Pitch Application Example

The following is an example of a successful application to pitch at Ultra Light Startups.

How is your product priced and how did you arrive at this pricing strategy?

We decided to provide our service to customers for free. Our site is modeled after food ordering websites like Delivery.com, all of which are free for customers to use. Accordingly, we felt that customers have become conditioned to expect similar sites to remain free, at least for the basic non-premium services.

We contract with local merchants to retain a fixed percentage of all orders originated through the site. We charge a lower fee to our pilot partner merchants and a higher fee to those we sign up later. As of now, we charge 10% to our pilot merchants. We plan to charge up to 15% to those that join our network later.

These numbers were arrived at after speaking with many local owners to determine what was an attractive deal and what was reasonable given the margins in the industry. Similar to Delivery.com, our partner merchants are not permitted to “mark-up” their prices to our customers.

What is the size of your market (in dollars per year) and how did you arrive at
this number?

The size of our market in New York City (phase 1 of our company) is approximately $4 billion. We arrived at this number using two methodologies.

First, our “back of the napkin” math:

Based on financial data obtained from numerous merchants around the city, we conservatively estimate that the average NYC location makes annual revenues of $900,000. There are approximately 3,000 locations according to City data. We can roughly estimate the market size to be $900,000 x 4,400 = $3,960,000,000.

Second, we purchased a 2010 Report on the national Industry.

Based on this analyst report, the total size of the US industry in 2009 was $67,202,000,000. Of this $67.2 billion, only 64% of all services are relevant to our business model. Excluding services such as product distribution, equipment manufacturing, etc., our relevant US market size is $67,202,000,000 * 64% = $43,009,280,000.

There are a total of 56,137 locations in the US, approximately 3000 of which are in NYC. We can use the ratio of NYC locations to US locations to estimate the NYC market size. Applying this method, we get $43,009,280,000 * 4400 / 55,137 = a market size of $3,432,193,119 in NYC for our relevant services in 2009. This number supports our initial rough estimate. According to the report’s forecasted industry growth, the size of the relevant NYC industry in 2012 will be $3,947,022,086— approximately $4 billion.

Comments on this entry are closed.