By BRENDAN FITZGERALD
Full link: https://www.toptal.com/finance/pitch-deck-consultants/fundraising-pitch-deck?utm_campaign=Toptal%20Finance%20Blog&utm_medium=email&_hsmi=88617319&_hsenc=p2ANqtz-9hnl3–STtzY9NyIScoQNxXAQw9tNfrrCAPI8cYepsPTOcPBRONXdQe6t1yZu-dSAdZw8lSqhhW_dKdj7NwXEVXDsqqg&utm_content=88617319&utm_source=hs_email
One of the primary documents essential to any early-stage company fundraising process is a pitch deck. I’ve created pitch decks for dozens of companies and have used them to successfully raise almost $700 million of total capital, including more than $40 million of pre-seed equity for startup companies. Based on this experience, I’ll share what I’ve learned about creating a pitch deck that works (i.e., gets capital raised).
The pitch deck is typically given to a prospective investor after they have heard or read your elevator pitch and expressed interest in learning more about your company. Any sophisticated investor will want to understand four key elements of the business opportunity, which should form the outline of your pitch deck:
I’ll discuss each of these elements in more detail. However, let’s cover a couple of general presentation FAQs first.
Pitch Deck FAQ
Q. How many slides should be in the pitch deck?
A. No more than 10-15. Save the real details for your due diligence deck, which will be one of the first things a prospective investor asks for if they’re still interested after the pitch deck.
Q. How much detail should be on the slides?
A. You should have two versions of the pitch deck – one that you use when you’re actually giving the pitch in person and another, with more details, that you send to people who will read it on their own. You just want the major takeaways on the in-person version, as you want the audience to be listening to you, not squinting to read detailed bullet points on your slides. The “read on your own” version can have more information. But remember, all you’re trying to do with the pitch deck is get their “greed glands” flowing. If you do that, there will be plenty of opportunities to give them more details. If you overwhelm them with details at this point, they may miss the big picture.
Q. How important is the “look and feel” of the pitch deck?
A. It depends. At the risk of stating the obvious, in all cases, the content should be clearly written and free of typos and spelling errors. If you’re presenting your company in a business plan contest or other situation where you’ll be one of a number of presenters competing for the audience’s attention and dollars, I’d suggest you think about hiring a professional designer to make your deck stand out from the crowd. If you envision just a series of one-on-one interactions with prospective investors, that’s not as important.
The example slides you’ll see in this article are homemade, i.e., I started with a PowerPoint template and was more focused on the content than the appearance of the slides. If I’d hired a professional designer, I’d have gotten a custom template, custom graphics or even videos, a more refined color scheme, better slide layouts, and probably fancy transitions between the slides. The content would still have been the same, but the overall look would be much more polished and refined. Having been in the audience many times when entrepreneurs were presenting their business plans one after the other, I can assure you that it quickly becomes a blur. Anything you can do to differentiate yourself and capture the audience’s attention is beneficial.
Q. Should the pitch deck cover topics in a certain order?
A. There’s no magic to the order in which you cover the four key elements of the opportunity. You typically want to lead with your strengths. For example, if your company just signed a JV with Amazon to develop the next generation of online shopping technology, get that fact out early, as investors will likely view everything else they hear in a more positive light. Also, you don’t have to strictly segregate each topic onto different slides in the deck. For example, if your VP of sales was formerly the VP of sales at the dominant company in your target market, you may want to mention them early in the pitch when you’re making general introductions, but then really highlight their credentials on a later slide, after you’ve explained the market structure, so the investors can have a better appreciation for how much value they add to the company.
Q. How aggressive should I be in my business outlook and financial projections?
A. There’s always a tension between having your “sales hat” on and showing a plan that you can realistically execute. Personally, I’ve always tried to create “reasonably aggressive” business plans and financial projections, which are then summarized in the pitch deck. I also try to build plenty of financial reserves into the plan for the inevitable surprises that always seem to occur in startups. Most investors will recognize wildly aggressive plans right away and won’t invest in them. It’s almost worse if they do because you inevitably end up in a bind when you’re unable to deliver on what you promised and you have to go back to investors, hat in hand, with vastly diminished credibility.
Q. Should I include risk factors on a slide in the pitch deck?
A. No. The pitch deck is a sales document. There will be plenty of opportunities to formally disclose risk factors further downstream in the fundraising process. Having said that, you should definitely be prepared to discuss risk factors when making the presentation. More often than not, someone will ask, “What keeps you up at night?” Your answer to this question should indicate that you know and acknowledge there are risks, but you have plans to mitigate them. There is no such thing as a riskless startup. If you try to pretend that yours is the first, don’t be surprised if you’re struggling to find investors.
With that general background, let’s break down the primary information you need to convey about each of the four key elements of your business. Since a picture is worth a thousand words, I’ve also included some example slides from an old pitch deck I used to raise $1+ million of very early-stage equity.
