneurs prematurely develop their business plans before they actually test or pilot their business idea for proof of concept. For example, we have seen founders develop their business plans in the wrong direction along the following six incorrect steps: 1) conceive the business idea; 2) develop the business plan; 3) identify the Angel Investors/VCs; 4) develop and build the product/service; 5) identify the market and confirm the market size; 6) identify the customer and confirm customer demand. This is the wrong sequence of creating a well-informed business plan for your startup. Instead, we strongly recommend that you reverse the above sequence of steps to create a data-informed winning business plan as follows: 1) conceive the business idea; 2) develop and build early version or prototype of the product/service; 3) identify the market and confirm the market size; 4) identify the customer and confirm customer demand; 5) develop a data-informed winning business plan; 6) identify Angel Investors/VCs to help fund the next phase of your startup.

Upon review, you will notice that the primary difference in this sequence of event is that you pilot your idea and confirm the market demand before you actually write your business plan. In this sequence, your business plan is data-informed in a manner that aligns with market’s realities and the due diligence rigor of the Angel Investors/VCs.

Question #3: Have you created a pitch deck which is systematic, progressive and data-informed?

As you prepare for your pitch deck before the Angel Investors/VCs, be sure it is no more than 10 slides long. Therefore, we recommend you ensure that this 10-slides pitch deck addresses the following 10 items: 1) The problem you’re solving; 2) The solution – tell the Angels/VCs that this solution is unique or innovative; 3) The customers – who they are and why they care; 4) The market – tell a story about the size in terms of its potential # of customers; 5) The business model – give an overview of how you make money; 6) The management – tell the Angels/VCs why your management team is the chosen ONE; 7) The technology – tell the Angels/VCs about your secret sauce or disruptive technology that will corner the market; 8) The IP (Intellectual Property) – if you have IP, the Angels/VCs want to know that it is protected; 9) Your competition – tell the Angels/VCs who your competitors are and why consumers will buy your product/service over your competitors’; 10) The financial projections – tell the Angels/VCs about your planned revenue streams, costs, expenses, funding needs, and how much you are raising and for what milestones of the startup.

Question #4: Have you created a realistic revenue model?

As you prepare for your pitch deck before the Angel Investors/VCs, be sure you have answered these two essential questions: 1) Does your revenue model specify in a credible manner how you have made and will make money?; 2) Does your revenue model clearly defines your customers (those who pay you) and/or users in a manner that is profitable and scalable?

Question #5: Have you developed a marketing strategy with an associated marketing calendar?

As you prepare for your pitch deck before the Angel Investors/VCs, be sure you have created a marketing plan that clearly shows evidence of your product awareness in the marketplace. Be sure to include the expected return on investment for each marketing event. Given the fickle nature of consumers, we recommend a 12-month rolling marketing plan. Furthermore, we recommend a monthly variance analysis to evaluate the effectiveness of the plan specific to its reliability in actually generating the desired growth and projected sales.

Question #6: Have you defined the current and projected sales pipeline?

As you prepare for your pitch deck before the Angel Investors/VCs, be sure that your house is in order by including the following essentials specific to your current and projected sales pipeline: 1) Sales process chart showing customers/users conversion is in place; 2) Sales pipeline log is in place; and 3) Online sales models are in place.

Question #7: Have you created financial projections for the next 3-5 years?

As you prepare for your pitch deck before the Angel Investors/VCs, be sure you have reached settlement on the following items in your financial projections: 1) Customer estimates are in place; 2) Definition of a typical sale can be clearly explained to the Angels/VCs; 3) Trend statistics for both actual and projected revenue are in place; 4) Trend statistics for both actual and projected costs are in place; 5) Trend statistics for both actual and projected gross margins are in place; 6) Trend statistics for both actual and projected sales and marketing expenses are in place; 7) Trend statistics for both actual and projected operating expenses are in place; 8) Trend for both actual and projected profit & loss (P&L) statements are in place; and 9) Trend statistics for your balance sheet (B/S) is in place.

CALL-TO-ACTION

  1. During the first 90 days from the launch of your company, create “Your Startup’s” Housekeeping Essentials Checklist. Be sure that this checklist is comprehensive and that it includes due dates by which each of the respective items will be completed. Then compile the evidence that aligns with each item of the checklist and bring them to the pitch with the understanding that you may need to share these artifacts with the Angel Investors/VCs if requested.
  2. Launch a pilot of your product or service for a defined amount of time (e.g., 6 months) then, if market demand and required margins are confirmed, then take the next step and create your “Winning Business Plan”. If market demand and required margins are not confirmed, then you should delay the pitch until this criteria is met.
  3. Create the Pitch Deck – Practice, Practice, and Practice is essential for formal or extemporaneous presentation. Arrive early to convey investment worthiness and bring copies of your pitch deck to distribute at the end of your pitch. The coversheet will contain your company name and contact information.
  4. Conduct an analysis to determine the credibility of your revenue model based on current and trended sales. Be brutally honest with yourself such that you convey credibility and integrity in your presentation.
  5. Identify key indicators for the effectiveness of your marketing plan that convey reliable data on a daily, weekly, monthly, quarterly, annually, and 3-5 years projections basis.
  6. Create and implement a mechanism for tracking daily sales that also includes the rhythm of the sales that align business and workforce hours that support sales while also implementing online product purchase options.
  7. Create a “margins timeline” that correlates with your sales models, with the understanding that profitability is experienced only when both sales and revenue margins are met.

NOTE: As a reminder, SIMBA Global Startups offers mentoring assistance for the design and implementation of the above Call-To-Action formulation to qualified entrepreneurs. We therefore invite you to review our qualification criteria and apply to our newsletter at our website: https://simbaglobalstartups.com/entrepreneurs/

MENTORING MOMENT: York Zucchi, Swiss born global entrepreneur

Whatever you do, always, always, always, tap into the selfishness of whom you are sending your proposal to. What’s in it for them first and foremost. You don’t sell for you, you sell for what they need/want. (York Zucchi)

https://globalman.co/york-zucchi-24-rules-business/

NOW Just IMAGINE!

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