Author: Brett Andrews Edited by:Vanessa Ayola
A good pitch deck is tough to come by. It’s important to understand that it’s really a tool meant to support your pitch, not supplant it. This means keeping the amount of words on your slides to a minimum and relying much more heavily on images and your own words to communicate. The last thing you want is your audience reading through paragraphs of text and ignoring every word you say.
I figured I would lay out a standard formula for putting together a deck. While there’s certainly more information that can be added, this should cover the basics.
Let’s get started…
1) Logo Page — The first slide is basically your intro slide. Take your logo and put it on top of a background that will set the design theme for the rest of the deck. You might also want to add a tag-line/mission statement underneath it if you’ve got one.
If you don’t have a logo, I would suggest you look into getting one as soon as possible. It helps to establish your brand and gives an investor the comforting impression that this is more than someone with an idea. With tools like 99designs and dribbble, it’s easier than ever to find freelance designers, who can help put one together for you fairly inexpensively. They can probably also help design a nice looking deck for you.
Use this slide to briefly introduce yourself and the name of your company, then get it moving.
2) Business Overview — Briefly explain what it is that you do — also known as your elevator speech. Your elevator speech needs a little more description than a mission statement, but should be no longer than three sentences. It’d be good to include whether you provide a product or service, the major problem(s) that you solve and for whom.
This is also the slide where you will want to pause and give a demo of your product if you have one. This will establish a solid foundation with your audience, so that you can start to cover the actual business.
Entrepreneur and Angel Investor Jason Calacanis does a great deep dive on giving a proper demo on his podcast This Week In Startups here.
3) Management/Founding Team — Your management slide should list all of the company founders as well as anyone in the C-level that is integral to the operations of the business. Typically their picture, titles and 1-2 pertinent bullet points will do. Feel free to expand on each member verbally, but you don’t need full resumes on the actual deck. Be sure to highlight any background that applies to the industry you are targeting and whether or not you have started other businesses in the past. Most investors are going to focus on the quality of the team over everything else, so consider spending a little extra time on this slide.
In the First three slides, we discussed how to introduce yourself, your business and your team. Now let’s get into the real meat of the pitch.
Who are you selling to?
How are you selling your product or service?
What significant milestones have you hit so far?
4) Target Market – As a start-up, addressing market size can be a double-edged sword. If it’s too big, you’ll seem like a guppy in an ocean and probably sound a bit crazy. If it’s too small, the opportunity — and corresponding risk — doesn’t move the needle enough for most investors.
I think the best solution is to find a balance.
Start with describing the size and demographics of the smaller market that you’re targeting first. This shows investors that you’re aware of who your customers are and that you’re going to be hyper-focused in the early stages.
Then explain the much larger vision and total addressable market you plan to infiltrate once you’ve found success on a manageable scale. It becomes much easier (and believable) to expand into very large markets when you’re the A-player in a smaller one.
Before Facebook had a billion users, it was a social network for college students. Before that, it was built specifically for Harvard students. Focus is critical in the early stages.
5) Business Model – Your business model is going to vary heavily depending on what it is that you’re selling (hardware, software, both). The most important part of this discussion is demonstrating an adept stranglehold on the numbers — both what you need to charge to be profitable and what the market will bear based off of current competition, plus or minus your value proposition.
Knowing your general customer acquisition cost and their lifetime value also shows you have a firm understanding of your business and are able to set expectations of the capital requirements to get you to the finish line.
This is a good time in your pitch to discuss your distribution strategy, which is arguably more important for future growth. Your plan for distribution will determine how you get your product or service into the hands of consumers. Like your business model, this could very well change over time, but having a plan to grow the usage of your offering is critical when you’re a start-up as it can influence product design, marketing and where you invest your precious capital.
You can argue forever over the best plans for distribution and most profitable business models. The winning combination will usually be unique to your offering and the market you serve. Ultimately, none of it matters until you start to see traction.
6) Traction – This part of the pitch is either dreadful or the right-hook you need to land an investment.
What is traction (in the world of start-ups)? Hopefully, it’s a growing customer-base. But it could be non-paying users if your product is software, web-based or a mobile application. It might also include any significant strategic partnerships that you’ve forged.
What is traction not? Your mom and best friend think you’ve birthed the best creation since seat warmers and see no way that this can fail.
So go ahead and talk about the numbers. How many customers do you have? Are you seeing growth and at what rate? What’s the feedback you’re receiving from early adopters?
Very few ideas are so groundbreaking that they’re investable pre-traction. On the flip-side, it’s very tough to challenge proven success. So having traction is almost essential when raising capital. Costs to start-up a business and get it to the point of “Customer 1” have gotten so low that it’s tough to find a viable excuse for not having sales.
