#1 Telling Your Investment Story
What are the best practices when it comes to pitching to investors during demo day? Here are some tips for you to follow so you can nail the pitch and attain the Sustainable Development Goals (SGDs) and build the sustainable cities and communities of your dreams with your impact startup.
This is a three part series that will help you achieve your best for Demo Day. After learning about your investment story, we invite you to fine tune your pitch and deck structure, and ultimately answer what your business growth stage is. Our supplementary posts are the Theory of Change helps you convince investors on the essence of your startup's existence, and a look at some examples with our 2020 Virtual Demo Day!
Pitching within a short limited time is not easy. You have to convince them that your startup can do good and is sustainable. Here are our best takeaways from incubating three years worth of startups under YSI SEA. We present to you the 3Cs, and 4 Investment Stories to help structure your pitch.
Your mantra: Important 3Cs to Pitching
Your pitch needs to be clear, concise, and convincing within a short amount of time since because your goal of the pitch is not to seal the deal right away. It is actually to get investors to be interested in you to come and talk to you after that.
Remember: 10 minute long elevator pitches do not exist.
Investors go for pitches day in and day out. They want something that is quick and they want something that is exciting to them.
After your pitch, they should be thinking that these people are solving an important, large or necessary problem. It doesn't have to be the best solution out there, but it's actually done in a smart way or that it's feasible to implement it.
You want investors to walk away thinking “okay, the team seems pretty well equipped and skilled to take on this challenge of running this startup".
According to Y Combinator, another way of understanding this is after your pitch, the investors need to understand your idea, they need to get excited by the idea, and they need to like the team.
If the pitch leaves an impression such that they can go to a dinner table afterwards and have a conversation about your team and say “hey, this guy is pretty interesting they're doing this and this”
that means that you managed to let them understand what you're doing!
Also they are excited by it because they're sharing it with others and they have confidence in you.
Know your audience
And you need to understand and ask yourself why are they listening to you in the first place.
if they are impact investors:
Why are they listening to you?
Are they listening because you have a particular solution that they are interested in?
There is some sort of return they are looking for.
Remember that this audience essentially listens to pitches day in and day out. They have tons of other people they would like to talk to.
if your are people from foundations who are looking to give grants
You will not focus so much on what the returns are and what the potential to scale is,
but you instead you'll focus on what exactly is the impact that you're generating.
And for every dollar of amount they put in, what impact can you generate?
The difference between pitching for a sustainability impact vs a traditional startup
If you watch pitches online and see how to make a good pitch, a lot of them focus on the narrative of
"okay, here's a structure, you need to have a problem, you need to have a solution..."
And then they will tell you to convince the investors that you can 10x this in five years etc.
But the thing is most of us here, we are impact startups.
So we have an added challenge of conveying both our impact as well as our business model, as well as our revenue.
How do we juggle this?
Four Main Investment Stories
Here are four main ways you can tell your investment story with considerations for the sustainability impact you are trying to create.
You need to understand what your investment story is early, so that you're able to prioritize the right things to convey to the audience that is listening to you.
#1 High growth opportunity
This is the typical startup angle which does not have much focus on impact.
What this means is you have a huge market opportunity that you have identified, and you have customers who will be able to pay you a lot of money, or there is a sizable customer base.
You are tapping into a possible impact opportunity.
What to focus on?
For a high growth opportunity, you need to focus on the fact that there is significant revenue traction, you're working on a large market opportunity and that you have a profitable unit model.
For example, Bamboo Company would be a good fit for a high-growth opportunity kind of angle where basically they have a good unit model, they have a understanding of what the market opportunity is, and they have a revenue traction.
And when investors are looking to invest in you they will expect market rate returns, as when they invest in a normal startup, but also the potential impact that you're bringing in, that's also a motivation for the investors to consider.
That is basically the tipping point for normal investors to come to you.
#2 Innovation play
This is the one that is getting a bit of traction these days with companies going: "we know this industry, we are going to disrupt this industry and we can do it because we have this amazing and innovative solution".
Going for innovation play does not mean that you have to neglect your impact because whatever your approach is, the impact can be found within that approach.
What to focus on?
You need to focus a lot on how your solution is unique and how it is exciting because you're essentially saying that you want to disrupt a market and an entire industry.
You need to show them that if you're disrupting the industry, is the industry big enough for you to actually disrupt and be sustainable financially?
Show them how big the market opportunity is.
And also you will need to paint a vision to investors that: "look, if our solution is implemented, the industry in 5, 10 years will look like this and it will look drastically different".
This is the kind of thing Uber or Grab or Go-Jek tells people.
When everyone has a Grab or Uber app, this is how ride sharing will be transformed.
That is a picture you need to paint for them.
And investors in this area usually have a high risk tolerance because these are players looking to really disrupt. They tend to be able to put up upfront a large financial sum with the expectation that they need to wait a bit longer or be okay with failure because they have a lot of other such investments.
#3 Impact at scale
Your story will focus more on how you're delivering impact through a scalable business model thus delivering impact is the main focus.
An example would be Light of Hope, will fall under this where they're delivering impact, they have a scalable business model to do so.
What to focus on?
Focus on your impact thesis or the Theory of Change.
Also focus on is why are you working in the market and how are you different from the mainstream players that are currently in the market.
Impact and financial returns need to go hand-in-hand.
This angle requires your impact to be front but also have viable financial return model.
The investors tend to have a medium to high risk tolerance and potentially open to your strong impact thesis.
#4 Addressing an underserved need
Your target market, someone who is underserved, maybe because they are from low to middle income where they're not able to kind of afford these services.
Is there a financially viable approach that you have that others do not and it helps you enter this market?
This is also quite popular with nonprofits. However, for-profits are also coming up with innovative mechanisms to tap into underserved markets with interesting business models.
One thing you need to be particularly careful for this, you do not get across to your investors as if you're exploiting the underserved market.
Especially if you're saying that these people do not have money to pay for X, Y, and Z, you must be able to convince the investors that: "hey, they do not have money, but our service gives them this"
What to focus on?
You need to focus on your strong impact with Theory of Change, and you also need to show that you are working in a market that people usually ignore.
This can excite investors because you're entering a new market.
And this can either be a nonprofit or for-profit structure.
(If you're a nonprofit and you are not going to ask for equity funding or so on, you're just going to ask for grants or some form support.)
And this is where your main focus is really impact investors with higher risk tolerance and also foundations who are willing to basically peg a dollar amount to the impact that you're making.
In partnership with Creitive, the Microsoft Innovation Center for Sustainability Solutions (MICSS) program harnesses the power of technology to enable corporate clients and solution providers to work together on creating a more sustainable future.
Microsoft and Creitive are teaming up to provide their support, Microsoft Cloud Platform services, and business connections to early to mid-stage startups that are solving environmental or social challenges within the SG Green environmental areas.
Pitch your sustainability solution and grow your business with up to $350,000 in benefits and with amazing partners
We also have a community huddle happening on November 18 featuring ecosystem players from Tarun Shiroley from Microsoft, Stanislav Borisov from EcoLabs, and Rachel Fleishman from Carbonless Asia who are ready to walk you through the program.
Here are some links that may just help give you an extra edge based on our three years of incubating impact making sustainability startups in Southeast Asia.