Investor Deck Guide and Prep for a VC Investment Pitch
If you google “how to prepare for a VC pitch” google will throw your way over 3.5M results in 0.6 seconds; Google “startup funding” and you’ll get even more. So, this is, by no means, an attempt to publish anything the internet hasn’t seen before. This should, however, put you in a pretty good starting point when prepping for your VC pitch and what to include in your investor deck. Because the truth of the matter is, it’s really quite simple.
Most VCs will either qualitatively or quantitively give you a score on 3 aspects: team, product/technology and market. You should be able to describe this in a sentence. This isn’t even your elevator pitch; this is what you need to get out before the elevator doors have closed. The points you want to make are:
- There is a big market — open to disruption. In this market, there are customers in pain, who buy
- You have a strong, differentiated and protected product to offer
- You have the best team in the world up for the challenge
Let’s try to go a little bit deeper:
Know your audience: #1
In any context of talking to a room full of people, this is probably the first rule in the book. Knowing your audience in this case extends beyond the specific persona you are meeting but to VC investors in general — what ’s their problem, anyway?
- VCs need to deliver big returns to their LPs (Limited Partners).
- They are hungry to do good deals, and the competition is fierce.
- It’s easier to find reasons not to invest than reasons to invest
- They know the unexpected is going to happen — that’s pretty depressing
At the end of the day — The statistics are against them. Most of their investments are likely not to succeed, so the ones that do really need to pay off:
Know your audience — #2
You don’t have a meeting with Grove Ventures, or LightSpeed, or Bessemer. It might say so in the title of the meeting invite, but your meeting is with Dov, or Lotan, or Tal, or Laurel. Do your homework! Open their LinkedIn, see what they did. What’s their background, who and what did they previously invested in. Should you dive into technical details? bother to review the market? Check what other founders have to say and make sure they are the best VC fund to partner with. Making sure you are familiar with the background of the investor you’re pitching to will help you prefect your pitch and time management during the meeting. You only have one chance to make a first impression, make this count.
Approaching the right VC the right way
The right VC: The right VC really does have greener money, and it is crucial that the VC you seek out is a good fit for you and your company’s needs. A few things to check:
- The fund is actively investing: It has enough money and the capacity for additional board seats.
- The fund is investing in the sector in which you operate.
- The VC has relevant (but not competing!) portfolio, expertise, and network.
· Investing in stages relevant to the stage your company is at.
The right time: the best round would be connected to a clear milestone, when valuation can be realistically set. This is true to every round, but perhaps the most crucial in your Seed round. If you did not have enough time to perform a proper customer validation, it is not a good time to go hunting for an investment. You are missing a critical element in your story
The right way: Referrals, referrals, referrals. Yes, there is a chance you’ll send a cold email and get a reply. Especially if drafted right. But a warm referral from another entrepreneur, Angel investor, a lawyer or any service provider, trumps a cold email, any day. Open your LinkedIn account and search for connections.
I got the meeting, now what?
Here are the things you need to have answers to when you meet your potential investors. This isn’t a presentation layout — not all must be included in your investor deck, but be prepared to respond to the below
1. Your team: Who are you? Why are you the best team in the world, and why are you most suited to solve the problem you’re addressing? Investors are looking for three things, really, when evaluating a team: entrepreneurs that have done it before, that they’re the best at what they do, and that they’re incredibly charismatic. So, bring as much of your team as you think helps to give the room absolute confidence you can pull off everything you’re about to lay out. The dynamics in the team are a critical test — make sure you perfect it
2. The problem: you need to pin-point and explain the fundamental problem you are solving. Show that you know both the dynamics of the market as well as build a case for your solution.
3. The solution: How you plan to solve the problem you described. It’s a simple rundown of your value propositions, illustrating how you plan to address the need you already identified faster, more effectively, and more affordably than ever before. When discussing your technology, you’ll want to demonstrate:
- Defensibility: What is proprietary? Is/can the technology be protected?
- Differentiation: How is it different than existing alternatives?
- What makes your technology state of the art?
4. The market: This is always a tricky one. If the market is too big — it is not credible. If it’s too small — it’s not interesting. Stick to numbers you can back (links to your resources are highly recommended) and make sure you understand the difference between your TAM, SAM and SOM. When reviewing the market, you’ll want to explain:
- Market size (in dollars and units) as well as the growth potential.
- Who are the customers? What is their need?
- “Why now?” focus on what’s going on in your industry that makes the timing of your business so critical.
5. Market validation — Customer acceptance. I hardly think I can explain how critical (!) this part is. A table showing you spoke to relevant people representing your target market, that you’re familiar with the alternative solutions they use today, what gaps do they have and how much are they willing to pay will be the strongest slide in your investor deck.
- Why is no one doing this? How are the ones who are doing it not doing a good enough job? And why are you uniquely positioned to capture the opening space?
- Competitive advantage: Do you have a unique technology? Are there barriers to entry? What are the key success factors?
7. G2M (Go to Market): This should be a short explanation of your revenue model. How do you plan to make money? What are your sales and distribution channels, are you targeting strategic partnerships and with whom?
8. Financial forecast: Map out the expected results of the business, per quarter X 8 quarters: Units sold, Revenue, Cost, HC.
9. Funding requirements: This is what we came here to discuss after all…
- How much money do you need?
- What do you need it for?
- How long will it last? And finally, what are your future financing planning?…
What’s in it for them
You’ve described the problem, walked through your solution, your team, your timing, your financials — the room is now ready for the bottom line: how your potential investors can make the 10x return they aspire for, thanks to your innovative idea and unique know-how. Demonstrate, using relevant case studies, the path to liquidation.
Your first pitch is only the beginning: Now what?
Most VCs, most of the time, will go silent or politely turn you down. They will also, most likely, take their time; Due diligence process is lengthy, risk reduces over time, milestones become closer and more concrete. Honestly, there’s not much to do with that. Be responsive and remember you’re building a long-term relationship, try to get actionable feedback and work to get that second date.