Breaking Down Your Pitch Deck Structure
1) Define the Product
Your product overview should be dominated by the answers to two critical questions:
- What unmet market need does your product fill?
- How does your product address the market need in a differentiated manner from the current competitors?
Many good pitch decks use the first slide to highlight the unmet market need the company is addressing and the second slide to provide an overview of the company’s solution. Additional slides can be used to explain how the product is differentiated from competing solutions as well as any intellectual property or other barriers to entry associated with the product.
Your company doesn’t need to have invented the cure for COVID-19 to get funded, but you do need to be able to clearly and succinctly explain why customers will pay for what you propose to sell. If you’re struggling to create a simple table that shows your competitive advantages, you may want to rethink things.
2) Cogently Quantify the Market
Your pitch deck has to address three critical questions related to the market:
- How big is the addressable market?
- What is your company’s market penetration strategy?
- How much, if any, market traction does the company have?
The keyword in the first question is “addressable.” One common mistake many entrepreneurs make is to overstate the addressable market size. It’s very easy to lose credibility when it becomes clear that the true addressable market for your product is much smaller than the total market size you’ve described. Imagine if you saw a pitch from the founder of a local brewery startup who told you that the market size was hundreds of millions of potential customers. It may well be true that there are hundreds of millions of beer drinkers worldwide, but a more realistic estimate of the addressable market is probably the tens of thousands of beer drinkers within a 25-mile radius of the brewery.
For most businesses, one of the hardest things to do is acquire customers. Thus, any sophisticated prospective investor will want to understand how you plan to make that happen and the cost you’ve budgeted to achieve the targeted market penetration. Do you plan on selling through wholesalers/resellers or direct? Are you exclusively using social media, or do you need a direct sales force complemented by TV ads? In today’s world, there are well-established customer acquisition cost metrics for many different business models. If your plan is well outside the norms, it probably won’t pass the smell test.
If you’re lucky enough to have market traction, by all means flaunt it! Customer testimonials are one of the most compelling things you can have in your pitch deck. Market survey results are also great, as is feedback from focus groups. Anything you can do to show that real customers actually do, or likely will buy your product is a plus.
3) Introduce the People Behind It
Sophisticated investors only invest in businesses if they have confidence and trust in the management team. In order to maximize your chances of raising money, your pitch deck should:
- Explain why the key employees you currently have are the right people for their roles.
- Address any “gaps” on your current team and the plan to fill those gaps.
I usually include pictures and brief bios in the people section of my pitch decks. In addition to their specific skill sets and accomplishments, I make sure to highlight:
- Any of the team members that have worked together previously (that’s a plus).
- Prior entrepreneurial experiences any team members have (even prior failures are typically viewed positively, as many investors understand that the knowledge acquired in a failed startup often minimizes avoidable mistakes in future startups).
In most cases, the CEO is viewed as most critical to the company’s success. If you can convince investors you have the right CEO, it goes a long way toward successful fundraising. Conversely, if your CEO isn’t able to demonstrate s/he is the right person to lead the company at its current stage, it’s pretty much a non-starter, unless you’re onto a really great opportunity and the CEO is willing to relinquish the role to someone else.
4) What Their Money Will Be Spent on
There are three things you need to cover related to money:
- A summary of your financial projections
- How much capital you’re currently raising and what milestones you plan to achieve with it
- Projected investor returns
In addition to presenting the high-level results of your financial model, somewhere in the pitch deck, you need to explain your basic business model. How is revenue generated (e.g., subscriber fees, freemium model, advertising)? What are the major cost drivers? Are you paying for the content or acquiring it at no cost? In either case, from whom? Simply put, how does the business work?
Your current raise and projected use of proceeds should also be highlighted in the pitch deck. If some of the desired capital is already circled, by all means include that—many individual investors don’t like to be the first ones in the deal, and institutional investors may move faster to avoid losing it to another firm if they like the deal. To be clear, you never say who has circled the deal, just that there’s interest.
Finally, you should include the returns that investors are projected to receive on their investment if your plan becomes reality. While most investors will run their own numbers as part of the due diligence process, you’re more likely to get their greed glands flowing if you tell them how much money you think they can make.
Provide What Investors Need to Move Forward
In closing, there is no such thing as one perfect pitch deck for all investors. Every prospective investor will have their own unique way of looking at the opportunity. If you try to build a pitch deck that addresses every possible question that anyone might ask, you’ll drive yourself crazy and have a 40-slide pitch deck that will have more people dozing off than reaching for their wallets. I like when investors ask questions because it gives me the opportunity to demonstrate that I really know the business and also shows they’re engaged enough to want to know more.
Even if you follow the guidelines that I’ve outlined here word for word, there’s no guarantee that you’ll be successful in raising capital for your startup. However, I can promise that you won’t miss out on a fundraising opportunity because your pitch deck didn’t provide enough information to whet investors’ appetites and give them the impetus to take the next step.