The Ultimate Guide to Startup Fundraising Part 3: The Killer Startup Pitch Deck VCs Can’t Ignore!
Welcome back to Part 3 of our Ultimate Guide to Startup Fundraising. If you missed the previous posts, I highly recommend you read through those first before continuing.
The Ultimate Guide to Startup Fundraising Part 1: Understanding Investors 101: The Pros and Cons of Angel Investors, VCs, Syndicates and Venture Debt Part 2: The Memorable Elevator Pitch that VCs Can’t Ignore Part 3: The Killer Startup Pitch Deck VCs Can’t Ignore! Part 4: The 13 Biggest Fundraising Mistakes Startups Make Part 5: Structure Your Fundraise to Close Your Round Faster
And now, if you are ready, let’s get on with the program.
So, your startup needs to raise money… Now what? If you’ve researched the differences between VCs and angel investors, accelerators, corporates, and angel networks, you know where to go.
The big question, how to attract attention? How to cut through the noise of the tens if not hundreds of decks investors get every week…
Hint: a warm intro helps. But you know that. You’ve reached out to portfolio companies, got recommendations/referrals and are ready to send your sexiest pitch through. But how do you ensure investors take you seriously and take the meeting?
That is ALL a pitch deck is for, getting the meeting. No meeting, no funding. And for VC firms, you’ll probably need to “win” several meetings to be able to pitch the partners. That’s the game, but it’s “free-ish” money, and you signed up for it…
This post is a follow up to The Memorable Elevator Pitch VCs Can’t Ignore and is for founders actively reaching out to investors.
Reaching out to investors
Truth is, no one wants to see your business plan. A business model canvas isn’t going to cut it either. For serious investors (especially the ones you want for your startup — more on choosing the right investor here), you’ve got maybe four slides to grab their attention.
But before that, the email. Let’s assume you’re firing cold, you don’t know the investors you’re pitching and don’t have a warm intro. That is okay. Not everyone went to Stanford, right? If you can’t find someone to make the introduction, reach out and be REALLY freaking convincing. Tell VCs exactly what they want to hear (again, more on that here).
So, let’s assume you got them to open the deck… But before that, how are you formatting it? Keep it simple stupid (KISS). If you send a Keynote presentation or fancy password-protected link and it doesn’t work IMMEDIATELY, they’re not reading further.
Stick with Powerpoint, PDF (probably easiest/best) or worse case, a Google Spreadsheet. Some founders like DocuSign and other trackable presentation platforms, and while the analytics are helpful, they can turn off some investors. No one likes to be spied on… And again, any drop off hurts your chances of closing your round.
The pitch deck itself
Like we were saying, you have 2–4 slides to grab my attention. Use them wisely.
And overall, keep your deck (minus the Appendix) to around 12–15 slides. Any more, it gets overwhelming and weakened, any less, you’re probably not explaining everything.
Pro tip: Your presentation deck doesn’t need to be the same as your email one. Assume you’ll leave things out of a “live pitch” deck that you’d include when emailing investors. You won’t be there to explain things in an email…
But first, before building your pitch deck: what is your elevator pitch? How are you hammering home your WHO, WHAT, WHY, HOW BIG and WHY NOW needed to pique interest? How quickly are you conveying that value prop?
Speed and simplicity is everything, plus upside (because VCs make their money on carry — more on that here)
Now, let’s build your perfect deck.
Slides to include:
- The Company
- The Problem/Hook
- The Solution
- The Demo/Use Cases
- The Value Proposition
- The Business Model
- Future Growth/Plans
- The TAM/Market Size
- The Team
- The Ask/Use of Funds
- Contact Information (Reiterate Traction)
The first slide is almost always a company/logo/tagline slide. It’s a quick “This is who we are and what we do” to grab the investor’s attention. If it looks nice and is memorable, it’s hard to mess up.
Airbnb does this well (albeit ugly, but that was a decade ago…)
This is probably THE MOST important slide in your deck. Plenty of startups build cool shit, but only the ones that solve REAL problems make REAL money doing it. The world doesn’t need another photosharing app, but if your app helps photographers protect their photography in a world filled with $100B of stock image piracy, that’s a big deal. So, sell that here.
Who cares about what you’re doing and why? Who is your target customer? There are NO mass-market products or problems…
And remember, investors aren’t electricians or bakery owners, you NEED the VC to feel the pain your customers experience before trying your product. Only then can they relate and realize the enormity of the opportunity, and the necessity of your solution.
If you’re were on fire, I could sell you a pitcher of water for ANY price.
There are many reasons female entrepreneurs are so underfunded (~3% of venture dollars), but an obvious one is investor empathy. If you’re pitching me the perfect period relief pill and I’ve never had to deal with the monthly cramps or crappy feelings… You get the picture.
Including competitors slide isn’t a clear cut yes or no. Some people say you need it, others don’t. I’m in the camp that believes creating one forces founders to consider just how different their product or service is from the competition, and how they stack up in the market.
