Why Does Your Startup Need to Exist?

Defining the problem that your startup solves is a critical part of pitching investors. This is where you move beyond understanding your investor audience and the unique strengths of your team and actually move into a brief discussion about the industry in which your startup operates. To begin this step, think back to when you first started your new business. What was the observation that preceded your idea? In other words, what is the problem that your startup aims to solve?

Why does your startup need to exist in the first place?

All successful enterprises are built in response to a specific and well defined need. This can be as simple as the need for a cheaper, better cup of coffee in your hometown, or as advanced as the need for access to malaria vaccinations in the developing world. Your potential investor will want to know the nature of the problem that your firm is able to profitably solve.

However, simply establishing the need is only half the equation. Next, you must define the outer limits of that need. Specifically, how many people are in your potential market? What is the overall purchasing power of that market? What is their willingness to pay for a solution to this need? Don't get too hung up on specific demographics and things of that nature. Remember, this is a pitch, not a business plan. The point is to convey 1) there is a problem 2) there are enough people suffering from the problem that it would be profitable and scalable to build a business around solving it.

This step is all about conveying the size and accessibility of your potential market to the investor. Do not begin discussing the solution that your firm brings to the table just yet. Instead, focus on establishing the need. You will have a chance to discuss your solution (as well as what the competition, if any, is doing wrong) in later sections.

Action Items:

  • Describe the problem or need that your startup aims to solve.

  • Define the outer limits of that problem. How big of a market does this need represent?

  • Answer the question, "why does your startup need to exist in the first place?"