5 Essential Elements for a Winning Investor Presentation

“The idea is the most important element of a startup.”“Your product is the 3D representation of your idea.”“You should work day and night building your product.”These are a few of the statements by Sam Altman of Y Combinator. He was the first speaker in last year’s Startup School. (They are about to start a new Startup School on April 5th, and you can sign up for free at startupschool.org.)

From Crucial to Essential

This focus on product is crucial to getting your company out of the ground for several reasons.A great product is crucial to attracting the initial employees.A great product is crucial to landing those first users or customers.A great product is crucial in gaining the interest of early stage investors.Sam is right, but it takes more than a great product to get early stage investors to write a check.The entrepreneur’s job is to show the investor how he will make a lot of money by investing in your company. You are not selling a product to the investor. You are selling your company’s stock. This is a different presentation to a very different audience. Your audience is investors, not customers.

Elements Required for Success

Here are five essential elements in an investor presentation.

1. Define the problem and show how you solve it

Every solution addresses a problem. So it is a problem that creates the genesis for the idea, and it is the idea which becomes a product.Therefore, defining the problem is critical in your presentation to the investor. The entrepreneur must define the problem in the clearest and most succinct terms possible.I didn’t get Snapchat until I read a quote from Evan Spiegel. He said, “We contend that because photography is now free and frictionless, it is a medium of communication, not commemoration.”As soon as I read this, I said, “I get it. That’s a big problem to solve.”So how do you solve this problem? This is the question begging to be answered. I’m ready. Show me the product. I want to see it.Demonstrate it to me.Draw me in.Get me thinking, dreaming, imagining.Show its simplicity and elegance.Allow me to conclude that it does indeed solve the problem.

2. Show me how your company will make money

There are lots of good ideas which solve problems. But there aren’t lots of good ideas which should be businesses. Most investors I know, including me, invest in businesses not just ideas.Show me how you will make money—software licensing, monthly subscriptions, advertising, services or some combination of all of these. But I must know how you plan to eventually get this business to profitability, to sustainability.Your thoughts help me understand the potential economic models. Only then can I forecast how much money will be needed to get you to this goal.The more practical and clear the economics, the more compelling for the investor.

3. Convince me the market is ready to buy

Show me the customers who are using the product. Entrepreneurs who gain investors show they built product while working with the potential customer. From the beginning, Google has used the beta tag on all their products, sometimes for a very long time.I remember having to apply to be a beta user of Gmail. Google constantly engages us, their customers, in the development of their products. They want to make sure I love the product as they monitor how I use it and how often. This was certainly true of their first product—Google search.

4. Show me how big your market is and how big it will become

You must show me a very narrow market. Show me you understand you can’t immediately solve the problem for everyone. Choose a vertical or segment. This creates credibility. It shows a deeper understanding of the market. Then show me how that segment will grow over time and become huge.Salesforce.com started by selling to departments within divisions of corporations. By selling to departments, they stayed away from corporate IT. They gave the departmental buyer ninety days free followed by a monthly subscription. After they had gained significant traction in corporate department sales, they moved to the enterprise. It took them over three years to close their first enterprise deal.

5. Convince me you can build this company

This is the close. As you are pitching the investor, you gain credibility with each building block you put in place. Every topic is not only explained but is exemplified with a great customer or former company anecdote.You are being sized up by the investor with each slide you present. The investor will conclude you are the entrepreneur who can build this business short-term or maybe even long-term. They will see it in you, your stories, the people who are on your team, your customers and your advisors.You are selling your company’s stock, rather than a product, to an investor. Investors invest in businesses. Show them the business, and if it is compelling, they’ll become shareholders.