This is part of a series of articles helping you, as a Business Starter, to communicate information, and in particular to improve your chances for success in finding investors. Understanding the necessary elements of a successful pitch deck can help bring you one step closer to securing the funding you need.
Most investment firms do not disclose much. Most of them will not disclose whether they lead rounds (most do NOT lead rounds). When contacting investors, it’s a good idea to check you match their specific areas of interest and investment criteria (although, it is very likely that it is NOT listed clearly, or NOT disclosed at all).
You might stand a better chance of getting a meeting with most VCs if you are referred in, however, the odds of raising capital remain equally low (whether introduced or not), and do you really want to be backed by an investor that only invests in people they know, or who their friends know?
So, the best is to put together an 8-15 page presentation deck (or link to a deck that tracks openings) and add that to a one-page introductory email.
The email should include the name of the entity, a website, your elevator pitch, your location, revenues (if any), details of your financing history (if any), and the precise terms on which you are seeking to raise capital. Write your pitch down and control the narrative.
Pitch Deck Overview: Introduce your purpose
The first page. Provide a succinct summary (one or two sentences) of your company (what you do, for who, to facilitate what) and the clear purpose of your pitch in a single declarative paragraph. Provide your location and contact information. Many VCs suggest using the Founder Institute’s Mad Libs elevator pitch deck.
Highlight an important problem. Convince investors there’s something wrong with the present. Explain what’s wrong with the world right now. Show people what’s unacceptable about “what is” before they’ll get excited about “what could be.”
Present your thoughtful, logical, and fact-based solution to the problem. Prove that you have done your homework and know how your solution will fill the gap in the market.
Many investors, particularly the most aggressive, will not consider an investment in companies targeting a small market segment. Define the broader market size and identify the segment that your specific solution will currently address.
Competition and Solution
Show knowledge of what other solutions are out there. Why are they failing? Why do they not fill the gap you are proposing to fill. How does your solution fit within the market? How do you solve this problem faster, cheaper, smarter?
Product or Service (Demo/Prototype)
Include at least a mock-up or a demo/video link of the Product/Service offering where possible in the pitch deck. Include any feasibility studies, or a Customer or User analysis, that you have done. Show mock ups, wireframes, screenshots, or a video demo of your product and what it does.
What is the greatest current challenge you are facing that might benefit from a relationship with your investor? Show you are committed to identifying and overcoming the limitations of your approach.
Business Model (Go to Market strategy)
How will you make money? Show your unit economics, who your target audience is, and how you plan to reach that audience. Which sales channels are you going to focus on and what is your distribution strategy. Acknowledge uncertainty and admit mistakes in the history of your organisational journey and explain how you dealt with them. Why is this a special time to be involved with the business?
Milestones / Traction (Past & Future)
Traction is your key focus as CEO. You need to grow sales with efficient use of capital. If you don’t have sales yet, show customer feedback, letters of intent, and/or daily active users.
If you are pitching a business with a longer (but uneven) track record, show how you have reconceptualized or recontextualized your business. Find other people to vouch for your idea through evidence collection.
Show how the business has developed with metrics related to revenue, the number of customers, team growth, and important events or milestones like capital raising rounds.
Identify the metrics that matter. Show a dashboard comparison of actual (vs. budget) Gross Revenue, COGS, Gross Profit, Payroll Expenses, Net Income (Loss), Cash Burn, Available Cash and Remaining Runway… or if you are early-stage, show metrics that matter, such as activation, engagement and retention.
Other metrics. Show (where relevant) your Headcount, Users/Customers, Customer Acquisition Cost (CAC), Customer Lifetime Value (CLTV), Churn %, Monthly Recurring Revenue (MRR), Sales Pipeline and Conversion to Sales %.
There may also be some metrics unique to your business, which don’t have any baseline, but are crucial to your company. Emphasise the traction already achieved and the metrics you are using to measure that traction.
What is the experience of your team (work history, network, and skills)? Why is this team relevant for this specific opportunity? Add links to your LinkedIn profiles for further investigation in your pitch deck. Show confidence in your ability to learn and become even better. What specific skills might you need from your targeted investor to help you build and grow?
Remember, many investors believe a management team is the most important determinant of business success. Include your resume highlights.
Include details of your funding needs & plans. What are the expected revenues, expenses, and cash flows one and two years out? How long will this financing round’s cash last you? VCs typically want to fund companies sufficiently so that they can run 18 months until the next funding, if needed.
Don’t only include an excerpt of a spreadsheet and a list of items you would like to spend on, but think about how your investor target can become a partner in the business. How much money are you asking for and what you’re offering in return?
How much do you want to raise and what is the intended use of the money? Will you grow a team, to support overhead, or to expand? How much have you raised thus far and from whom, and at what valuation? Details of your previous financing rounds (and valuations) are important. What type of capital are you raising?
Where is your firm or opportunity domiciled? What is its legal structure?
What else would you like to see?
Remember that investors are looking for you to succeed. They want to hear the best idea they’ve ever heard from you. They are hoping you are providing the solution to a problem that they can be excited about and that they know other people will be excited about too. Give them a great story!
Also remember, that aside from a great pitch deck, your website should include the basic corporate information. You should have an “About” page, a “Team” page with links to your presence on major social media platforms.
Please advise us of any suggested additions to a pitch deck.
Contact us if you would like help.
Imagine trying to put together the best football team, but only from people that Alex Ferguson personally knows, or the people that he knows, personally knows. Warm introductions might work at specific points in time, but it’s often best to respectfully pitch your story directly to investors that might be interested.
We can help you with your search. Contact us via info (at) littlesquarecapital.com