Chapter 8 - Fundraising Documents
IN THIS LESSON
Pitch Deck Fundamentals
When you present your company to venture capitalists, you need to show slides with a quick overview of your business known as a “pitch deck.” It is an important fundraising tool, usually running 10 slides or fewer.
It’s not that you shouldn’t try something new, it’s that often the tried-and-true methods for success are repeatable and familiar for investors. For example, here is a great report on pitch decks that raised $300M+ in capital: DocSend Fundraising Research.pdf
A pitch deck showcases a start-up’s business model, value proposition, management team and financials (i.e., future projections), among other key metrics and milestones. It is good to spotlight accomplishments to date, provide timelines, give a peek into a go-to-market plan, and share a point of view about the competitive landscape.
The following are five best practices for approaching the development of a pitch deck:
Keep it simple – Describe your business in as few words as possible. Use a large font on the slides. Don’t create overly busy slides. Have a clear message for each slide.
Start with a strong intro to get investors to pay attention – Tell a compelling story or a “what if” scenario. Appeal to the heartstrings of people (investors are people, too). Humanize your business. You can also use analogies to help explain something new.
Use a problem/solution structure to frame up your story – Be clear about what problem your start-up is trying to solve. The size of the problem you are solving affects the way investors will look at you. You must maintain credibility–a problem you can solve.
Use solid numbers – Tell your powerful story through verifiable numbers, such as growth metrics, user engagement, or online traffic. Focus on the most important numbers; don’t create eye charts full of numbers that mean little to venture capital firms.
Convey a sense of traction – Give a sense that your company is gaining traction in the market. You can communicate a sense of traction by talking about customer adoption of your product or service, emphasizing how you have achieved key milestones and sharing how the experience of the management team has already opened new doors.
Pitch Deck Slides to Include
Problem — Give a striking overview of the challenges that you address and solve. Company purpose, logo, tagline — What’s your mission? Condense your pitch to a simple, yet powerful sentence about the purpose of your start-up. Consider the words of Simon Sinek (1): “People don’t buy what you do; they buy why you do it. And what you do simply proves what you believe.”
Validation — How did you reach this conclusion? Present data, primary and secondary market research. This shows you’ve done your homework.
Market Opportunity— Show that you address an appealing market. You can touch lightly on the Total Addressable Market (TAM) and what percent of that you believe you can obtain.
Solution — Reveal your product (or a prototype).
How It Works — Show screenshots of your product in action – embed your demo
Competition — A common mistake founders make is claiming that their company has no competition. There is always competition, direct or indirect. Even the customer’s refusal to buy (inertia) is considered competition. You need to stress clearly how the competitive landscape is differentiated and what makes you unique.
Business model / How you make money — How will you earn money and who will pay for it? This section doesn’t need to be comprehensive at this state, but you need to show that you’ve addressed this question.
Go-To-Market Strategy — The most important thing is to have a clear go-to-market strategy and a plan for how to acquire users. Demonstrate that your strategy is KPI driven, and what steps you’re taking to achieve those results.
Vision, Financials & Exit Plan —Discuss your overall vision. What is the long-term goal for your start-up? In 5 years or 10 years? IPO? Acquisition? Show your financial projections under your current business model.
Team — Why is your team the best fit for this start-up idea? Show that you have the relevant experience and skills for this business. If you have experience in working together, make this explicit.
Your pitch deck should proceed as a narrative rather than a dry business plan you’re submitting for an MBA class. As your start-up grows, your narrative will change too. Don’t be afraid to adjust the deck depending on your target audience and what makes sense for your start-up.
What should NOT be in your deck? Salary information, and any other information you wouldn’t want seen or known by your competitors or a larger audience.
In the end, investors care about only three things:
Strength of the opportunity
Strength of the entrepreneur
Passion (enthusiasm & excitement)
Your pitch deck should be an aid, not a replacement, for that passion.
Pitch Deck Design Principles
Your pitch deck must communicate your points clearly in a manner that is visually engaging and compelling. Here are some principles that you should keep in mind for your pitch deck:
Make it legible, simple, and obvious. Your slides should be legible, simple, and obvious. Don’t complicate your visual essay with too many slides – keep it less than twelve – and excessive words. Less = more.
Use large type, with bold text, and a simple (sans-serif) font that makes good contrast with a clean background. Your audience needs to be able to read your slides in a quick and efficient manner. Remember that legible slides are ones that even old people in the back row with bad eyesight can read and understand. Ideally, use Helvetica, bold font.
