This is the third post in our series about how to prepare for funding. If you haven’t seen the first post, which provides an overview of the entire process, start there.
Consider this stat: A typical early-stage venture firm looks at between 2,000 to 5,000 pitch decks a year, and spends an average of just 244 seconds on each deck.
How can investors make multi-million dollar funding decisions in under four minutes?
The good news is most don’t. There are many other steps in the funding process where investors get to dig into the fundamentals of a business to fully determine its worth. The bad news is that pitch deck is what gets you to those later stage conversations.
That old adage of “you only have one chance to make a first impression” is spot on when it comes to the funding process, which is why the next post in our funding series covers how to package and sell your story so investors want to hear more and start reaching for those checkbooks.
Searching for greatness
There are a lot of good companies on the planet. There aren’t as many great ones. And investors are looking for greatness.
We know they’re out there, which is why we come to every meeting hoping for a compelling presentation that shows the founders have a smart take on the market, a real idea of what makes their business different and better for customers, and evidence that shows their vision and execution are tightly connected.
When we meet founders who have a good story and are able to tell it with confidence, it’s exciting because if you can tell a clear, concise, compelling story to us, you are probably good at selling it to prospects and employees.
But when founders struggle, it’s a red flag. If the person who believes most in their company is not sure where they’re going, why, or how they’ll get there, how can they convince others? Will they struggle to retain great talent? To woo customers? How can we be sure they’ll invest the capital wisely?
What investors really want to hear in a story are clear, simple answers to hard, complicated questions.
What investors really want to hear in a story are clear, simple answers to hard, complicated questions.
- Could this company and leader be a great investment?
- What is their potential?
- What are the risks to meeting that potential?
- Are they a better bet than others we’ve seen in this space?
It’s the last question that is so critical. As we’ve established, investors see a LOT of companies. So how do founders stand out from the crowd and paint a picture of their true potential? The pitch deck.
The components of a great pitch deck
Think about your pitch deck as your calling card. It’s the first introduction to your company, typically emailed in advance, or if you’re lucky, presented live in a short meeting. It’s not your life story, and it shouldn’t include every detail about your company. Save that for later meetings.
Your initial pitch deck should be 15 slides max and free of the buzzword bingo that plagues so many corporate presentations. Don’t create a 30 slide deck and think, “I’ll just skip around to the most important slides.” That just creates a scattered presentation and it doesn’t force you to think about what elements of the story matter most.
Sequoia wrote the definitive piece on what makes a good investor pitch. We don’t believe in reinventing the wheel so we’ve built on this incredible foundation with a few tweaks for what we like to see in pitches and why.
Here is our take on the 11 must-have slides:
1. Your company at-a-glance: This should be a statement that defines who you are, what you do, and the category you play in with a few key stats about your business. This is your headline. The cover letter for your resume. If you get it right, people will keep reading.
2. Your purpose or mission: What’s your vision for the company? Why should the world care that you exist? Knowing and articulating why you do what you do is just as relevant to investors as it is to employees and customers. As an example, Tercera’s mission is to empower the people and businesses that make technology work. Yes, our goal is to make money on our investments, but it’s helping the people who make, manage, implement, integrate and support the technology behind our digital economy that gets us out of bed every day.
3. The problem: What customer or market problem are you trying to solve, and how are you uniquely positioned to solve it? Be specific. Investors will be more intrigued if you say you’re helping mid-market banks create blockchain payment offerings, than they would if you’re one of a million companies helping with digital transformation.
4. The market opportunity: First, be specific about what market(s) you play in, and quantify the opportunity in that space. What’s the Total Addressable Market today, and what are the market trends and tailwinds that make the space so attractive now and over time? If you are in the cybersecurity space, which segment of that market is your sweet spot? How fast is that segment growing, and what’s driving demand? Paint a picture of the potential.
5. The competition: How should investors think about where you fit in the competitive landscape? Why are you so well positioned to compete against other existing players or the way customers are managing the problem now? What’s your plan to win the long game? Be honest. Investors spend a lot of time researching these markets. Be realistic with your competitive set, but aim high.
6. Your customers: Who are your past and current customers? This can be your standard logo Nascar slide with your most impressive customer logos. Or maybe it’s organized by vertical or region. Or maybe it’s logos with a hard-hitting customer case study. Don’t be afraid to think outside the box on this section because nothing tells your story better than your customer stories.
7. Your partners: With whom are you partnering to go to market? Who are most strategic? This is especially important for services firms, as partner relationships influence growth in so many ways. Know that you’ll be judged by the company you keep. Are you at the forefront of the market, working with newer, faster growing tech companies? Or are you tackling a larger, more mature market where relationships with the established vendors matter to large customers?
8. Your solutions: What specific products and services do you provide? How are your offerings different or exceptional? How are you providing them or packaging them in a unique way? The key here is to be clear about what you actually provide and how your solutions address the problem you laid out earlier.
9. Your team: Who are the founders and key leaders responsible for driving growth in your company? What experience do they have in your chosen market, and do they have a track record of success? Investors bet as much on the people building companies as the company and idea itself. How diverse is the leadership team? Investors understand that diversity is correlated with better results and this is becoming more important to highlight.
10. Your financials: This isn’t meant to be a full run down on your financial situation (that happens later in the process). This slide should include the most important metrics for the investors you’re pitching. If you’re a SaaS business, your Annual Recurring Revenue (ARR) and net revenue retention rate is critical. Services investors like Tercera will care about things like bookings, utilization, headcount growth, project size and bill rates. Every investor will care about revenue, YoY growth and margin profiles.
11. Your plan: What will you do with the money you intend to raise? Will you spend it to build out the leadership team, expand into new markets, fund M&A in key areas for growth, to build out specific products or intellectual property? Investors want to understand the strategic choices you’re making for the future of the business, and where their money will be put to use. Our next blog in the series will cover more on this topic.
The optional slides: Are there 2 or 3 slides that bolster the story above or reinforce your market position or differentiation? This could include go-to-market strategy, additional color on customers or partner relationships, your regional delivery footprint, or specific thought leadership or IP that you own. It could be a slide recapping the investment highlights. Just be thoughtful. The more you add, the less people want to read.
Remember, investors like patterns. Patterns make it easy to consume info quickly, and for investors, time is money. Patterns also make it possible to spot anomalies. This means you’ll want to follow a bit of a formula with your deck, but don’t be afraid to color outside the lines. After all, the goal is to stand out and show why your company is a better investment than the other 1,999 decks they’re seeing.
Next up: Know the why behind your investment.
