How to Address Tech Challenges When Pitching to Investors

Tech companies, particularly SaaS and mobile app developers, are able to attract some of the best global funding opportunities today. Pitching to investors is a part of their business model. 

Mobile SaaS app development is now primarily based on cloud technology, which means that the entire data is stored in the cloud. 

In stand-alone mobile apps for business, the users must export files to email, Dropbox, or another service in order to make it accessible to all team members. 

With so many ideas out there competing over the same funds, it’s important that your pitch to investors is impeccable. 

Here are some of the key challenges that mobile app developers must overcome when pitching to investors.

Demonstrate a Lucrative Market Opportunity When Pitching to Investors

Investors want to make sure that the mobile app you are pitching has a substantial addressable market. 

To ensure this, you should be able to clearly define the target market and put a reasonably estimated dollar value to it. 

Convince the investors that your app is positioned just right to capture a good portion of this market. 

Discuss other potential markets that your app-based services can unlock over time.

Address Concerns Over Your Business Model

SaaS and mobile app development companies often face various business model issues, and investors can be particularly concerned about them. 

You should be able to: 

• Explain to the investors during your pitch why you think your mobile app or SaaS offering will be differentiated from dozens of similar-looking products already present in the market. 
• Give accurate data on how long and how costly the process of new customer acquisition will be. 
• Say whether you’ll be able to find a scalable strategy to acquire the targeted number of users in a competitive environment. 

Be prepared to answer what kind of ongoing costs you expect to incur on product improvement in order to stay ahead of the market trends and customer expectations.

Account for Technology, Security and Intellectual Property Issues

Investors in SaaS and mobile apps for businesses prioritize the quality of the software and technology you are using, and the value of the underlying intellectual property if any. 

The developers of a mobile app for business should take into account the need to deliver an app with high performance, intuitive design, and clean information architecture. 

It should have the capabilities for reconfiguring and multi-tenancy, and above all, they should tackle advanced security issues. 

You should be able to provide logical answers to investors’ questions, such as whether it is easy to replicate your technology to develop additional products or services and how expensive it will be to produce, maintain and expand the existing set of offerings. 

Investors will want to know whether you have any copyrights, trademarks, patents, patents pending, or domain names, and if you have ensured that your intellectual property is not violating any third party’s rights. 

Have a Clear Idea of the Competitive Marketplace 

Some investors may raise concerns about oversaturation in some of the areas related to the SaaS and mobile app competitive landscape. 

You should have clear and accurate answers to an investor’s questions about who are your product’s primary competitors, what are the central differentiating features of your product, and what is your core competitive advantage. 

During your pitch, you should demonstrate an intimate understanding of the prevailing competitive environment. 

Some of your competitors are likely to have a much larger capital base, so expect one or two inevitable questions about how you intend to compete against bigger players in the market. Make sure you follow up with some hard data and numbers that speak in your favor. 

Show the Amount of Early Traction You Have Obtained 

You have a better chance to win the investors’ confidence and extract beneficial financial terms if your business has obtained some early traction. 

To show it to the investors, you can present the following at the time of your pitch:

• The creation of a beta offering 
• Strategic partnerships that you have already entered into 
• Initial customers onboard or pilot customers
• Early social media buzz and press releases 
• Admission into technology accelerator or incubator programs
• Client testimonials, reviews, and ratings 

Astute investors will probe further into what exactly has led to your initial breakthroughs and how these can be scaled and accelerated.

Provide Accurate Financial Metrics to the Investors 

Large potential investors will want to evaluate a host of financial metrics before they make an investing decision. 

Here are some of the vital financial metrics that you should be ready with as a SaaS or mobile app developer pitching high-profile investors: 

MRR (Monthly Recurring Revenue)

If you are a SaaS company with a monthly subscription model, you should be able to provide figures such as the number of new customers added during a month, the number of customers who exited the subscription during a month, and the incremental revenue realized from existing customers who have extended subscription. 

ARR (Annual Recurring Revenue)

The ARR comes into focus if your business model is based on annual or multi-year subscriptions. 

ACV (Annual Contract Value)

This refers to the average annualized revenue per customer contract. 

For instance, if you have a customer with a four-year contract for $20,000, the ACV will be $5,000. 

The ACV is the average amount across all customers. 

LVC (Lifetime Value of a Customer)

The investors may ask you the lifetime value of a customer. 

This can be difficult to quantify during the early days of your tech startup, but you should be to project a reasonable LVC so that the investors can assess customer acquisition costs versus customer profitability. 

Cash Flow

New SaaS and mobile app development companies often have a significant cash burn in the initial years, which can create cash flow challenges. 

The problem may only exacerbate if you experience very fast growth in a short period. 

Therefore, determine your estimated capital requirements and burn rate very carefully when you pitch to investors.

The Bottom Line

Cloud-based SaaS and other mobile app development projects are readily backed by investors as long as the foundations are built right. 

SaaS and app developer startups have tremendous potential, which has generated excitement among the investor community. 

Learn to create the right pitch and convincingly address the concerns and doubts of the investors in order to obtain long-term funding at favorable financial terms and conditions.