And failing to at least note the competition can look like an oversight, even if it feels like you’re creating a category.
Use the competitors slide to subtly sell yourself. What differentiates you and makes you better than all the brands out there? What would customers choose you over the market leader?
Slack does this incredibly well, positioning “competitors” as partners and showing how Slack can unify these disparate services into a better functioning system.
The Solution/Use Cases
How do you save your customers the headache/heartache etc… of the ENORMOUS problem they’re stuck dealing with? Don’t just tell me, show me. I want an explanation and I want images.
Demo your product, make it tangible. If I don’t know HOW you solve the problem, it’s hard to wrap my head around your business, and you won’t get the meeting.
And unfortunately, given the B2C boom we’ve seen in recent years, the product is everything. If your app or offer isn’t polished, that can really hold you back, so be sure to sell the vision too. Kickstarters don’t only show the prototypes but include photorealistic renderings to make it as lifelike as possible. Do that, if you can (but make it obvious it’s touched up). The only thing worse than a subpar movie is the one your friend couldn’t stop talking up for two weeks which was Netflix material at best…
NOTE: The demos will generally be made up of several slides. That is fine. Use the space on the margins and text highlights to showcase additional important details, and remember ALWAYS BE SELLING.
The Value Proposition
Some pitch decks put this before (or combined with) the solution and use case slides, others preferred to hammer it home. But when it comes to the Value Prop, it never hurts to overemphasis. People pay for value, so what makes your product worthwhile for consumers and investors alike?
This is pretty much your elevator pitch…
Here are a few examples:
- Slack helps businesses and organizations communicate with a simple chat interface.
- Uber helps individuals get from A to Z with a simple ride-sharing app and lets car owners monetize their free time.
- Amazon helps people buy and sell things online.
The best examples combine text and images to get the point across.
Need help with this? I help companies build the perfect pitch deck.
“Show me the money!”
This slide should be pretty straightforward. A few things to watch out for:
Twitter followers are not traction
Press mentions are not traction
Product completion/features is not traction…
All too often, founders confuse metrics with traction. Traction relates to your KPIs (key performance indicators).
How much money are you making? How many customers/users do you have? How often are they using your product? How’s growth?
These are the kind of things you should show.
Have information on the cost of acquisition (CAC), lifetime value (LTV), churn… these are important as well.
And for goodness sake, track Net Promoter Score: From 1–10, how likely someone is to refer your product/service to a friend? As a follow-up question, ask them what is the #1 reason for their answer. That will tell you (and potential investors) a lot about the quality of your product/service/business and give you insights on key selling points going forward.
The Business Model
How do you make money? And how quickly can you explain it to me? As a rule of thumb, the more complicated the business model, the less likely it is to succeed. And most successful businesses have only ONE business model, at least in the startup stage. Solve one problem really well for a ton of people. Once you do that, you can think about expanding.
But like the Sharktank guy who wants to start a subscription box business, a food truck and distribute to big box stores simultaneously, the more you divide your attention (and team and resources), the more likely you are to fail. And in the high-stakes, high-failure world of startups, that means no deal.
So, ONE business model, at least for now. Lead with your BEST/first one if you plan on adding more in the future. And break down the numbers, possibly with simple projections.
This slide serves two purposes: 1) showing investors you’ve considered the future projections with reasonable expectations [numbers you can actually hit] and 2) showing how you plan to get there.
Hockey stick growth doesn’t happen overnight or without work. If Facebook ads or affiliate marketing is your strategy, showcase that, and explain why (for more on organic methods of mass user acquisition, see this post). Here is also a place to highlight any tests you’ve done concerning acquisition channels/optimization etc…
And where do you plan to expand in the future? Is it a new product line? New sales channels? What about franchising, moving into Europe or adding additional feature sets…?
Investors want to know you have a plan. Of course, things change and you deviate/pivot as the market dictates, but at least show you’re thinking things through and have the chops to adapt, should the need arise.
The TAM/Market Size
Ah, TAM, or total addressable market. This is always a hotly contested topic. How big is the upside? That’s what investors want to know. They aren’t interested in $10M markets or outcomes, they need B’s.
And money is the ultimate drug (for good and for bad…)
Be careful though. Unrealistic market sizes and comparables can cripple your pitch. You NEED to be on point here. Be specific. Explain your reasoning.
Many founders pitch a market without being impartial. They oversell reality. The professionally managed global real estate market is about $7 trillion dollars. The total real estate market, however, is $217 trillion.
That is a big freaking difference.
If you are helping real estate companies manage their portfolios, your max TAM is about $7 trillion (technically much lower unless you look to own the real estate assets themselves).
But doesn’t $217 trillion sound a whole lot sexier?
Don’t do it. Investors will know you are either lying or too stupid to size the market. Either way, you are uninvestable…
There two ways to think about market sizing: 1) top-down, or 2) bottom-up. Different investors have their own preferences. Explore both models when calculating your TAM.
