There are plenty of tools that startups and companies can use to better present themselves to potential investors. So, as a founder, you need to understand them and know when it's best to use them. One of the most data-rich tools that you can use is the pitchbook. It can help gain traction with big names to lure investment in the right situation.
A pitchbook is a document that describes a company's business. It provides current and historical financial data, projections, assets, and company transactions. Also, it's important to remember that a pitchbook is a sales document. It's a document that gives all the information needed to any potential buyers.
Founders tend to prepare a pitchbook from the most favorable angle possible, and that's valid. Yet, at the same time, investors and potential buyers want cold, hard facts. So, the pitchbook must include both the strengths and the weaknesses in a positive tone. So, those weaknesses should come with the company's strategy to deal with them.
How a pitchbook works
A great way to understand how a pitchbook works is by looking at the different types and when you should use them. These can include conversations with potential investors and when you want to sell your company. Each comes with specific details that are important to know, so let's review them.
As its name states, the general pitchbook provides a general overview of your company. Be sure to include all the pertinent financial information. This includes profits, deals, key executives, company size, competition, and history.
Investors will also want to see a client list and the commercial relationship. You might feel wary of releasing your client list but remember that, for investors, this is essential information. They also consider it crucial to know about the competition. So, include the leading competitors and how your company has performed against them.
You can have your pitchbook ready anytime, not only when you're about to face investors. So, invest time in creating it, and pay attention to detail. That is, if you haven't done so already.
The Deal Pitchbook is ideal for you if you want a specific deal or an IPO. You can think of this type as a step above the general pitchbook. The Deal Pitchbook caters to a particular need at this stage, so it should have precise information.
Let's say, for example, that you want to go through an IPO. Then, you will need to explain how the company and possible investors will benefit. Plus, you need to include comparables: how have other companies fared, and who has invested in them.
Last but not least, the Deal Pitchbook should include potential buyers, projections, and valuations. The document should also present the plan of action to achieve those goals. It sounds logical, but let's remember that buyers use this document to understand your company. Therefore, the clearer the information, the better it is for potential buyers.
What Is An Investment Banking Pitch Book?
As its name implies, this example of a pitchbook applies to the other side: investment banks. When clients approach them for possible deals with other companies, they look for investment banks to help them with the process.
Investment banks will create a pitchbook to attract clients. The goal is to have the client choose said bank to handle any transaction, whether selling a part of the company or the entire entity.
There are other names for these pitchbooks. You can find them also as Merger and Acquisition and Sell-side Pichbooks. Since they're most often used with investment banks, founders don't deal with these frequently. However, you will encounter them if you want to sell off a part of the company.
How do you make a pitchbook?
Now that we've seen the most critical details in a pitchbook let's discuss how to make one. As we'll see later in this article, there are other tools, such as pitch decks that you can use to approach investors. These tend to be more along the lines of concise content, whereas a pitchbook relies on having more detailed information. So, it's not unusual to find the same information but with different levels of detail.
A pitchbook includes your startup's vision, mission, company overview, and business model. That's standard information for most pitch decks or books, and then there's this information:
Share price performance, if available.
Valuation overview and analysis
Strengths and weaknesses, as well as recommendations for improving on them
Conditions for any possible financial deal
Be sure to process all this information in such a way that it comes through easy to understand. You shouldn't extend past 15 to 20 pages, as investors don't have much time to process long documents. At the same time, these documents must have all the details necessary for extensive financial operations. So, be sure to go over the information and review it with a focus on precision and conciseness.
If you want to know more about how to prepare a pitchbook, we've designed an app that helps you sort everything out. It might be overwhelming, and we know we've helped thousands of startups develop the necessary documents to grow. So, with this app, you'll find everything you need to create a pitchbook.
Who Prepares a pitchbook?
As we've seen in this article, a pitchbook can be helpful for companies, investment bankers, and investors. So, who prepares a pitchbook depends on what the end goal is. In the case of an investment banking pitchbook, it's the investment bank that will create the document. In it, the bank will try to lure the company to use its resources for any financial moves, be it a partial or a complete sale.
In the case of a general pitchbook, this can come from a large company or a startup. It's an important product for both and can be an essential part of negotiations in some cases.
If you're looking to create a deal pitchbook, it will usually come from the company looking to land a deal. At the same time, investment banks could create documents to provide their side of the information.
What is the difference between a pitch book and a pitch deck?
This question is common amongst startups because both terms can feel interchangeable. While that's partially true, it's not set in stone. We've covered pitch decks before, and we love making them, so if you want more information, check out this article.
In short, a pitch deck is a set of slides that you use to approach potential investors. Its main goal is to be concise and to the point. Most of the information in a pitch deck might also be in the pitchbook but with different levels of detail. In fact, you can think of them as concise (pitch deck) vs. detailed (pitchbook).
So, whereas a pitch deck shows only the essential information, a pitchbook dives deep into the details. A pitchbook covers the areas that we mentioned above as much as possible. At the same time, it provides the company's strengths, weaknesses, and future projections.
Another key difference is that a pitch deck is a widespread tool for startups, but investment bankers won't use it as much. A pitchbook, on the other hand, is a more complex financial tool that banks and investors prefer. So, the level of complexity, language, and information can vary between them.
While it might initially seem overwhelming, creating a pitchbook isn't challenging. It also helps to have the right tools. Check out how Slidebean can help you build your pitch.
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