This is a shortened version of a post that originally appeared on forEntrepreneurs.com: What Your Opportunity Slide is Missing — Make Investors Believe.
This article is part of our series “Pitching to Investors” that shares real examples and practical advice from the Matrix General Partners on creating your pitch deck.
The opportunity slide is misunderstood by many entrepreneurs. In fact, it’s rare that we see a great one. Founders often think the way to pitch is to show there’s a clear problem, a large market, and that their team and solution are the ones to take on the problem. But, there’s a critical piece missing. You must also explain what has shifted to create the opportunity and how you will enter the market in a way that is defensible. If there’s no opportunity to enter the market and you don’t have a way to outcompete–you have no chance of building a successful company.
One of the reasons so few startups succeed is because usually there is no realistic way to get into a market. Often the market is too mature and crowded to break in. Or, the market doesn’t even exist yet, and there isn’t a sufficient force or trigger to create a new market. But on rare occasions, there is a shift, an opening, that creates an opportunity to enter an existing market or create a new market. When you can show in your pitch that you have found this opportunity and that you have a defensible advantage over others, that’s when you have a winning and investable idea.
The key to creating a convincing opportunity slide is answering these two questions:
Your explanation of the opportunity depends largely on whether you are entering an existing market or creating a new one. There will be a burden of proof you’ll need to demonstrate in each scenario.
In entering an existing market, you’ll need to answer why you’ll be able to displace current players, and why now is the right time to do so. You may have created a breakthrough technology, or can offer a product at a much lower cost, or have a vastly better user experience. Your burden of proof is to show that you have something so compelling that it will disrupt the status quo.
If you are creating a new market, you need to answer why the opportunity necessitates the creation of a new market, why this hasn’t been done before, and why now is the right time. Your burden of proof will be that the market exists, and that there will be demand for your product or service.
Once you’ve established what has shifted to create an opening in an existing market or the opportunity to create a new market, you’ll need to explain your ‘Proprietary Rationale’. Your proprietary rationale is how you are uniquely positioned to take advantage of the opportunity — it’s what gives you your edge and creates a good pitch. It shows you’re differentiated from your competition and aren’t simply trying to ‘out-execute’ others.
In my experience, there are many types of proprietary rationale for why there is a big opportunity to start a company. Here are a few of the main types we see.
Having a technical edge means you have created or have control of a unique technology that is vastly better than previous technology or that of your competitors. Having a technological edge creates an opportunity that wasn’t possible before, or allows you to surpass existing solutions using new innovation.
A counterintuitive point of view is a unique perspective that few others share. Most people believe what you’re doing can’t be done, but you have a solid rationale for why it will work, and why the conventional wisdom is ripe for being overthrown. As Peter Thiel famously states, a counterintuitive point of view is your answer to, “What important truth do very few people agree with you on?.”
Your proprietary rationale may be a novel model for selling into a new or existing market. This could be a new sales and distribution strategy, or extending a known business model to an atypical or underserved customer segment. Or, it could even be a new strategy for taking on tough industry regulations.
In contrast to the technical edge rationale described earlier, which implies you’ve created (or acquired) the new technology yourself, an opportunity can be created when a team recognizes technological advances in the market and builds a new offering on top. Timing is critical here–you need to be one of the first to recognize the potential a new technology affords, and act on it. Once others recognize it, you may face tough competition and will need a different rationale for why you are going to win.
Large scale changes in user behavior can also cause an opening into a market. For example, in the past decade, increased access to mobile devices has created a ‘mobile friendly’, and now often mobile-first, world. Snapchat moved quickly to take advantage of this shift toward wider and more frequent mobile usage. They offered social sharing on the go and in real time, using a mobile-only approach to leverage the shift in user behavior toward frequent and widespread mobile usage.
For examples of each type of proprietary rationale described above (from Oculus, Tesla, HubSpot, Zendesk and others) plus the most common mistakes to avoid when building an opportunity slide and example opportunity slides, you can read the full post on the forEntrepreneurs blog: What Your Opportunity Slide is Missing — Make Investors Believe.