Before you get to a diligence stage you have to get parties interested enough to speak to you. The Pitch Deck or a Teaser for more established companies are key to do this.
When a Start Up tries to raise capital “Less is More” is considered the best foot forward. Capital cycles change quarter to quarter with money flows concentrated on specific sectors, for example anything scalable with AI is attractive at the moment, but that might not be the case in 6 - 12 months time.
If you are a Start Up at Pre-Seed you probably don’t have much market traction and you may not even have your MVP (“Minimum Viable Product”), so there really isn’t a huge amount to write about. So what ground do you need to cover and what are some of the metrics and language to incorporate into your pitch.
You should try to keep your Pitch Deck between 10-12 slides. I’ve taken the publicly available Sequoia Pitch Deck for visual aides throughout this article. You can use, Key Note, Powerpoint or off-the-Shelf providers like Slidebean to produce your content.
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1. Cover Page
This is a pretty standard (nay boring) slide cover page. Its the first page someone will see but they will move on quickly so keep it clean. ABC Limited “changing traffic management systems” / your Stage (while missing below) is preferable Pre-Seed / Seed etc with the Month and Year, your name, role and contact info.
Someone has to understand who you are and what sector you are in at a glance - that is the aim, be memorable but only cover the basics. It seems obvious but pick a consistent color palette that compliments your Brand or Logo.
2. The Problem
This is the cornerstone of your VC / Angel Investor life, what problem are you tackling? The world is full of problems and if your problem resonates with the Investor you are likely to be getting to the next stage. In that case, it becomes important to vet who you are sending the pitch deck to. There is no point sending a health tech business to a fin tech specialist, they simply won’t get it.
So with the problem(s) clearly identified, its time to explain how you make life just a little bit easier for everyone.
3. The Solution
This is your chance to explain what your product does to mitigate and resolve the problems that you have highlighted. Its your time to break down why you have the secret sauce that nobody else has. That could be a killer team, a killer process or some pick and shovel technology that is state of the art (“world class”).
Sticking to how you fix the current problem is a very useful tool for the future to help you revert to first principals - i.e. are we still the Company we set out to be or have we changed?
4. The Product
This slide provides the chance to showcase where you are with the Product (Development / MVP / Beta / Beta 2 / Lauch etc). You can provide insights into the future plan for the product, but for me this is the chance to highlight what you have learnt from the development and testing process as well as any unfiltered feedback from beta users or even clients.
You can incorporate what you think your Product Roadmap is, but if you are honest you are painting over the cracks as to whether you have Product/Market Fit at this stage. Learning from feedback is an important trait in a founder, don’t be afraid to highlight what you’ve learnt through your process to improve your product.
5. The Market (Total Addressable Market - “TAM”)
This is a common slide that catches a lot of Companies out. It is very easy grab some statistics from Google or pull data from Statista.com on the size of your sector and apply some math. This can be dangerous. Applying a 3% targeted market share to a €300m Annualized Revenue business, would mean that your business would only have a Turnover of €9.0m per annum.
Why could a $9.0m Turnover line be a bad thing? In this example it would mean that in order to achieve $100m ARR, the Company would have to hold 30% market share. Remember you are competing here for the attention of the Investor. They see lots of decks. Ideally what they want to invest is are Unicorns ($1billion Companies). This means you have to have a $100m ARR which means the market size has to be massive, in that a small market share actually achieves $100m ARR in the future.
Go to small, you aren’t of interest, go to high and you’ve lost their interest.
6. Business Model / Go To Market Strategy
There are a number of key metrics that Investors look for and I’ll cover some here but it is quite an exhaustive list at times and you’ll find different Investors focus on different metrics (and even have different view on how to calculate these metrics).
MRR - Monthly Recurring Revenue
ARR - Annual Recurring Revenue (hint multiple your MRR x12).
CAC - Client Acquisition Cost - how much does it cost you to secure a client?
LTV - Life Time Value - Revenue x Expected Duration of a Contract
CLTV / CAC - This ratio shows your Return v the Cost to secure that Revenue
The list really does go on and on. Instead of spending time going round in circles, be firm with the data you present. Give indications that any proposed pricing has had some positive and maybe negative feedback, but explain the logic to what you have decided to charge. In your roll out modelling always include a % of Churn Rate (losing clients). Sometimes solutions just aren’t received well or that the Client doesn’t have the time to implement it.
Do highlight any key Channel Partnerships / Sales Distributors but don’t over cook them if they haven’t delivered any sales to date and try to avoid horror words like exclusivity or assigned territories.
7. Your Edge
Most of the time, an investor is looking at the sector, can I (the investor) make a difference to this company, do I provide some Edge? But really their final decision will be whether or not you are the differentiating factor. What are you bringing to the table that others can’t?
Your market might be in a better position (e-commerce advancement over Covid or AI or Machine Learning) these days but don’t forget that Investors invest in people first and foremost. If you have “The Edge” you have a great chance, so emphasis it when its there.
8. The Competition v Your Value Proposition
This is a slide, not to talk down your competitors, but to highlight where they have positioned themselves and how you see your product being different or creating a better platform for your clients.
If you can tie in your Competitors to Market Size (TAM) in Slide 5 above that would be helpful, but make sure you are consistent in your presentation and that there are no contradictions.
9. Financial Info and/or Traction to Date
Everyone expects to see a hockey stick chart but they will give you hassle for it. There is only perhaps one slide that is guaranteed to be completely inaccurate and that is your financial projections.
In many respects you can control your Burn Rate (the amount of money it costs per month to keep the project going) and hence your Runway (the total length that the money you have will keep the project going), but only over a relatively short period of time 12-18 months. Beyond that point too many variables come into play.
Be strong on the short term and more flexible on the long term. Seems like common sense, but common sense just isn’t that common anymore. This is a good slide to incorporate some usage or metrics to identify where you are and where you are planning to be by a set time.
10. The Team / Advisors
Don’t focus on your Advisors, focus on your and your team’s strengths and why you are best positioned to take advantage of this opportunity.
As an aside, while Advisors may appear important, don’t over compensate them. I’ve seen Advisors get as much as 1.00% equity at Pre-Seed but the table below should act as a guide to the “sweat equity” that should be offered.
11. The Ask
Don’t be ashamed to ask for what you want and what you need. Usually there are guard rails for Pre-Money Valuations and unwritten caps on certain Funding Rounds, however it is all relative.
Remember that Investment Markets change on a quarterly based on Venture Capital firms Fund Sizes and Funds to Deploy. Even in a depressed market place in the US, the Median Seed Stage Fund Raise was $2.8m in Q1 2023 against a Median Pre-Money Valuation of $13.0m, equivalent to 21.5% Equity. Obviously certain sectors are hotter than others at different times but the Median is a fair yardstick to use.
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