What do the most influential investors look for in a startup before they make their investment decisions?
Raising capital from investors is difficult and time-consuming. For a startup looking to raise funding, it must create, through a pitch deck, a compelling case for attracting investment in the opportunity, the product, and the team.
What is a pitch deck?
The pitch deck is your calling card - a persuasive statement of the opportunity that you have identified. Investors will see the pitch deck before they even agree to meet you.
Putting a pitch deck together is essentially an exercise in communications. The pitch deck communicates your company’s overview and critical market information to potential investors. It includes details of the problem being solved, the size of the market, the size of the competition, growth models, and the ability of the founding team to capitalize on the opportunity. The purpose of a pitch deck should be to present a compelling, concise, and credible rationale for potential investors to decide to invest in your business (the investment opportunity).
Preparing a compelling pitch deck is an essential part of the fundraising process. The pitch deck has added significance for startups that are raising funds because the company is only just starting, and the business idea is still unproven.
There is no ideal VC pitch deck template for crafting a winning pitch. No template can guarantee that you will land a term sheet. However, knowing what goes into the best pitch decks - what is essential and what should be left out - helps communicate the proposal effectively and increases the chances of attracting investors. The pitch deck should spark interest in the business idea, and act as a gateway to securing follow-on meetings for further intense discussions with the investors.
Creating a Winning Pitch Deck
Although there is no template for an ideal pitch deck, the winning VC fund pitch decks, which communicate the startup’s business proposal effectively, contain a few essential components that help convey the startup’s idea. The best decks, through their structured narrative, demonstrate that the founder(s) have thought deeply about all the important aspects of the business.
- A Compelling Narrative: The best decks have a cohesive proposal. It pays to invest time and effort to distill the essence of the venture and its impact in a concise message.
- Clear Product Description: Although it seems easy, many founders find it difficult to describe in simple terms what their products are. Just from reading the pitch deck, even someone from outside the company should be able to tell what the company does. Airbnb’s pitch deck had a slide that said - “Book rooms with locals, rather than hotels” - a concise and clear product description.
- Showing versus Telling: Showing a functioning product/working prototype is better than a detailed description of the product. A product demo is the most compelling pitch deck. But when a product demo is not possible, the pitch deck should capture the essence of what the product does.
- Identify the Market: Most startups, in their pitch, like to claim that their product will address a market of a billion dollars or more. Regardless of the market size, the investors should be able to see, from the pitch deck, the extent of thought that has been put in to understand the opportunity.
- Claims of Omnipotence: To make a favourable impression, do not exaggerate the strengths of your product, and run down the competition. Highlight the product’s strengths or the unique approach that gives the product an edge. Claiming omnipotence does not impress investors. What impresses investors is demonstrating that you have analyzed the competition and devised a strategy to gain an advantage. Balancing enthusiasm with reality is the best approach - experienced investors can see through over-inflated claims.
- Strength of the Team: The deck’s narrative needs to convince the investors that the founding team can execute, and realize the startup’s stated vision. Highlighting the professional background and successes of the team’s members helps. LinkedIn’s pitch deck had a slide that highlighted the founding team’s entrepreneurial experience, technical expertise, and knowledge of social networking. Grabbing investor attention with the product, opportunity, and team is critical.
- Good versus Perfect: Ironic, but a too-slick design and overly high production value of the pitch deck can sometimes be perceived to be an effort to distract. Sometimes, a perfect pitch deck raises red flags for the investors as well. This is not to imply that shoddy work is acceptable, but a little imperfection in the pitch deck can be more realistic. However, while the form is important, the substance is even more important.
- Knowing the Investors: Everyone has a finite amount of time and energy to pitch for raising funding. Finding the right investors to pitch to is critical. Research the areas of interest of the investors, their investment theses, investment size, investment portfolio, etc. to identify the right investors to pitch to. Although seemingly trivial, it is also important to research how the target investors interact with founders and their nature as people.
The Pitch Deck - Key Slides
Although every business is unique, good pitch decks include some essential information that is similar across businesses. As discussed earlier, the goal of the pitch deck is not to raise money but to pique investors’ interest to get a follow-on meeting. Inclusion of the following essential information maximizes the chances of eliciting investor interest.
- Company Overview: This is essentially a summary using 4-6 bullet points - of the business idea, the problem it solves, details of the management team, and the traction already achieved. The overview should grab the attention of the investors to convince them of the company’s ability to capitalize on the opportunity.
