5 Things That Have Changed in Startup Pitching This Year Due to the funding crisis, this year's startup pitching has undergone a major shift, with a stronger emphasis now being placed on cost structures, profitability, and unit economics.

Startups are pivoting their business models to remain more relevant with the times as a result of the financing winter and changing expectations from the funds. According to Shrijay Sheth, Investor and Founder of Legalwiz.in, one notable change is the focus shifting from traction or user growth-based business models to revenue and profitability-driven models.

Firms with sustainable growth, such as Zerodha, Dream11, and Zoho, have firmly established a trend of being economy-centric businesses. Startups making investment pitches are now more aware of their cost structures, profitability, and unit economics, Sheth said.

Apart from the economics, the following other aspects of startup pitching have altered this year.

Focus on automation and AI

With recent buzz around ChatGPT and other advances in artificial intelligence and machine learning, many startups are now focusing on leveraging AI to build lean business models that are less human workforce intensive. While pitching for the funding, AI capabilities are seen to be explicitly highlighted, noted Sheth.

Growth projections

Umesh Uttamchandani, Co-founder of DevX Venture Fund, claimed that in the last three to six months, the way businesses pitch has undergone a fundamental change. The founders seem much more prepared in terms of their ask, and in addition to the investments, they are also looking for advice and outright asking what investors can offer in addition to money on the table.

"Interestingly, the growth projections have been an imminent feature in most of the pitches we go through and founders are backing it up via strong data points to substantiate what they plan to do. Notably, founders seem to be well prepared when nudged for data as well like MIS, Financial Projections, etc, and thus at DevX Venture Fund, it gives us better confidence in the founders as we enter right at the seed stage," said Uttamchandani.

Emphasis on the product rather than the money

Many businesses used to put a lot of effort into convincing investors of their financial projections and funding requirements. The emphasis now is on showcasing a strong and innovative product or service.

"Investors are now placing greater importance on the viability and uniqueness of the product, as well as its potential to address market needs. Startups are adapting by investing more time and effort into refining their product offerings, developing prototypes, and demonstrating market fit, which has become a crucial aspect of successful pitches," emphasised angel investor Prateek Toshniwal.

Logical and realistic valuation

This year, valuation has grown to be a key factor in startup pitches. Investors are becoming increasingly wary of the valuations assigned to early-stage companies as a result of the rise in startups entering the market and venture capital funding. Startups are now expected to provide a reasonable and well-justified valuation that reflects their growth prospects and industry benchmarks.

"This shift has led to a more balanced and rational approach to valuing startups, with investors seeking fair and reasonable terms that reflect both the startup's potential and the risks involved," highlighted Toshniwal.

Focus on reaching specific domain investors

This year, startups are increasingly customising their pitches to appeal to investors with knowledge of and interest in their particular industry or domain rather than adopting a broad strategy and targeting a broader range of investors.

"This approach allows startups to tap into the knowledge and networks of domain investors who can provide valuable insights, connections, and strategic guidance," Toshniwal added.

As per Toshniwal, startups can improve their prospects of obtaining finance and the specialised assistance they need to succeed in their unique markets by aligning their pitches with the interests and goals of domain investors.

Furthermore, according to Srinivas Ramanujam, CEO of Villgro, there is an increasing emphasis on the founding team's execution skills and running a tight ship. He is witnessing a boom in startups dedicated to making a meaningful impact and advancing an eco-conscious ecosystem. Additionally, he mentioned the need for consumer and market knowledge in the current business environment. Without a strong model, simply getting users is no longer an option.