How important is your pitch deck for funding?
Grabbing the attention of an investor shares many common traits of gaining the awareness of your target market.
It takes a funnel.
Your customers move through the marketing and sales process. Many potential customers see an ad (or content via SEO), some of those visit your site and then a portion of those visitors sign up to begin considering your particular solution.
- So, large groups of targeted individuals lead to a number of visitors to learn more.
- Then, visitors become leads by either giving contact information or becoming a trial or freemium user (for software and SaaS startups).
- From there, you begin the process of trying to convert those leads into customers.
Investors follow a similar flow. First, they learn that you’re seeking funding. Next, they’ll give the details a bit of attention. If your business seems like a fit for their portfolio, investors will scrutinize the available data.
Almost all of this happens via a “pitch deck”. A slide presentation with all pertinent information about your company, the market you’re in and the potential upside for those who invest.
What does that pitch deck look like?
Again, a funnel. Specifically one with the three phases outlined in the rest of this article.
The primary example: Buffer is a huge player in the social media space. Once upon a time, they were also prolific fundraisers. Early on, the company shared a slide deck they used to raise one of their first rounds. The core information still holds up and serves as a great example.
Stage One: Quickly Share the Big (Market) Picture
Some products are fantastic, but there’s not a large market. A VC or independent investor wants to know there is potential for exponential growth. The technical term for this is called “Total Addressable Market.”
Essentially, it’s the total dollar amount of the field you serve.
Example: A fast casual restaurant. The believed addressable market size of the restaurant industry is nearly $900 billion. Fast Casual makes up about 7.5% of that market and growing ($65 billion, estimated).
Those numbers are great, but notice that Buffer didn’t use those when showing off the market they’re targeting. But things like “twice” and “surpass SEO” are included.
Key point: Every slide has the primary job to intrigue the right investors to want the next slide.
“You want to be able to share the big vision. Let investors see just how much upside there is in a dream case scenario. You don’t want to oversell, but it’s important that the investors see enough upside to make it a worthwhile investment.” — Justin McGill, Founder of LeadFuze
Why the big market picture is important
- Peaks interest in qualified investors: It gives them just enough to look further. You’re not trying to put up a bunch of fluff, smoke and mirrors. But they do need a taste of the upside.
- Reduces the number of interested, yet unqualified investors: If it’s an industry or field that an investor doesn’t really understand or have interest in, they’ll move on (and that’s not a bad thing).
- Sets the stage for the potential of your business: Investors are going to simultaneously look for the viability of your business while considering the potential upside for them. The big picture shows how big things could be, if done correctly.
- It’s the opening copywriting to sell your potential: Buffer finessed their addressable market size to include compelling copy, not numbers.
Stage Two: Briefly Differentiate Your Business
Those who move past your addressable market now want to know a bit more about your product. Depending on the market, investors may understand a great deal about your competitors.
You must know:
- What users in your market know (aka the typical user’s knowledge)
- Key differentiating factors of your products vs. the average solution
- Why that matters and how it changes the game
The example slide is a bit misleading. It shows an older version of Buffer’s tool. But back in 2011-2012, scheduling posts for multiple social media platforms was mind blowing.
Further reading: Great piece on finding the competitive advantage through differentiation.
There is a sizable danger when showcasing what it is you offer customers — overexplaining your product(s).
Investors are looking for a good company, not a cool software tool. Too many pitch decks are essentially a sales call or demo. Doing so makes your deck too long and off topic.
What not to do when explaining your product(s)
- Don’t treat them like an interested customer, they don’t want (or need) a full product demonstration. They can see this later, if interested.
- It’s also unnecessary to lay out things out feature-by-feature. Give them the core function(s) and lay out a brief roadmap.
- Don’t talk about yourself more than the market and potential upside for the investor. They want to see how it fits their needs, not what your company culture looks like.
Stage Three: Hit Them with the Right Data (Loads of it)
The first two stages are the tip of the iceberg. Data is the girth underneath the surface of the water. That means, it’s also the longest section of this resource. There are so many metrics you can show. Whichever numbers you choose, they must be potent, concise and compelling.
There are 3 types of data to include.
For a software startup, there is no shortage of metrics. But Buffer used two primary things to convey monetary information:
- The progression of the top number revenue
- How long it took to get there (via a basic timeline)
- The business model used to gather that revenue.
Note: It is vital to have clean books and a clear picture of financial health. The first thing an interested investor will want is to look under the financial hood. The revenue intrigued them, but if you’re burning through cash they’ll likely walk. If you’re looking for funding, work with an accounting service that specializes in startups. They’ll get the books in order and even help you compile the right information for your pitch deck.
Investors look for massive numbers, both in current users and potential growth. Big numbers often mean better exit scenarios (whether it be via IPO, buyout or greater value of shares through more funding rounds).
What’s important to know is that all of these numbers work together. You wouldn’t necessarily put your revenue on a timeline of one slide and then the revenue growth timeline on a different slide. It wouldn’t make sense. It wouldn’t tell a story.
Key point: Financial data and customer data go together to clearly point out the trajectory of your business.
Competition is a good thing. Sure, Slack is an anomaly which basically created a new sector, but that is exceedingly rare. Some founders become timid and don’t want to show the massive competitors.
Don’t leave them out.
The right investors are going to immediately connect the addressed market to a healthy amount of competition. If you’ve done your job and explained your unique value proposition — they’ll want to know more.
What’s not needed is a full competitive analysis. Investors don’t need Excel spreadsheets going over every detail and feature. That comes later, once someone bites.
Key takeaway: All 3 of these data sets (financial, user-based, competitive) work together to tell the story of your business. Potential funders need to walk away from this pitch deck knowing you have something that works.
- You’re gaining users
- It’s matched by a growing revenue
- And there are plenty of competitors to go after
Remember, Under the Hood Comes After the Pitch
Nailing the pitch is great. Emails get returned, your phone begins to ring. But that’s really when the work begins. If you haven’t created the investment terms, it has to be done.
Founders is an accounting firm that understands startups. From tracking finances, preparing investment terms and wisely tracking the cash runway post funding — we help founders grow. Serious investors will want to look at your financials, are they ready?