In this article, we will help you prepare this document by examining an example of a pitch deck to finally arrive at a model.
We chose to focus on the pitch decks for early-stage startups. As companies mature over time, their investors and investment proposals change, so do pitches.
To whom and why
Before making any presentation you should always understand your audience and clearly define the purpose of your presentation.
- Understand your audience
Understanding your audience will be the first step in convincing them.
Expect your audience to have the following features:
- Limited time for your presentation
- Assist in different pitches every day
- It is looking for opportunities and clues to find successful companies
Therefore your pitch should aim to offer these clues by answering the most important questions an investor has. And it should do it clearly and concisely.
- Work with a purpose
When creating your pitch deck, you should do it with a clear purpose in mind.
Investing in startups is a very uncertain activity. Most of the investments do not go anywhere and many startups fail after the first year of life.
Your presentation should therefore convince the investor that your company has the potential to be the next 10x company.
However, your pitch deck is not the only document that will be used to make an investment decision. This document is all you have to excite the investor.
Investors generally look for the following items in a presentation.
The maximum limit of your company’s potential will always be your addressable market.
So, before anything else, you have to convince the investor that there is a market for your product and that one day you can generate a lot of profit from that market.
A good market opportunity is generally a combination of the following factors:
– A significant problem that needs to be solved
– Existing products / companies that do not provide the right solution
– A temporal component that allows a new solution (regulation, customer behavior, etc.)
Ability to perform
Once the investor is convinced of market opportunities, the question arises if you have the right team for the job.
Investors are looking for teams that are able to concretely implement the project they believe in. Determining the strength of your team is a crucial part of the investment decision, as the investor will prefer to invest in an A team running a B product than the opposite (trusting an A team to eventually move on to the right product).
So rely on your team, its track record and its victories so far, to highlight your ability to perform.
Once a market opportunity has been defined, one must then be able to offer it that opportunity.
An important indicator of success for investors is the ability to acquire and grow customers successfully in a scalable way.
Make sure you focus on the ability to scale both in terms of product and business model.
Every great opportunity will attract many competitors.
Investors are looking for startups that can compete in the long term. The first step to do this is to understand and properly evaluate the competitive landscape.
Show your knowledge of the market and highlight your unique competitive advantage; whether it is a network effect, a technology that is difficult to replicate or the possibility of out-executing everyone else.
Finally, investors want to have as much evidence as possible that the company will work. A good start is very positive.
Try to show that you are going the right way, showing your results in creating a team, creating your product, getting traction from the customer and, of course, sales growth.
Prepare the pitch deck
Now that we have clearly understood our audience and the purpose of the pitch, we become more practical.
Before immersing yourself in the content, two words about the shape of the pitch deck.
Limit the number of slides
First of all, people are not good at understanding more than 10 concepts at a time. Moreover, they are not very focused.
Make the most of your audience’s attention and limit yourself to entering key concepts and points that will really make a difference.
It is recommended to have about 10 – 15 slides, with only one message per slide.
Do not load content slides too much
Since slides are few, we tend to contain more information in them.
Do not do it. Try reducing messages by selecting the most important ones.
If the investor thinks after reading your slides, what are the key concepts you should know? Make sure these points are well treated and leave out any element that can create confusion / distraction.
Tip: use clear and concise terms, don’t over-use examples and bullet points. A great way to limit yourself is to use a large font (30pt).
Although this certainly does not concern who is the best in PowerPoint, the graphic aspect is important.
Since you are trying to convince an investor that your company can succeed, this aspect is also worthy of attention.
Tip: the use of a good color combination and a clear character are optimal.
Now that we have chosen the right shape, immerse yourself in the content of your pitch deck.
A summary of a row
Aim to define your company in a single sentence.
Don’t list the features of your next product. Instead, focus on communicating a clear mission for your company
- Problem and opportunity
What problem are you solving? What advantage are you providing?
Not only do you define the problem you are trying to solve in your pitch deck. Define also for those who try to solve it, how it is solved at this time and what are the main shortcomings of the reality that surrounds us.
- Define your solution
Now focus on your business and your product.
It clearly illustrates how your company will provide the right solution and why this solution will be the best for your customer.
What do you do? Do you save time, money, generate revenue for your customers or give them lots of fun?
Make sure that the investor fully understands why your product is so appreciated and useful for your customers.
- Why now
Many large companies have had a great sense of timing.
There may have been a recent technological innovation, or a change in regulation or in customer behavior: all these factors could have made your company a possibility today.
If you can convince an investor that you are part of a strong wave of growth and development, you will become a very convincing investment case.
This slide is not always easy to include. If you can, surely do it, if not, don’t worry.
- Market potential
Clearly identify your customer and your total addressable market.
In general, there are two approaches to finding your total addressable market:
Top-down: start from an existing market from which you expect to take a slice
Bottom-up: start from possible customers willing to spend a certain amount of money on your product.
Try to take advantage of existing market research. Company archives, stock research reports and consultant white papers can be great resources.
If you create an analysis yourself, make sure it is easily verifiable. Explain your estimates, provide details for your assumptions and describe the source of all the data you use.
Put together all the useful information for an investor so that you all arrive at the same conclusion.
For example, if we state that our CRM software for small B2B companies represents a significant improvement over existing software, then we can consider this market as our total addressable market.
