The author’s views are entirely his or her own and do not represent legal advice or council.
It’s tough to admit it, but many of us don’t know the order of operations when it comes to preparing to raise equity-based capital from VC or angel investors. In this week’s Plan Friday, Brent sets us straight on when to start your pitch deck and how best to structure it.
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If you’re an entrepreneur, and you have a meeting with potential investors, congrats! You’ve got your foot in the door. Now the pressure’s on to not screw it up. You only have a short window of time to wow them.
If you don’t impress potential investors, they won’t give you the money you need. And all that nervous sweating you did--and the subsequent dry cleaning bills--will have been for nothing.
In order to get the investment you need, which will help get your company off the ground, you need an amazing pitch deck. Keep in mind that a business plan and pitch deck are not the same thing. A business plan is a very detailed, 20- to 50-page document that lays out everything a loan officer or potential investor needs to know about your company. A pitch deck, also called a slide deck or pitch presentation, is MUCH shorter. It’s the PowerPoint presentation or slideshow that you play while telling investors about your company. Think of it as the Cliffs notes, the bullet points version, the “Greatest Hits of the ‘80s.”
Now, don’t make the mistake of skipping a business plan and going straight to your pitch deck. I explain more about that and why it’s such a terrible idea in this blog post. Suffice it to say, doing a pitch deck without a business plan is putting the cart before the horse. Don’t do it! Your business plan will be the source material and foundation for your presentation.
Here are the slides that an awesome pitch deck will include:
A cover slide with your company name and logo.
A statement identifying the big change or trend in the industry or market. Is it widespread internet access, an app, or another technological development? Changing consumer expectations?
The change, trends, or other relevant data. How much revenue is the new Uber of your industry making? Or how many years have things been trending in this new direction?
The status quo, industry losers, or why current options are failing with specific market data.
Winners or where the industry is headed. Back up your claim with trends or a relevant data-point of how the market need is not being met.
Primary features, advantages, or value that set your company apart. Highlight your company’s key milestones, screenshots, prototypes, features, or a side-by-side comparison of your business versus existing companies.
Your business model or revenue model. How does your company make money? Is it freemium, subscription, B2B, premium-priced, or commodity-priced?
Your success and outside investment to date (not sweat equity). You want potential investors to know how much has already been invested, the status of your product or service development, any existing partnerships, sales to date, and number of users or early adopters.
Sources & uses of funds. How much are you asking for, and what will you do with it?
Leadership team. List the top three C-levels at the company and give a two to three sentence bio on each. Include professional photos.
Contact info: your name, phone number, and email.
If it makes more sense, you can talk about your company before industry data. In fact, some investing firms prefer that, or have their own approach, so it pays to do some research ahead of time. For example, Sequoia Capital recommends you spend the first 5 minutes on three slides:
The change in your industry that created the need for your company
Key figures such as year founded, number of employees, investment raised to date, and investment currently sought
Leading with those three slides provides a mental framework for potential investors and piques their interest. After that, give them a chance to ask questions before you launch into the rest of your pitch. That way, if they have concerns, you can address them as you present the rest of your slides.
Creating most of your slides will be pretty straightforward. Be as specific as possible about your product, why it’s unique, and the size of your target market, with recent statistics from reputable sources. Don’t be vague and definitely don’t say you’ll appeal to everyone. No one’s market is everyone!
The hardest part for many entrepreneurs is financials. Your financials should include a 3- to 5-year forecast for growth, income, and expenses. You should also know the value of your company and exactly what percent ownership you’re willing to trade for investment. VCs usually take 15-45% ownership.
Make sure your financial projections are realistic, including your exit strategy. Will you license your product, be part of a merger or acquisition, or have an IPO? Yes, investors want your company to make them rich in a few years, but they’ll also know if your exit strategy is unrealistic. Solid financials are the finishing touch in the best investor pitch decks.
Overall, keep in mind that less is more. Investors will also have your business plan in front of them, so there’s no need to regurgitate it. Keep text to a minimum on each slide, because there’s only so much information the brain can take in. Investors are there to listen and absorb what you’re telling them, not to read. You can include lots of info in your personal speaker’s notes, but your slides should not be overwhelming. If there’s too much text on one slide, split it into two.
Speaking of design, pick one main color and one accent color to keep things simple. (Match them to your logo, if you have one.) And make sure you use a consistent font throughout. A beautiful pitch deck is clean and easy to take in, with consistent design elements. Here are three awesome sample pitch decks so you can see for yourself.
Some of the world’s most successful and most recognizable companies like Facebook, Airbnb, LinkedIn, YouTube, and Buzzfeed all started with amazing pitch decks. It’s not a guarantee of success, of course, but it is a powerful and helpful tool to help you take your company to the next level.
Disclaimer: The information in this blog post is intended to be general information; it is not legal or financial advice. Specific legal or financial advice can only be given by a licensed professional with full knowledge of all the facts and circumstances of your situation. Consult with legal and financial experts before making financial investments.
Brent Butler is Masterplans’ founder and CEO.