12 Essential Topics
Whenever you are raising money, whether debt or equity, your primary selling documents are your Executive Summary, your Investor Pitch, and your Business Plan. Each of these documents needs to cover the same essential topics, albeit at a different level of detail. A well written set of investor documents is structured much like a classic newspaper article: the first sentence tells the story; the first paragraph tells it again with a bit more detail; and the rest of the article tells the story yet again, with the full detail. This structure maximizes the delivery of information in the shortest possible time, while being designed to draw the reader in. Each of your three documents should be structured like this, and each itself is a layer in the story.
No matter what the level of detail, each investor document needs to cover the following topics in order to be complete.
- The market opportunity that the company is targeting. This is often best done by first covering the problem or obstacle that a class of customers faces, and then outlining how the company solves that problem.
- A description of the product or service that the company is offering.
- The customer segment(s) the company is targeting and why.
- The size of the market that the company is actually addressing (not, for instance, the retail value of the end user market for products in which the company’s software is a tiny component).
- The distribution strategy the company is following to get its product to market.
- The company’s major competitors and its advantage(s) over this competition.
- A description of the company’s Intellectual Property, trade secrets or other “secret sauce” that constitutes a sustainable competitive advantage (describe, but don’t give away the farm).
- The company’s business model, including revenue elements, pricing methodology and sample price points.
- Financial projections: an Income Statement, Statement of Cash Flow and Balance Sheet. At a minimum investors want to see at least a 3-5 year projection, the amount of cash the company projects that it will consume to reach cash flow breakeven and the dates at which it projects that cash-flow breakeven and profitability will occur.
- Short bios of the management team (but not a rundown of the advisory board or board of directors).
- Any major milestones that the company has accomplished to date, and projections for major accomplishments in the near future. Of particular importance are regulatory approvals, release of the first product, close of the first Alpha, Beta or commercial customer and major rollout milestones (geographical expansion, second product release, etc.).
- The amount of capital already raised, the sources of that capital, and the amount that the company is currently seeking to raise.