Should I Pitch The Problem Or The Product First To Investors?

There is never one template on what can make a good pitch to investors. And that’s because each business will have different dynamics. Some concepts will be super clear to every individual you meet, and some concepts may be unfamiliar to most, except to those in the industry.

E.g. if you are creating another dating app, I don’t think there may be a need to state the problem you are solving as the product features can illustrate why users will prefer your offering over other options. (And if the investors don’t get it, it is likely that your intended users may not get it either).

But if you are creating a SaasS solution for large companies to reduce their ‘first day no-show for new joinees,’ then you would need to explain as to why large companies who recruit in the hundreds every month indeed have a problem of a quite a few people who accept their offers but don’t turn up on the joining date, and what impact it may have on the company.

Understand Your Investor To Pitch To Them

Overall, you need to understand what the objective of an investor pitch is. Is it simply to help an investor understand that they have a reasonable chance of getting multiple times return on the money that they invest.

Early-stage investors will look for 10–15 times return on the money they invest as early-stage investments are risky, and most of the companies they invest in may either shut down, or not give adequate returns.

Now, if that is the objective, then you have to assess what helps them understand the following:

• The opportunity is large.
• The current solutions are inadequate.
• Your solution addresses the problem meaningfully.
• You and your team have something in you that will increase the odds of you succeeding.
• There is money to be made in this i.e. unit economics are positive (i.e. you will earn per customer more than it costs you to service them).
• That value can be created i.e. this will be a valuable business in the long-run.
• That they will be able to sell the equity they buy in the current round to someone else: Investors don’t make money by buying equity. They make money by selling that equity at a higher price to someone else – either follow-on round investors, or strategic investors, or IPO in rare cases.

Based on the circumstances of your business, and the dynamics of the area you are operating in, structure your pitch deck in a manner that helps the investors get a clear picture on the points mentioned above.

[This post by Prajakt Raut first appeared on Quora.com and has been reproduced with permission.]

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