(The original post in french can be found here. Because of its success, we are translating it in English and hopefully in other languages. Do not hesitate to leave comments and suggestions)
Since the launch of Kima Ventures with Xavier Niel in February 2010, we received thousands of pitches from around the world. The vast majority of business plans are received via our website, which is linked to our database of start ups.
We have invested in over 130 start-ups (some are visible on our site) in 18 countries, from China to Nicaragua through Pakistan, Israel, Norway or Switzerland.
Reading business plans can be fun, but for this to be true, it needs to clearly answer the questions on the investor’s mind without going into unnecessary detail.
For instance, there is no need to present the evolution of the e-commerce market over the last 10 years when you present a start-up selling pins on the Internet.
You really have to realize that an investor receives a large number of projects. You can be the most motivated entrepreneur, you may even think that you have an idea to rival Google and Groupon, but do not think this is enough to convince an investor.
Examples such as :
“I told all my friends about it, and they believe it’s a killer idea”.
“We already have 30 users; this proves that there is a need”.
will not convince an investor. You have to be pragmatic and provide some real and factual elements to prove that you have a project with high potentials.
These elements must be as concise and precise as possible.
Here’s how to present your company in a few slides. Please note that the quality of this slide deck (clarity, design, setup) is as crucial your project itself.
An investor once told me when he saw a friend’s pitch: “I don’t know anything about this market but I have never seen such a great presentation. I want to invest.”
Personally, the fact of seeing a well crafted presentation let me think that the execution of the project can be equally good. (not always the case I agree 😉 )
Let talk about content now.
Here’s what you need in your business plan.
Ideally target between 10 to 15 slides for a first contact. You can double some of the slides below if it is strictly necessary.
Slide 1: Name + Company logo + Baseline + Vision.
Example 1: Google : let’s reinvent online search
Example 2: Kima Lab, become the go-to tool to help create business plans/pitches for entrepreneurs.
Slide 2: Be sure to explain who is in the operational team.
You will notice that you have not yet described your product. That’s fine.
Describe precisely the founding team, it’s experience, specialties and roles within the company.
Feel free to add hobbies to highlight your temperament.
There must be a minimum of two founders to succeed:
1 sales person + 1 tech person or 1 product person + 1 tech person.
The ideal is a team of three founders:
The sales/marketing person + the tech person + the product person.
or the tech person + the product person + the business/finance person
You can of course recruit necessary skills later, but nothing beats a good team of cohesive and complementary founders .
I will write another post about the importance of the founding team later.
Do not be confused if you have no experience … Just demonstrate why you think you are the most appropriate person to properly implement your project.
Slide 3: Explain the product very clearly
Briefly explain the product. Ideally, your grandmother should understand what you say – some investors may not be more competent than your grandmother on some topics anyway.
Really, I’m not kidding. Make a test with non-professionals to verify that your presentation is clear and that your product is understood.
Slide 4: Show the product.
You should definitely show your product (if it’s already live) or your prototypes. If you do not have a prototype, use precise mock-ups of what you plan to deliver.
Some tools allow you to make mock-ups like Balsamiq Mock-up, but you ideally want to present the project’s design or your online site.
Slide 5: Economics and scaling Forecasts.
Provide the following:
• Revenue per transaction
• Gross margin per transaction.
• Net margin per transaction.
• Planned transaction per unit of time (day, month)…
• Cost of acquisition (for each channel)
Please present your figures over time (It is very likely that your gross margin evolves after a product launch and as you achieve higher volumes of sales)
For instance, if you have an e-commerce web site, your shipping costs will get down as volume rises. Same for all your operational costs when you get economies of scale.
If your service requires high level of resources (server, bandwidth, ..) it is likely that your costs will decrease with time too. To make it simpler present it in 2 parts: before scaling / after scaling
It’s still too early to build a financial plan (see below). The goal here is to understand how much you actually earn on each transaction.
Slide 6: Describe the project situation and current progress.
Where are you in your roadmap? Is the site / product ready? Already launched? Since when? Do You already have customers?
Slide 7: Numbers.
If your service is already live, or selling products … how many customers do you have? How much revenue have they generated in the last 30 days? The last 12 months? Since the launch of the project?
What is your customer/user acquisition cost so far?
Provide as many meaningful figures as you can. That is the THE most important slide.
Simply put, demonstrate that the revenue generated with your customers is more important than the cost to acquire them. Not so simple.
And if your model does not work yet, describe practically why you think it will be working in the future work.
Slide 8: Market Size.
AStartup investors want to make at least 10X on each of their investments. You need to show you’re in a big market and that your company can get big.
A typical VC will not be interested in a business that can generate less than $ 100M in revenue within 3-5 years.
Your market sizing needs to be realistic. If you run a mobile application to monitor heart rates, don’t show the size of the mobile applications market in general. This will not help anyone.
Slide 9: Describe the international deployment strategy (if any).
It’s cool to plan to conquer the world, but as you know it is never simple. Explain specifically how your product will be deployed in other countries.
Slide 10: Do mention all your direct competitors and differentiation factors.
An investor will have to check your competitive environment before investing. Do not hide competitors from us because you will get blamed for not knowing your market.
Describe your real position in the competitive landscape.
Slide 11: Your financial forecasts.
Give details of your expenses and income over the next 3 years. Show something simple but detailed enough to determine whether your approach is realistic. (Excel allows you to dream, but selling a B2B product to 5000 customers per year with 3 sales reps may be difficult).
Slide 12: Your Financial Needs.
Provide your past fund raising data, what you plan to raise today, and under what conditions. Do not write “Conditions: to be discussed.” Offer something.
Slide 13: Your Contact Info.
First Name / Last Name / Email.
Some other tips:
– Do not send your presentation in PPS format (which requires the reader to view it in full size)
– Do not use animation in your PPT presentation.
– Feel free to incorporate a little screen-cast demo of your product. You can create it with Camtasia or Screencast.com.
– Prepare your presentation in ENGLISH. Your investor may be anywhere.
Even if you already answered to our questions in your presentation, answer them again precisely in the form.
Ps: thank you Fabrice Grinda, Myriam Rosenrib, Pascal Emmanuel Gobry, Jacques Sitbon, Uriel Bitton, Amir Banifatemi, Alban Denoyel, Yael Rozencwajg for their translations, proofreading and corrections.
Sorry for not posting as often as before on this blog (although I plan to remedy to this). You can follow me more frequently on Twitter.