Lately, we have spent a good deal of time discussing terms like venture capital and angel investor, but, as you could imagine, there is a lot more to the process than just cold-calling investors and equity firms and asking if they want to invest in your emerging business.
On the other hand, if you are a venture capitalist or angel investor, there are likely more start-ups and small businesses than you can possibly research.
“It’s like a blind date”
In many ways, it’s like a blind date: our two economic entities are looking for someone special, but don’t know exactly how to meet them. Of course, what is needed is a third party familiar with both the business and the investor in order to set things up: this would be the investment bank (or M&A advisors, business brokers, etc.). However, when trying to assure a match, you can’t simply leave things to chance; you have to show our two participants that they would be a good match, and that is where today’s word, pitch book, enters into the equation.
Also called a Confidential Information Memorandum, a pitch book is a marketing presentation designed to show – with targeted arrangement – the key points of how certain businesses can meet the needs anddesires of certain investors, and, in the case of the bank orfirm making the pitch, why they would be best positioned to facilitate the deal between the business and the investor.
Where does the word pitch book originate from?
As a compound term, pitch book, along with the previously discussed pitch deck, has a rather murky origin, though it appears to have been in use by the mid-1990s, having been referenced in 1995’s Dictionary of Finance and Investment Terms by John Downes and Jordan Elliot Goodman.
Breaking the term itself down, we can see a metamorphosis of terminology. Our word pitch, from the Old English piccean, initially meaning ‘to cast or throw’, had adapted the modern understanding of ‘’throwing’ ideas and attempting to ‘cast’ persuasion and acceptance (in order to sell something) first appeared in The Saturday Evening Post on September 25, 1943, which noted that: “Louie […] pitches kitchen gadgets.”
As for book, which comes from the Old English boc (meaning “book or written document”) and the older-still Proto-Germanic bokiz (meaning ‘beech’), though the first mention of it appears in King Alfred’s translation of Gregory’s Pastoral Care circa 880 – ironically the first book translated into English. This iteration of the term, meaning ‘something to be studied or used as a reference’, originates around 1340 in a translation of Ayenbite of Inwit by the Benedectine Dan Michel of Northgate, which states in the Kentish dialect that: “better may each man read the same sin and the others in the book of his conscience.”
5 sections a pitch book should include
In form, though it can be adjusted to meet the needs of what is being pitched and to whom, a pitch book typically includes 5 sections:
#1 Market Update – Why now is the best time to do this
#2 Introduction/Credentials – Why we are the best for this task.
#3 Strategy – How we will meet your needs.
#4 Valuation Methods – How we reach certain assumptions.
#5 Appendix – The information we use to reach our assumptions.
If anything, this process proves that much like finding “the right someone”, pitch books require a lot of thought and detail, but, essentially, much like love, it is all about the right fit with the right information at the right time.
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