Your value proposition must be unique, and state your value to the investor. This is not the same as your product’s value to your customer, and it is not a feature or a benefit (both of which are focused on your product). What you pitch to your customer has little to do with what you pitch to your potential investor.
Your value proposition to your potential investor is about your company and its position in the marketplace. It is about your company’s likelihood to scale its revenue, profitability, and market share. And ultimately, of most importance to your investor, it is about your company’s ability to grow its valuation towards a significant exit through M&A or an IPO.
So, what is your company’s uniqueness, its secret sauce? Some of this uniqueness may indeed lie in your product or technology. Or it may be that your company targets a unique market sector that few others can penetrate without your personal contacts. Or your technology is so disruptive that it will actually displace major companies or business models, and change how business is conducted in that sector, and you have deep experience and a powerful rolodex in that market.
If your company is a service business, for example, a SaaS application, what is your secret strategy or technology platform, which will dominate your target market? And, what reseller and OEM channels have you established, to combine your product with other applications, to reach more deeply into your own market, or to open and penetrate tangential markets with your partners? What strategies do you have in place to weaken your competition and defend your market share?
In all cases, you need to be offering some unique value, even if you aren’t the first to market.
iTunes, for example, offered a unique solution: it solved the music industry’s pricing, payout structure, and digital assets management issues. With this unique value, iTunes acquired the rights to the music, and built an online distribution channel for the downloadable songs (and for many others applications).
Twitter introduced a unique kind of blogging, microblogging in 140 characters, offering ease of use and worldwide distribution across many platforms. This combination created ubiquitous Tweeting.
Identify what is unique about your company, its potential for success in its market, and your team’s ability to execute this vision of value to a liquidity event and a return on investment. Then you are ready to prepare your pitch for investment (part 3, next week).