Discover more from Project Arrow
Hey,
Dragos here, from Project Arrow, where we mentor founders about how to build from 0 to 1 and get their startups investable in the process.
Let’s talk about positioning - that is, crafting the best angle for pitching your startup to investors. That requires crystal clarity explanation about what your startup does - the lack of it is one of the most important reasons for investors not getting your pitch.
Here’s a specific example - let’s assume you are building a consumer mobile app that recommends healthy food choices. Its logic is as follows:
the app provides access to a smart assistant asking consumers about their food preferences
it then builds a user profile based on which it will recommend food products
the food products can be directly purchased from local supermarkets via the app.
the app uses machine learning to improve the recommendations based on the purchase history. The more users purchase via the app the better the algorithm for recommending products to buy.
for the shopping experience, the app will onboard a fair number of supermarkets - ideally hooked up on their APIs for getting real time access to their inventory.
the app makes money by getting a commission for each sale generated. If all goes well, users can also pay a subscription a la Amazon Prime to get access to a set of benefits such as discounts, free delivery of other perks.
Sounds complicated? It’s certainly not easy. :-) To summarise the above in one sentence, I’d probably get to something like:
A mobile app for consumers using machine learning for providing personalised healthy food recommendations and which they can buy and have delivered to their home.
You need a bit to digest it, right? How can you sell this complicated thing to investors in the best possible way, that’s super easy to understand? Let’s unpack:
A mobile app for food recommendations
That is the main value proposition for your consumers - they use the app to get healthy food recommendations.
A machine learning/AI-based business
It is an app that in the backend uses machine learning for predicting and suggesting what users may be interested in, based on their personalised profile.
A personalised e-commerce startup
Consumers pay for getting food deliveries - so it is an e-commerce business, just like Amazon.
A consumer marketplace platform
The mobile app works as a one-side marketplace - it aggregates the inventory of multiple supermarkets matching customers purchase preferences.
As you can see there’s (at least) four ways you can present this business. You start your pitch with one, and the discussion will naturally evolve to other sides of the business as well.
How do you decide which one is appropriate to start with? Which one of them is best for positioning the startup in order to pitch the investors?
It really depends.
Professional investors have specific interests they follow, and good ones are specialised. You may as well find specific investors interested in each of the above four types of positioning - consumers apps, marketplaces, AI startups or ecommerce startups. Also important, VCs invests in trends - see, for example, how these days investors chase AI-based startups even though they’ve been around for at least a few years.
If you know what investors want, then this is what’s easier to sell to them - all investors scan the pitches based on a specific interest, and that is the reason you need to breakdown and customise the startup positioning to each.
The more simple, the better. If investors don’t get it, it is very likely that you didn’t explain the startup positioning in an uncomplicated way. If they’re not interested, it is likely you don’t sell what they’re looking to buy. Either way, you should build a crystal clear explanation about what your startup does, so easy that even a grandmother would understand it. :-)
This simple positioning exercise requires outside thinking and iterative discussions and it is an important step for your startup to become a fundable story - it is what we do at Project Arrow every week. Sign up now, you will get a professional evaluation and an actionable plan for your startup to become investable.
- Dragos
PS. On Monday evening we’re running a workshop with practical advice on what to do when looking for investors. We still have a few spots open, let me know if you want to join.
Subscribe to Project Arrow
helping entrepreneurs be better prepared when raising money.