Luckily, if you have it, you have validation. The dog eats the dog food. You will also know a lot more about your market/customers, which allows you to invest in improving your offering to better fit their needs. Whether it scales or not is a different conversation and hinges much more heavily on your level of execution.
So far we’ve covered the first half of the pitch deck. You’ve introduced your team and the market you’re targeting as well how you plan to make money and where you are in the process of executing this plan.
You’ve established the base level understanding of your company with your audience by providing information. Now it’s time to be persuasive.
Are you the only people smart enough to take advantage of this massive opportunity? (Probably not)
Why you? What gives you a unique advantage that will allow you to win?
If you do win, what’s the upside? What can investor expect and over what period of time?
7) Competition – If there’s one section of the pitch that I see most often scantily clad, it’s the competition. It’s usually a combined result of heavy bias on the part of the entrepreneur and the lack of understanding what makes up “competition”.
There are folks that are doing nearly the exact same thing as you (direct competition) with a minor twist in business model (SaaS model vs. Freemium vs. Ads etc) or distribution model. Then there are companies/products that are replacements for a problem you solve (indirect competition).
If you have a mobile gaming company competing for the attention and discretionary income of people looking for an escape from boredom, then you are not only competing with Candy Crush, but Xbox and PlayStation as well.
While it’s not necessary to detail each and every one of them, you can make a much stronger case for why you will win if you understand the macro-trends (why people prefer mobile gaming to the alternatives) as well as the micro-trends (paid apps vs free with ads).
This section sets you up perfectly to explain why what you have is better than both types of competitors.
8) Competitive Advantage – Your competitive advantage is the secret sauce. It’s what makes you special. If you are the first to market with a given product, this could also be known as your future competition’s barrier to entry.
What do you have (or know) that no one else has (or knows)? If you are manufacturing some sort of hardware or you provide a service with a unique process, this could include patents or other various forms of intellectual property. It’s good to be clear when detailing the current status of your intellectual property and what it actually protects.
If you’re working on software, patents are much more rare and depending who you talk to, rather useless and a waste of precious funds. The code/algorithms/processes used in the software is intellectual property whether or not it’s actually patented, but software changes so fast that these assets only mean so much.
Often times your competitive advantage is your team, the knowledge of the space, assumptions about the market and plan for execution.
If you’re in an industry with minimal barriers to entry, your product or service can be easily copied and your assumptions of the market are in line with most others, you may want to reconsider what you’re doing getting into this in the first place.
However, if you do have some form of differentiation and you can represent a unique view of the world, you’re going to need to show a would-be investor the potential upside of jumping on the train.
9) Financial Projections – Projections are like throwing darts… blindfolded… left-handed (right-handed for you lefties). The point is it’s almost impossible for you to know what you are going to do in sales 5 years from now, even more so if you’ve yet to make sale #1.
A couple things to consider:
- A) Projections past year 3 are worthless, so don’t waste your time. It’s hard enough to predict what you will do a month from now. Don’t waste your valuable time calculating what travel and entertainment will cost 5 years from now. Stick to years 1 through 3.
- B) Focus on the Big 4 — Revenue, Cost of Goods Sold, Expenses and Profit. This will lead you to your projected gross and net margins, which will be a good financial indicator of the potential success of the business. While it’s helpful to break up expenses into separate line items for your own benefit, it isn’t necessary at this stage.
- C) Assumptions are everything. This is the part of the projections that will be of most interest to the investor(s). What level of market penetration would it require to reach that revenue number? What are you assuming your conversion rate (link) is going to be? What affect does a lower conversion rate have on these projections? What sort of growth rate are you assuming and how does that compare to other companies in your space? etc. etc.
If you’re company has some historical financials, it makes this process a bit easier because you can extrapolate current trends and have more credible assumptions, however, the projections are still a guess.
The most difficult part of projections is the balance between being attractive and believable. Too low and it isn’t worth an investor’s risk; too high and you risk being laughed out of the room. Striking this balance is an art more than a science, which is why having strong assumptions is all the more powerful.
Ultimately, if you have a viable business concept in a large market with a team that can execute, an experienced investor may disregard the projections all together, but it’s a helpful and necessary exercise nonetheless.
Next, we’ll cover what you’re looking for as an investment, what you’ll do with the money and how to properly close out the presentation. Stay tuned.
About the Author: Brett Andrews is a Partner in NewGate Capital. Learn more about Brett here
Are you considering selling your business? We can help you. Contact us anytime at http://www.newgatecapitalpartners.com/business-brokerage/