Tell Your Investor Story With NumbersOct 19, 2023
Here’s a quick tip when you’re pitching startup investors: use numbers to tell your story.
Pitches Should Focus on Investor Risks
Too many founders focus on the wrong things when pitching an investor. Dozens of founders approach me each month, eager to tell me about their cool startup venture. Most entrepreneurs love their idea and spend way too much time getting into details that aren’t needed in a concise investor pitch. Founders should briefly and clearly explain what they do and then quickly move on to sharing some nuggets about why an investor should spend more time with them.
Investors face many risks that threaten to shipwreck their portfolio companies. Founders need to show how they’ve mitigated these risks. Building an investor’s interest requires more than just empty claims. It requires numbers.
Use Numbers to Substantiate Claims
Most founders make a dozen or more unsubstantiated claims in a short 5-minute investor pitch. Compare the two claims below:
- “Our startup is going to build a community where people can address their mental health needs. We’re going to capture 10% of the market in five years.”
- “Our startup is a mental wellness community that connects end patients and service providers. In just two months with no marketing budget, we’ve already signed up 1,300 patients and 110 providers on our waitlist.”
The first statement comes across like testosterone-fueled chest-thumping. “I’m Superman and I can leap tall buildings in a single bound.”
Better would be: “After working with 27 college athletes, our specialized training program helped them increase their vertical leap by 47% on average.”
The first statement is at best, likely to be silently dismissed, or at worst works against you because the audience feels you are full of feckless bluster. The second statement is more persuasive, as it gives the investor a tangible idea of your efficacy.
Use Numbers to Show Risk Mitigation
Numerous risks threaten the life of every startup company, including questions such as:
- Is there a market for this product?
- How much will people pay for the product?
- Will the product’s price fuel a profitable business?
- How much does it cost to acquire a customer?
- How many customers do you lose each month?
- And many more…
Let’s focus on the first question of market desirability — one of the three key components of product / market fit. Most founders focus on the novelty of their startup idea, thinking that the market desirability is obvious. It’s almost a “Who wouldn’t want what we’re building?” approach. Even if the first impression of the idea is mostly positive, that’s usually not enough to convince an investor to write a big check.
If you are building a human resources automation solution, instead of just describing the problem you solve, it’s more effective to project market desirability with a survey. Ideally, running a structured, methodical survey enables you present hard numbers to show how you’ve started mitigating the risk around market desirability.
Imagine how effective your message would be if you said:
“We surveyed 80 people with the job title of HR Manager or HR Director at a company with between 100 and 500 employees. 71% said they were interested and asked us to follow up with them when the product enters beta testing. 16% went even further and put down deposits ranging from $25-$75 to get first access to the product.”
The 16% would likely be the innovators, and the 71% the early customer adopters that will help you “cross the chasm”.
Note that, using survey techniques, founders can predict a key element of product / market fit even BEFORE the product is built. These techniques are taught in our How to Validate Startup Ideas class and delivered through our Venture Validator service.
Use Numbers to Show Trends
Many founders will proudly say “We have 100 total customers”. That’s good, but that’s only somewhat persuasive.
Better would be: “Over the last four months, we closed 10, 20, 30, and 40 customers, which is a blended average 61% month-over-month growth rate.”
One data point says very little. Two data points might be a fluke. Three data points suggests that a trend might be forming. Trends are much more important than isolated, individual numbers. Investors are more willing to believe your company is headed in the right direction if you can demonstrate healthy trends over multiple months - preferably six months or more.
Sample Elevator Pitch to Investors
Let’s pull this all together in the sample elevator pitch below:
"I'm Mary with XYZ Startup. We have a marketplace that connects offshore software development companies to startup founders who need affordable, but reliable teams to build their MVP. Sadly, 83% of outsourced software development projects end up distressed -- over budget, behind schedule, and/or poor quality. Our marketplace solves the root causes of these problems, cutting distressed projects by 60%. After launching our MVP just 6 months ago, we've already closed $1.2M in projects with only a $10K marketing spend. Over the past four months, our business grew 32% month over month. We're looking for investors who want to get in on the ground floor of this high-growth venture and we'd love for you to be a part of it."
The statements in red are where you drip in content that hopefully stands out to an investor. It provides some hard data for an investor to work with. Pitches to investors are always more effective when the story is told with numbers. Specifically, this elevator pitch uses numbers to:
- Shine a light on the magnitude of the problem.
- Refer to the effectiveness of the solution.
- Quantify the revenue potential (since it only took half a year to generate 7-figures in transactions).
- Demonstrate cost of revenue is very capital efficient.
- Show a history of growth.
With multiple, tangible data points, founders can build a captivating story of a validated startup that motivates investors to act. Don’t just tell a story. Tell a story with numbers.
Fundable Startups Training Focuses on Actionable Guidance
Telling a story with numbers is just one of literally thousands of best practices that founders must implement. We’ve captured hundreds of these actionable best practices in our Fundability Before Fundraising startup training academy and our self-paced founder training. We help founders apply these best practices in our founder coaching. We invite you to learn about our offers, review the testimonials, and evaluate if they are right for you.