The Essence of a Pitch Deck
When I speak with founders of early-stage startups, most work tirelessly on pitch decks. Decks for investors, decks for customers, partners, and so forth. For the most part, founders create decks for investors. Today, some of them also create an early corporate deck. This is generally for new hires — especially the CXO ones followed by early customers.
This post will focus on a ‘pitch deck.’ Pitch decks are usually presentations that investors ask for. Consider Pitchbook or Tracxn. Take a look at 4 to 5 decks. An idea on how to pitch to investors begins to form. This post has been based on reviewing several pitch decks over several years. If you’re a startup looking at pitching to VC funds, here are some best practices to follow while developing your pitch deck.
Why do Investors look at a pitch deck?
Almost every VC fund’s website requires a pitch deck to be submitted. However, it isn’t just the deck investors are interested in. Investors typically look at the founder’s pedigree apart from financials and due diligence. A holistic view of the business and a sense of whether the founders know what the company is doing is a positive indication to the investor. At the very least, one can expect a meeting with the partners.
Aspects of a good pitch deck
1. Industry — An investor first determines whether he/she understands the business. Consider Peter Thiel and his investment in Facebook. Thiel’s background before this investment was rich in tech. Paypal and eBay were pioneers in peer-to-peer payments and e-commerce respectively. He understood Mark Zuckerberg and what Facebook was envisioned to become.
To this day, the first thing I look at is the industry in the company pitching operates. GSV Ventures exclusively invests in Edtech. Pulse 63 exclusively invests in Healthcare in the Philippines. Bigger VC funds such as Tiger Global are diversified. Their portfolio includes companies across sectors. However, they have teams of analysts working in each vertical.
2. The team — As mentioned before (and in previous posts), most VCs look at founder fitment. Early-stage startups have no revenues. Most times, these startups simply have ideas. This means that VC funds have little to go on. It is important to articulate the founding team’s credentials. In my experience, I’ve noticed VC funds make note of the following:
- Education credentials — If you’re a Harvard or Stanford grad, your chances improve. In India, most startup founders are IIT/IIM grads. A good and quality education works well in your favor.
- Previous work experience — A friend who started up recently has an incredible CV on paper. He worked in senior positions for Google, InMobi, and other companies. His most recent experience was as COO with a unicorn. A position he held for 7 years. Needless to say, he raised funds without much problem.
- Returning founders — Most VCs would be keen on founders who have returned money to investors. This has been covered in a previous medium post on VCs and founder fitments.
3. Problem Statement — This is an important slide irrespective of what stage you are pitching. Even if you’ve gone through a pivot, it is important to mention the evolution of the idea. The problem statement gives investors a shrewd idea of the industry. And if there might be any intersection between industries as well. For startups in the idea stage, VCs look at whether it is an idea worth solving and what the evolution of the idea could be.
4. Solution (Or Proposed solution) — Depending on the solution, this can be on the same slide as the problem statement or a separate slide. This is as important as the problem despite the solution being something amendable. Should you successfully onboard the VC fund, they should help fine-tune the solution. The solution also gives insight into the execution pedigree of the founders in question.
5. Roadmap — How far along is the venture? As we have seen previously, most investors do not come aboard for a plain text idea. A validated idea is the least an investor looks for in a pitch deck. Most startups begin secondary research to build a thesis before doing primary research to validate their hypothesis. Activities that have already happened and the roadmap are important factors of the deck. It gives an investor the sense that his/her investment is something that will give returns in addition to being long-term. Moreover, long-term investments are indications of good returns for investors. Therefore, it is crucial to show a roadmap.
6. Any investment raised — Four people invest in idea-stage startups. Friends, family, fools, and from yourself. Most of these individuals are not on the cap table. However, some of these individuals are invited to the cap table. Depending on the cap table and the price per share (PPS), an investor will look at pumping in money.
Bringing it all together, a pitch deck is a crucial part of raising investment. However, it is important to consider that investors always do their due diligence before putting money in. Take a look at this ‘Open Pitch for VCs’ to get a better idea.
