Venture Capitalists are very busy and looking for a very specific set of criteria, so they need to quickly understand what your company’s about and what you are offering when going up to raise a round or positioning your company for an acquisition. As David Ehrenberg of Early Growth Financial Services says, a pitch deck is “not the time to get creative.” Your pitch deck needs to provide them with the information they’re looking for in a concise and clearly structured way. Of course it’s essential to have background and supporting information for when you’re asked (and you will be), but lead with a presentation that’s clean and crisp and save the rest for the appendix and follow up discussion.
VCs want something clear and concise. Your first instinct is likely to stuff your slides with information to impress the VCs. Fight this urge! Use the slides to give a high level view, instead of overwhelming the VCs on the first pitch. You should definitely come prepared with digital packets tied to each slide for additional information, but keep this information as slides in the appendix in order to respond to follow up questions during the pitch or to send afterwards.
From my experience at Modular helping hundreds of startups pitch VCs, I agree with Ehrenberg’s list of essentials for a pitch deck. Adding on to his advice above, here are some of my tips on what you should include on each slide of your pitch deck….
Upfront, you need to explain to VCs why your product is needed in the market. What is the problem you are solving with your product or service? Why does your company need to exist? What opportunity is your company carving out? In many ways, these questions are more important than what does your product do or how does it work.
You need to clearly explain the space in the world that your company is carving out and the mission that you are on.
Some people refer to this as the “value to be delivered,” but I like to say it’s the “So what?” In other words: what do people get out of your product or service?
In a way this is the keystone of your pitch. It answers these fundamental questions:
Yes, many of the slides below involve more research and analytics, but this slide is the foundation of what you are offering. Being able to describe your company concisely is essential to your pitch. Make sure to take the time to brainstorm the appropriate wording and test this explanation on people who are unfamiliar with your team and company to see if they can clearly understand what you’re offering from an outside perspective.
In my experience, this slide isn’t always necessary, but Ehrenberg suggests it as a summary slide that brings the whole big picture together and emphasizes your startup’s ‘secret recipe’ that makes it unmatched. It should be short, possibly solely visual (for example, can you visualize the size of the potential market for your startup?), and represent a big picture view of how your company is a winning investment.
Note: This is also a good moment to show a live demo of your product, or embed a link to a video of it in action.
Emphasizing your business model is the best way to show your investors you understand the market. It shows you know how people currently access and engage with your product and how your company is different from your competitors.
It’s important to emphasize not only how you get customers, but how you keep them. This is why many investors favor monthly recurring revenue (MMR)/subscription models because it’s easier to keep a current client/customer happy and returning than constantly having to seek out new customers. It also makes cash flow modeling much more predictive and the lifetime value of the customer (LTV) easier to calculate.
Remember that VCs are capital-seekers first, and are filtering everything you say through an ROI lens. They are not merely looking for a solid business, they are looking for a home run. They are asking themselves: Is there an opportunity for a huge return? Your market opportunity slide needs to answer: How big is your world?
There are a lot of great market research firms that can offer this type of information, such as: Dataquest, IDC, Gartner, Mintel, and associations from different universities. Oftentimes, you have to pay for these research reports, but you can also look for press releases on key reports relevant to your industry and they sometimes include market size and other relevant statistics.
Generally, VCs are looking for a market that’s a billion dollars or more. They understand you won’t capture the full market, but that’s the general scale. They are looking for a 10–20 times return.
A go-to-market (GTM) plan is used when you’re launching a new product or an existing product in a new market. In this section investors may be looking for your strategic objectives:
It can be useful to include a bird’s-eye view of your product roadmap, but more importantly, it should speak to your “marketing mix” and what tactics you’ll utilize to spark interest and purchases.
I confess that one of my absolute favorite parts of doing my MBA was learning about Porter’s 5 Forces and conducting SWOT-style analyses on dozens of hypothetical companies. There is something so satisfying about using simple competitive frameworks to help shape how you think about where your product sits in relation to what’s already in existence. These constructs shouldn’t be relegated to the MBA-world — keep in mind that many VCs are business school buffs who still use the same lenses to analyze a company’s advantage. It’s better to use tools they’re familiar with and trust than to reinvent the wheel with your own format.
These frameworks help quickly communicate a concept in a language VCs understand. If you’re more technical than academic, another analysis format is the features chart. To make a features chart, ask yourself: What does your product do (or have) that others do not? What else is out there, and how is yours differentiated?
If this is your first company, the more subject matter expertise, the better. Your business likely combines expertise from various areas, creating your team’s unique specialty. Thus, your team needs to have experienced specialists, whom, with all their skills combined, make you the dream team for your specific business offering. You likely already have some competitors and more will pop up in the future. The investor wants to make sure the jockey they’re betting on will win the race, and your team can show that through its specialized expertise.
Every time you go out to raise capital, your company needs to have a higher valuation (up round) than before. This helps prevent dilution and ultimately allows you to give up less of your company over time.
So, this slide needs to answer the question: “What are the key milestones I need to hit with this money to make sure the next time I raise capital, it will be worth more?” To research this, ask advisors and think about key milestones, such as: finishing your product, getting X number of customers, building out your development team. Once you’ve identified these milestones, build a budget based around those objectives. And don’t forget to give yourself about a 25% cushion. For example, if you think that will cost $2 million, raise $2.5 million.
For the structure of your financial projections, it should be three years long, with the first year divided into quarters. Remember, keep this simple and at a very high level! Limit your projection to: revenue, cost of goods sold (COGS), and 4–5 growth drivers: opportunities, market, personnel, professional services, outside vendors, travel & expense (T&E).
While your slide is simple, make sure to have the information to back up follow up questions. As mentioned above many VCs are MBA guys, not techies, so they’ll dig into your analysis. They want rigor and you need to show you’ve thought through your scenarios. For example, you need to be able to say: “In month four, I need to hire a Ruby engineer. It’ll take 2 months to find the right candidate and one month to train them.” Have details to support all the high level numbers in the model.
We’re in the era of the lean startup, so the VC knows things will change and evolve over time. In reality, the assumptions become more important than the actual number you include. You still need to show you’ve thought everything through and the reasoning behind your calculations. A VC is trying to understand: What criteria are you basing your projections on? For example: “It takes X long to close an enterprise client, Y long to find, interview, hire, and train a salesperson…”
… and explain “who we are and where we’re going” from a numbers perspective. Now that they understand your business, you can make your final ask. Make sure to be confident and assertive in what you need. Walk them through your assumptions and reasoning for this specific amount (e.g., why you need to invest $X on tech instead of $Y or that your runway is Z number of months because it will take you three months to hire and train a team of developers).
Oftentimes founders don’t know how much they should be asking for or feel uncomfortable request a large sum, so make sure you do your research and then practice making the ask in the mirror. The ask is not only about proving you know your business, but also about you as a founder, revealing your self-awareness, your needs, and your thought process. Are you throwing out a random number or are you a rational person who has developed an ask based on specific requirements.
Now that you have everything you need to make an effective pitch deck, stay tuned for my article on tips for meeting with investors, or drop your email in the box below, to learn more on preparing for this potentially once in a lifetime opportunity.