Enabling social change/impact
This article discusses nuances in structuring a pitch deck and kick starts series on the start-up ecosystem. Written in my quintessential style, expect music and lots of knowledge. Topics include pitch deck videos, startup insights, porter model and much more.
Start-ups are key enablers in driving economic activity, innovation, and productivity through a well-connected start-up ecosystem and catalyze SGD 8(sustainable development goals) Decent Work and Economic Growth and SDG 9 (Industry, Innovation, and Infrastructure). Start-ups make markets more competitive, bringing in cutting edge innovative practices and increasing productivity. Sustained innovation through start-ups alleviates inequalities fostering gender equality and well-being through better human resources practices (SDG 3).
Originally intended to be a Quentin Tarantino thriller on start-ups with four parallel lines converging in the end, this is one simply follows a single line of narration. Infused with examples of global, especially the US, Europe, and the Indian ecosystem as a revolving theme.
# Start-up Begins
One of the most significant milestones for an early start-up not backed for by coffers of an Egyptian Pharaoh or kid of a multi-millionaire is getting funded. The start-up movie begins with a few actors, including friends and family, crowdfunding, co working spaces, angel and seed investors, incubators, accelerators, venture capitalists, government, academia, mentors, entrepreneurs and businesses backed by an enabling technology platform to drive the community within.
# The Valley of Death
The valley of death not to be confused with the valley of death in the US, which is one of the hottest places on Earth, is part of startup financing cycle when a young start-up looks to fund its operation. A newly formed start-up is usually bootstrapped by FFF (friends and family) or angel investors, although crowdfunding is fast rising as an essential source of capital for wannabe entrepreneurs. As your idea goes through a validation stage to a minimum variable product or your service starts to mushroom, funding to sustain the business becomes the essence. As you fight for life, the burn rate becomes an essential controlling variable. Pic: commons.Wikimedia.com
The burn rate and your cash reserves will determine when you must reach out to investors for funding. Two ways of funding yourself during the valley of death are either reaching out to investors or finding part-time consulting work concentric to realms of your area of work. Reaching out to investors is more impactful akin to the shortest path between two points i.e. is a straight line. Triumphantly or sadly, either way, life is multidimensional, and if you are, my man better walk that line — Shania Twain at her best and one of the greatest country genre music.
“Overheads must be kept at the minimal to keep the burn rate low and becomes a key feature in lean start-up methodology.”
Many start-ups are bootstrapped and generate enough capital and don’t require funding from investors. Ventures generating operating income more than operating cost ignoring CAPEX, don’t need money for sustaining their business but would need funding for scaling up their businesses. This happens during the growth stage when business lines, customers are well established and not the focus here.
“India to invest $1.4B in start-ups through fund of fund route in the next few years including a $142M seed fund.”
The journey for a very early start-up looking for funding begins with a pitch deck. Pitch desk, usually a presentation, shares a panoramic overview of your venture. This forms the single most document for reaching out, persuading, delighting investors to fund start-ups.
Pitch decks form the fundamental part of raising funds from investors, whether it’s an early start-up or for a start-up looking to scale up the business. According to Y Combinator, the mother of all seed accelerators (Dropbox and Airbnb fame), mentions lack of capital as the second most important reason for start-up failures. Among the key reasons for the burgeoning US start-up ecosystem apart from profoundly networked entrepreneurship led market-driven academia (which also has its flip side) is the ease of early-stage capital for start-ups. Y Combinator and Techstars are twin engines firing, mainly the US and global start-up ecosystems. My interview with a mentor at a Techstar event is here.
“Equity infusion is usually accompanied by equity stake. Y Combinator takes 7% for $1,50,000 while Techstars 6% to 10% for $1,20,000 of funding. Key global benchmarks.”
Investors look at thousands of pitches in a week, so there a few critical enablers which help in formulating a pitch deck.
# One line pitch
The beginning of any pitch starts with a single line that best describes your venture. The fewer the characters required for summarizing, the better for everyone. Investors in a start-up ecosystem (including all actors like seed incubators, accelerators, venture capitalists, etc.) look at hundreds of pitches, so a catchy creative phrase defining your business quickly catches the eye. Sounds easy, but this can be one of the most challenging parts of your presentation.
“Slush a student driven initiative is the world’s leading startup event and community defining a new paradigm in the world”
Take the example of my venture, although not the best but works beautifully: Kick-ass platform and publication enabling social change or Kick-ass platform, enabling social change. Or Kick-ass platform and publication enabling social impact or Kick-ass platform, enabling social impact.
Try to ask yourself if you had only their words to describe your venture, how would you do so?
“Enabling Social Change”/”Enabling Social Impact”
Words above communicate the essence of my site. The shortest description of your work acts as the first enabler for your pitch.
# Problem and Solution
Now we come to the very gist of what you want to do as a start-up — the Problem and Solution. Sounds easy, but it will take a lot of cudgeling your brain. The problem and solution must be as concise as possible. Try and ah, you know there is a problem, and you have identified it but just cannot put words to define your work. This will need a lot of repetitive work, but sweat is so essential not to succeed but lose weight keeping diet constant. Multiple regression analysis involves more than one independent variables (X) describing the dependent variable. For example the dependent variable Y outcome if influenced by three variables (ignoring omitted variable bias) can be studied for individual variables controlling other variables constant.
One this falls into space; the rest works sweet. A solution always has enablers, and they fill in the rest of the deck. Guy Kawasaki suggested a guideline for making pitch decks and is relevant even today. The 10:20:30 rule.
# Business Model
Change hats and consider what would your investors like to hear about the most. For an early start-up, it would be a business model rather than the revenues. The business model shares a holistic idea of how your revenues would pan out over the years, although if your business is in the service-oriented online sector, the business model will fine-tune over the years. More important than anything, it’s your clarity and vision and how you are going to implement your strategy. The business model will define your channel strategy detailing future revenue pathways. For start-ups in product development, a minimum variable product is required. Refer to Eric Ries Lean Start-up to know a bit more about lean start-up methodology.
One critical feature will be traction, market size and competitor analysis. Facebook got funded because it was able to garner 1,50,000 users within a few months. When it comes to traction, be bombastic and never mention that your venture has no competitors. This is precisely the greatest mistake one can make in front of investors. A couple of slides can be on SWOT Analysis or Porter Model to share insight on your key competitive advantage in the industry over your peers. If you have a market-defining innovation, this is where you need to nail it. Find the best matrix as an ENABLER for your product or service.
# Video Pitch
One of the less applied but highly impactful features in a deck is a video shot outlining your pitch about your start-up. Research has repeatedly proved that visual aid garners more attention compared to text and a well-articulated, eloquent video goes a long way in catching the eye. “The Catcher in the Rye, remains one of the most defining novels in modern times, a literary classic making it an invigorating read.”
The mantra in video pitch is to be concise and short. Y Combinator has a one-minute time limit, although 2-minute pitches are frequently used. Make it simple yet elegant with your creativity at its best. This is your time to highlight your showmanship but moderately in the middle road. Find the delicate balance and insert the video into the deck.
And now you are ready for the presentation. Practice it repeatedly your thoughts on the deck and bring out all the panache while presenting to investors. Confidence and delivery are the quintessential attributes to make an indelible mark backed by facts and data to support you, and deliverance shall be yours.
So which actor are you within the evolving entrepreneurship ecosystem?