- Company Mission/Vision: Include a brief statement on the mission/vision of the company. This portion of the pitch deck is akin to a compelling 30-second elevator pitch for the business.
- The Team: For most investors, the company’s team is the key determinant of their investment decision. Details of team members must include their educational and professional experience and domain experience. Equally important are details of advisors/consultants/board members of the company.
- 'Problem' Statement: This section is a definition of the problem or the need that the startup intends to solve/address. Details should include the size of the problem, its importance, who is affected by the problem/solution, and target customers.
- The ‘Solution’: This portion of the pitch deck articulates the solution to the identified problem. The deck also explains why the startup’s solution is better than the other solutions available to the consumers. The ‘solution’ portion of the deck and the ‘product’ portion complement each other.
- The Product: This section articulates the product/service’s features and highlights the unique/distinguishing characteristics. The product section answers some questions - why should users be interested in the product, what are the major planned milestones, what are the additional features planned, etc.
- Market Opportunity: Investors aim to invest in opportunities that have large addressable markets. It should define the market, market size, and how the startup aims to serve and grow in the market.
- Customers: It helps to list the details of the company’s early customers. These details add credibility to the pitch. It is customary (almost cliched) for startups to display the logos of the larger and better-known customers.
- Technology. Investors are always (understandably so) interested in the underlying technology of the product - whether existing or under development. This section is used to describe the details of the technology, the intellectual property rights owned, the edge (if any) provided by the technology, and why it will be difficult for the competition to replicate the technology.
- The Competition: Investors like to be aware of the competition. Details of the competitive landscape to be monitored also include factors like differentiating features and competitive advantage. The startup’s grasp of the competitive landscape signals the company’s understanding of the market to the investors.
- Traction: Early traction is viewed positively by investors. Sales, traffic to the website, app downloads, press coverage, customer testimonials constitute traction. Strategic partnerships concluded, and plans for sustaining/accelerating traction are also to be detailed.
- Business Model: The startup’s business model explains and provides details on how the company makes money, its pricing model, customer's long-term value, and the customer acquisition channels and costs.
- Marketing Plan: Even the best products require a good marketing plan to attract customers/users. The plan should cover details of key marketing channels (paid search, social media, email marketing, PR plan, PR agency, etc.). Analysis of early successes, marketing channels that worked, per customer acquisition cost, anticipated customer lifetime value, etc are also components of the marketing plan. Investors are also keen to know if there has been any early press coverage.
- Financials: To make investors interested in the startup, the founders need to provide details of the company’s current financial situation, and proposed future burn rate. The details of the financials also include near-term and long-term financial projections, unit economics, recurring revenue, working capital requirements, total revenue/expenses, EBITDA, and assumptions made (if any). Projections need to be realistic. Unrealistic projections adversely affect the overall credibility of the startup.
- The ‘Ask’: The all-important ‘Ask’ is usually the final slide of the deck. The ‘ask’ lays out the quantum of investment sought, the duration the financing is expected to last, major milestones targeted with the funding, end-use of the funding (new hires/product development/marketing, etc.). Details of existing investors (especially established investors) also help strengthen the pitch.
Venture Capital Pitch Deck Templates
Before you finalize your pitch deck, it is a sound strategy to look at some well-known and successful VC pitch deck examples. It is to ensure that your pitch includes all the required information and makes a convincing case for your startup’s business idea. The pitch deck examples provided below are a few of the many available.
The VC pitch deck examples provided are meant to only assist you in gaining an understanding of the essential information that investors expect to see in a pitch deck. Remember, there is no ‘ideal’ pitch deck. Opinions on what is a good pitch deck vary. Some opinions may even seem contradictory. As a startup founder, you need to craft your final pitch deck tailored to the unique features and requirements that best characterize your business idea and funding need.
- Guy Kawasaki’s pitch template
- Ycombinator’s slide template
- Airbnb’s seed deck
- Facebook’s original pitch deck
Summing it up
A great pitch deck can vastly improve the possibility of attracting investors and obtaining finance. For that, the narrative in the pitch deck must be interesting and compelling. All the topics, relevant to your business, that the investors expect to see must be included in the pitch deck.
The pitch deck should be able to convey the essence of your startup’s business idea even without an accompanying presentation. The founder’s presentation should aim to only supplement the pitch deck. Most often, investors ask for a copy of the pitch deck to take another look at it and to discuss it with their internal investment teams. The pitch deck should have a compelling enough narrative, even without the founder being there to support it.
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Access more guides in our Knowledge Base for Startups.
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