Arm’s and Instacart’s IPOs may have ended the IPO drought, but are you “funding ready?”

While Blaise Pascal, French mathematician and philosopher, was probably not referring to equity stories in his Lettres Provinciales (1623-1662), his maxim that brevity is a virtue still holds true today, even when it comes to constructing effective pitches. Easier said than done. In a world governed by shorter attention spans, it has become even more challenging to know what to include and, relatedly, what to exclude. So, how do you write a concise equity story?

The short answer is: it depends. First and foremost, it depends on you and your company. General pitch templates can have value in helping to understand what investors are expecting to see, but those models largely ignore the unique elements that make your story memorable. How is your vision tied to your company’s strategy and how will you get to your desired outcome? Having a perfect pitch might not help you become the next Instacart, but it will go a long way in helping your company secure growth capital on the best terms possible to help you accomplish your own mission. Nobody wants to miss a funding window, but only the best are able to craft a concise equity story that stands out in today’s competitive market.

Maximize Your Valuation Potential

Designing compelling equity stories means prioritizing the “right” information for your company. There are many qualitative and quantitative measures that shape valuations, but here are five key considerations to get you started:

1. Competitive Advantage – What sets you apart from your competitors? What are the barriers to entry within the current markets that your company serves? Investors want to understand if their potential investment is safeguarded from competition and copycats. You shouldn’t bore your audience with a long-winded explanation, but clearly identifying your moat and how effectively it protects your company is key to a well-crafted pitch.
2. Brand Value – What comes to mind when customers think about your product or service? With whom do you want to be associated? How does your company support its brand awareness? While brand value is more often associated with a sales pitch, savvy investors will factor this element highly when evaluating an investment thesis. Even if your brand is not established yet, your strategy to attract customers matters.
3. Innovation/R&D – What industry problems are you solving? And how about your pipeline? Investors are always looking into the future. While track record is important too, where you’re going and what steps you’re taking to get there will always be the main focus.
4. Scalability – What’s your plan to take your company to the next level? Are you and your company “10x ready?” Show investors how you will put their money to work and the potential return on their dollars. Convincing investors that your projections are worth the paper they are printed on is crucial to success.
5. Finance Structure – Is your income statement full of parentheses? Which KPIs are important to investors in your industry? How do you get an investor to accurately value your business model? Understanding how and what to disclose financially and operationally can make or break a funding round. Smaller and early-stage growth companies especially need to prepare themselves for institutional grade due diligence before facing investors.

Convincing equity stories not only include an effective flow of data and information, they also connect the dots between storylines to create a narrative that increases the likelihood of investment. Knowing how to engage with your target audience can make or break a successful funding round. While it’s not yet clear whether Arm and Instacart’s foray into the public markets signals the true end of the IPO drought, companies at all stages of the funding spectrum should be watching closely.

Partnering with an experienced advisor can help you navigate this complex process to get you “funding ready.” Gateway has helped hundreds of companies perfect their pitch, from seed-stage startups to multi-billion-dollar enterprises.

Reach out to ralf@gateway-grp.com to learn more.

About the author

Ralf Esper is a Director at Gateway and advises clients on all aspects of their investor relations. His deep experience stretches from market analysis and equity story development through IR program planning and execution.