Pitch deck is very often your first contact with a potential investor. One of them is Andrej Petrus, Chief Investment Officer at VC family office ZAKA. Hundreds of pitch decks have already passed through Andrej's hands, the best and worst of them. Read his advice on how to make them as good as possible.
Fundraising as a complex sales process
Imagine the process of fundraising as being a sales guy in enterprise segment. First and foremost, find VCs for whom you are a fit in terms of your stage, sector and geography (qualified leads). There are plenty of free VC databases with information about their investment focus, even about their previous investments.
Create a long-list of investors you want to approach, identify the most fitting ones and use some CRM tool to keep track of every interaction. The worst which can happen is that an answer from a VC got lost in your messy inbox, without any answer from your side. Keep it structured.
Reach out to them with very personalised approach. If you have some common connection, ask for warm intros, if not, cold outreach still works when done correctly - personalize and send over the deck with short intro about why you approach the investor, what you do, how big is the problem or opportunity, what have you achieved (as a team or in terms of traction) and how much are you raising. Ideally in bullet points.
Make the whole fundraising process competitive, reach out to VCs at once and try to set clear timing for the fundraising. But before doing that, send your presentation to someone who already gone through the whole process to get some high-level feedback.
Are you VC fundable?
There are two important things in venture capital: risk-reward ratio of an investment opportunity and portfolio construction. Statistically, more than half of invested start-ups from the fund will return nothing or just the amount of the investment. With each investment VC funds take risk but rely on the fact that a small percentage of their portfolio covers all the write-offs and generates returns of the fund. Out of 30 companies in fund’s portfolio, maybe just one or two will be the deciding outliers. Therefore, the role of a pitch deck is to convince the fund that you belong to that small percentage which is able to generate big enough VC returns, and basically to pay for other write-offs. So what is important?
First of all, start-up should be located on a growing and big enough market. Add having a great team, and a good product, and we get a solid basis for investments. Of course, there are many other factors investors take into account: traction, healthy cap table, right timing, defendability, competition overview, etc.. If all fits, start-up might be fundable.
Big market = unicorn case
In theory, the best case of VC fundable start-up is a company which is able to reach revenues of 100 millions EUR and therefore a potential valuation of 1 billion in 10 years since the beginning. To get “unicorn” revenues, start-ups need to be located on the market where the revenues are already in hundreds of millions. Ideally, it should be total addressable market in a volume of 1 billion minimum. Both from top-down and from bottom-up market sizing perspective.
Pitch deck which gets attention
Let´s get real now. Create an interesting piece that says everything important, but at the same time it is concise, the standard length of start-up presentation should be around 12-15 slides. Use data and insights.
The structure of information that should a start-up founder include in pitch deck is vital:
Team & founder-market fit. The team = founders are “pillars” of a start-up. A skill set should be complementary, because only high-quality teams can execute big growth strategies or a very fast pivot if needed. Investors look for a good leader and tech co-founder – this combination makes it much easier in the early-stage companies. Founder-market fit is significant criteria and is related to the problem: “Why did you decide to solve this problem with your start-up? What is your experience with this problem? Are you familiar with this market? Why do you see there something others do not see?”.
Mission & vision. WHY? Why do you do this? Why is it important? What is the reason? Tell your story.
Problem & solution. Identifiying a problem, which is big, urgent and costly for the customers is the way to go. What is then the best way to solve this problem?
Product. Sometimes it is hard to explain how the product works and all its important characteristics on 1 slide in brief description. In this case you can for example add link to 3-5 minute loom video and present more what your product does.
Business model and go-to market. This part of pitch deck says about how you want to earn all the money you promise investors you will earn. Who is an ideal customer, pricing, how pricing will change in the future, what products can be developed and added to the portfolio and how can you scalably acquire customers?
Market. The size of the market, revenues on the market, its growth.
Competition. Who are incumbents vs. newcomers and where is your position among them, funding of the competition, product positioning.
Traction & milestones. Show the progress of start-up, growth, attention of customers and data supporting validation.
Defendability, moat. If your idea or part of your idea is protected, great, you can possess IP, or patents, unique data with a big value for investors. For sure include this information in the pitch deck.
Funding. State the amount of financing you need, and clearly describe where and how fast the capital will be used and what effect it will have on start-up growth and development.
Timing, why now. Summing up.
What to write in pitch deck, if I am pre-revenue?
In a case you are a start-up still in pre-revenue case, but decided to enter the VC funding world and try to get your first capital, you still have plenty of data which might be used and presented:
- you don’t have revenues but you might have user and engagement data,
- you might have clear calculation of how much money could you save your customer,
- hypothesis validation based on feedback and interviews with potential customers,
- maybe you cracked the distribution game and found a really cheap way how to bring users to your product and website,
- there is always some non-monetary traction you can showcase.