Top-down TAMs are often akin to saying “There are 1.3 billion people in China. If I could just create a product that each of them bought for a dollar, I’d be a billionaire…”
And while this sounds absurd and we inherently know it is a bad idea, there are situations where top-down market sizing works.
A less ridiculous example:
Amazon charges FBA sellers ~15% for every transaction and accounts for about half of all US eCommerce (and increasing… Amazon is engulfing eCommerce). If eCommerce were to increase from 15% to 30% of all US retail ($6T in 2018, Source), Amazon would process $1.8T in transactions, earning $270B/yr in transactional/FBA fees alone.
And that is revenue, not TAM. Their TAM, assuming 30% of all retail would be $1.8T as they’re also creating their own Amazon Basics line to commoditize EVERYTHING.
Bottom-up TAMs are generally smaller and more realistic. They start, not by taking massive markets and assuming penetration percentages, but by looking at sales locations/channels and comparables, and working from there.
Consider selling snack bars at Starbucks. There are 6,031 Starbucks in the USA. And let’s assume each has 10 premade and 10 handmade snack options. Now, if they’re selling an average of 100 units per day (a made-up number), adding an additional product means you’d account for 1/21, or ~4.5% of their product line — about 4.5 bars per day per store (all things being equal). That’s 27,139 bars per day, which, at a $3.99 pricepoint equates to $108,000/day or $39.5M per year.
Now, if you expanded internationally, or into other coffee shops, 7-Elevens, etc… your TAM would go much larger… That’s an example of a bottom-up approach, and most VCs prefer it because it yields more reasonable numbers.
For your business, calculate the TAM using both methodologies and explain both the reasonable and the really big, and how you plan to get there.
What makes YOU the ones to succeed where so many failed. Facebook wasn’t the first social network, Google wasn’t the first search engine… you’ve heard it all before.
The path to success is paved in skeletons and crushed dreams.
As a founder, you need to prove to investors that WON’T be you.
What makes you different/unique/unstoppable?
This can be a lot of things: from an all-star cast of Apple alums to repeat founders building on their last big success, from scrappy immigrants solving affordable housing to recovering diabetics fighting obesity…
What makes YOU the person to solve this? Highlight the founder-market fit and don’t be afraid to brag and sell yourself. You’re the product, the ONLY difference between success and failure.
Ideas are worthless, execution is everything.
Don’t have credibility yet, that’s okay. Do your best and if/when you do get the meeting, highlight that, attack it head-on.
“I know I’m not the most experienced founder, don’t have an exit under my belt, but I’m willing to work my freaking ass off to make this a success and here’s why…”
The Ask/Use of Funds
The MOST important part of any sales call is the ask. If you don’t have a call to action, it was just a nice time, but inevitably sizzles out. If you don’t ask for her number, you’re never seeing her again…
And the same is true in venture capital. VCs have specific targets for ownership and check the size. They NEED to be able to filter deals fast and know exactly what you’re looking for. So, tell them…
It can also be beneficial to explain what you want to use the money for. How is this cash the rocket fuel your startup needs to scale, to derisk, to reach the next milestone? And what is the next milestone, what type of traction metrics do you need to attract follow on funding?
This is SUPER important for VCs to raise their next funds (and they’re raising every 2–4 years).
So, what are your goals and how quickly can you hit them?
The last slide is the one that gets left open (both during presentations and on an investor’s PC). Why will they remember you, and what do you want to hammer home?
The best pitch decks place traction information here, or some type of hook to get/keep investors interested. If you want them to hit reply, or to forward it to their partners, you need to give them a reason.
You only have one chance to make a last impression, and it’s your last impression that dictates whether or not they’re still interested… Much like that goodnight kiss after an incredible evening:
Leave them wanting more…
Crafting a pitch deck is hard but incredibly important. You’re asking someone to give you a boatload of money to build your business with little to no recourse. Scheduling a meeting is a big commitment. Investors are inundated with founders seeking funding. They HAVE to protect themselves and their time or they’d be constantly listening to subpar pitches.
So, hopefully, the points above help you refine your deck and land the meeting. If you need more help on your deck or a founder/CEO coach to help grow/scale your business, I’d love to chat.
Building a business is hard, raising money sucks and entrepreneurship is a freaking rollercoaster… But if it was easy, everyone would do it, and it wouldn’t be worthwhile. Entrepreneurship is worth your while, so is building something that meaningfully changes the world.
Now, take the advice, fine-tune your pitch and put your best foot forward. Good luck!
Show me the money…
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Don’t forget to check out the rest of the Ultimate Guide to Startup Fundraising
Part 1: Understanding Investors 101: The Pros and Cons of Angel Investors, VCs, Syndicates and Venture Debt Part 2: The Memorable Elevator Pitch that VCs Can’t Ignore Part 3: The Killer Startup Pitch Deck VCs Can’t Ignore! Part 4: The 13 Biggest Fundraising Mistakes Startups Make Part 5: Structure Your Fundraise to Close Your Round Faster