Simplicity is key. Keep your big idea simple so that everyone will understand. In other words, don’t intertwine your idea with other ones that convolute what you are pitching. This means that your slide deck expresses one single idea. That also means there is no room for several ideas in your pitch deck. Even if you are trying to express several concepts and ideas for your big idea, try to do so in a way that weaves it all into one core idea. Some examples: “we’re the Netflix of online video games”; “we’re the Netflix of Mexican video content”; “We’re the Uber of private jet travel”.
Keep it obvious. Seriously, the more obvious your slides are, the easier it will be to convey your message at first glance. The notion here is that obvious ideas are easier and faster to understand. This is important for you, the entrepreneur, because you typically have a limited amount of time to present your idea and because people have short attention spans. Investors are no exception to distraction. In fact, investors are more likely to get distracted because they tend to be more impatient and will veer their attention elsewhere the minute your presentation becomes confusing or boring.
As you develop your pitch deck, remember to think about your audience: investors. They want to make an investment in a good idea. If you want that to be you, then you need to make it easy for that investor to say Yes, and not No.
Pitch Deck Fundamentals
Developing an effective pitch deck for you to “pitch” your company (sell your idea / concept) to potential investors is one of the most important things you can do early on to position yourself to attract financial investment in your company.
Understanding the fundamentals of a pitch deck will help you both be successful and avoid mistakes. You don’t want to be making a bad impression on investors because your pitch deck is flawed.
One of the most fundamentals is the length of your pitch deck. Here’s a rule of thumb that is as rock-solid as anything you’ll hear about pitch decks. Your pitch deck should be between 10 slides and 15 slides (max) and delivered in 10 to 15 minutes.
You violate this rule of thumb at your own peril, and you better have a good reason why you are doing it; otherwise, investors will turn off, tune out and dismiss you. When you cannot be succinct and have the right content, investors begin to distrust you.
Before we go slide by slide in the ideal pitch deck, there are two points to embrace at the beginning. First, be sure to include your contact information. You’d be surprised how many start-up founders don’t do it. List every way an investor can contact you (phone, email, social media, address, etc).
Second, it is smart to include a “quick facts” slide somewhere in the deck. You should include:
your website
your stage of development
the capital you have raised so far.
the capital you are seeking.
key investors
date founded.
you can even include your lawyer and accountant (if you have them lined up)
Now, let’s look at the proposed content on each slide of a well-conceived pitch deck that you can use with investors.
Slide 1: Customer problem
What is the customer pain point? How can you solve it?
Slide 2: Overview of your product/solution
What do you do and for whom? What it’s compelling?
Slide 3: Key players
Founders and key team members, including expertise and background.
Slide 4: Market opportunity
What is the market size you are targeting? What are the market growth rates? How is the market segmented? How can you grow faster than the market?
Slide 5: Competitive landscape
Who is the current and future competition? What is your competitive advantage? What relevant details can you share about competitors’ products?
Slide 6: Go-to-market strategy
How will you sell your product?
Slide 7: Stage of development and key milestones
At what stage is your product development? What are your partner relationships? Where are you with customer acquisition?
Slide 8: Critical risks and challenges
What can go wrong? What will you do when it does?
Slide 9: Financial projections
What revenue do you project five years out? What is best case, along with key assumptions? What is worst case? What is likely? How much money and time will be required to get to the breakeven point for cash flow?
Slide 10: Exit options
Who are the likely buyers of your company? What are the rationales? In what categories are they?
Slide 11: Funding requirements (aka, the Investment Ask)
How much are you trying to raise? How much runway will it give you to run your business? How will you use the money? What milestones will the money enable you to reach? When you reach each milestone, how much more valuable will your company be?
Some people believe you should have two versions of your pitch deck – a simplified, stripped-down version you use to present, as well as a detailed version that you can email to investors as a follow-up. You would not want to present the details version and email the simplified version.
Additional Tips
You may be a PowerPoint wizard or Prezi master, but, as far as the aesthetics of the slide deck, we recommend that you do NOT use animations or Internet-dependent content, such as a live online demo. Keep the slides simple.
Also, try not to make last minute changes before an investor meeting, which would increase your risk of making a mistake. Work on your delivery; be prepared and rehearsed. Let your passion for your idea be expressed. Your passion for your idea + a good pitch deck = a better presentation in front of investors.
Below are several pitch deck resources you should review and integrate into the creation, design, and execution of your own pitch deck. Your goal at this point is to create a compelling presentation that defines your idea clearly (in relation to the problem or need it is addressing), succinctly elaborates on the market opportunity, and ultimately entices investment.
Sequoia Capital Pitch Deck Template
30 Legendary Start-up Pitch Decks
SlideBean Pitch Deck Examples from Successful Start-ups