- Competition and alternatives
For almost all problems your client will have a series of possible solutions.
Make sure you understand the entire competitive landscape. If the investor can find more relevant competitors than the ones you are presenting to him, with a simple Google search, he will not trust you.
Provide a good overview of who the direct competitors are, which are the adjacent markets, who are the possible competitors and what are the possible substitutes is always a fundamental step.
Clearly define in your pitch deck what you are different from others and why you should win this competitive battle.
Focus on the differences especially in terms of strategy.
- Business model and strategy
This section is dedicated to explaining why you are potentially running an extremely profitable business.
Tell investors how you plan to make money. You must sell in the future potential and use your current metrics to establish a trust connection with the investor.
Start by answering the following questions:
-How did you acquire clients in the past and how will you do it in the future?
-Where did you find your previous customers and what were the acquisition costs?
– What are your conversion rates?
– How many customers continue to work with you (or the opposite: what is your churn rate)?
– It also clearly illustrates your plans for future growth.
Will you increase your sales and marketing team, enter new markets or increase current customers?
This is the moment in your pitch deck to explain all this clearly and concisely.
It’s time to show your team.
Investors are looking for the right team. Include in your pitch references to previous results and complementary skills in your team to strengthen your credibility.
You can also add the key positions you are trying to enter.
- Metrics and historical financial data
Depending on the stage your company is in and the results achieved in the past, it may make sense to include some metrics and historical financial data in your pitch.
The key thing to show in your pitch deck is your traction
If you decide to use a chart, make sure it is well formatted to support what you want to show.
Now that you’ve caught the attention of investors, it’s time to explain why you’re trying to raise capital and how you’ll use it in the next period.
The points to be included are:
– The period during which the money will be used
– Objectives / goals of the product and company achieved so far
– The key assumptions to be made
To support your plan, it may be useful to include relevant future financial projections.
Be sure to cover the same time period as the period for which you are collecting capital (eg 12 – 24 months) and to support your numbers with clear projections on the number of users and customers that you are going to acquire.
Everyone knows that financial data is a leap in the dark for startups.
However, a well-structured financial projection can give investors an idea about where you are going, what are the key metrics and how the management of your product / service is already rooted.
Finish by going into detail on how much money is collected, if there are previous commitments, what the timing of the round is and any other relevant details.
Other documents to prepare
Start by creating the pitch deck, as this will be your main story to show to investors.
Once you have created this document, you can take advantage of all the work and effort it takes to produce it, in order to create other interesting materials.
Due diligence documents
The ideal outcome of a teaser is that the reader wants to see your pitch.
Furthermore, it serves the following purposes:
– It allows you to introduce yourself to the investor
– Warm up and prepare the investor before your pitch
– Allow the investor to share your story
The document should be a summary of the key aspects of your company in an easy to read format.
Be sure to highlight the following key aspects:
– Product: explains the product and why it is important (Problem / Solution)
-Market: highlights market opportunities (market / timing)
-Team: show the execution team
As you can see the content of the teaser is highly superimposable to your pitch deck.
Your pitch deck is all about convincing investors to take a deeper look at your company for future investments.
At this point investors, as they usually do, will come back to you with a series of detailed questions.
You must be prepared to cover 90% of their due diligence requests in advance. This not only speeds up the process, but also gives a good impression of you.
A key aspect of investor due diligence is to better understand your product and associated technologies.
The following documents can be prepared to support this phase:
– Technological scheme: provide details on the technology (PDF, Word)
-Product description: provide product details (PDF, Word)
– Product development scheme: provide details on the development roadmap (PDF, Word)
Many investors will also build basic spreadsheet models before making an investment decision.
This activity does not serve to make predictions about your business, but allows the investor, as an outsider, to understand your business and the key levers for success.
To support this effort, investors could come back to you with many questions related to metrics.
To start with, you should prepare basic financial data (monthly basis):
– Cost of goods sold
– Customer acquisition costs
Depending on your industry, you should also prepare a detailed analysis of the most relevant metrics.
Generally, investors will look for more details on three key elements:
– Cost to acquire a customer
– Sales value of a new customer
– Cost to serve a customer
Marketing and sales
In your pitch deck, you’ve probably made statements about future growth.
These must be supported by a solid marketing and sales plan.
During the due diligence, investors may require more details, so it is desirable to prepare the following documents:
– Marketing plan (PDF, PPT)
– Sales floor (PDF, PPT)
– Sales pipeline (XLS)
Finally, investors also want to understand how all this ties in and how they plan to use their investment to create value over the next 2-3 years.
Therefore, it is important to also prepare a three-year financial plan based on the sales and marketing plan and provide a detailed overview of future expenses.
Be sure to include the following in your spreadsheet:
– Historical financial data
– Entrance, COG, CAC, etc.
– Customer growth
– Staff growth
– Product development costs
– Legal documents
Typically these documents come into play after signing a term sheet, but it is better to play early and prepare them already at this stage.
Make sure you have digital and physical copies of the following:
– Contract signed by the company
– Previous investment agreements
When preparing these documents, be sure to keep them as confidential as possible. As with the documents shared during the Due Diligence process, it is better to maintain control over access to this sensitive data.
Well now you’re really ready to present yourself to your investor! Good luck!