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One of the main reasons startups fail is lack of cash. This highlights the importance of generating profitable revenue streams but early stage startups don’t always have this as an option. Building an amazing product can take years and millions of dollars before reaching profitability. To solve this, many startups look to investors to foot the bill until they can reach profitability.
Convincing investors to share the risk in your startup isn’t an easy task. Although startup investors invest in high risk companies, they still look to mitigate risk by investing in companies that are hitting important performance milestones.
Even if your team has great traction, a terrible pitch deck can hinder your ability to raise capital. Below we’ll be covering how to build a pitch deck that will WOW investors and so you can close your next round of funding.
First, a few things to keep in mind:
The Goal of a Pitch
The goal of a pitch deck is not to sell investors. Although it may be tempting to highlight all of the amazing features you’ve built into your product, this should be avoided. Y Combinator recommends focusing on clearly stating your vision, traction, and goals while leaving it to the investor to sell themself throughout the pitch process.
It’s actually quite obvious if you take a second to think about it. Investors first need a clear understanding of your company, vision, and traction before they can even begin to ask questions, much less decide if they want to invest.
It’s not uncommon for teams to get carried away with stylized text requiring them to shrink the font sizes on their pitch deck. Small fonts can be hard to read and can take away from the point you’re trying to emphasize.
According to Bryan Landers from BackStage Capital, a small or illegible font are some of the biggest mistakes founders make when crafting a pitch deck.
Startups often use corporate jargon in pitch decks but this can confuse potential investors so it’s best to leave jargon, acronyms, and any other industry terms out of your pitch deck.
It can be hard to determine what’s considered jargon when it’s your company so it’s best to practice pitching to a few friends to see where they get confused.
Avoid Introductory Language
Don’t build up to points or tell stories. Instead, work on clearly stating your current business and future plans for growth. Preamble and stories should be left off of your pitch deck as it’s distracting and digressive.
The 10 Slides You Need in Your Pitch Deck:
Below are all of the slides/ sections needed in a pitch deck. Each section may have multiple slides but if you’re able to limit the section to a single slide, that’s best.
#1) Opener Slide
Every pitch deck should open with a slide that shows your brand/ company name and clearly explains the product in a single sentence. This section should be no longer than 1 slide.
#2) Problem Slide
Clearly lay out the problem that you believe you are solving.
Ask yourself: “What problem is our target customer experiencing that we will improve?”
Lay out the problem in a few concise statements. Investors should immediately be able to understand why this is a problem.
In the words of a venture capitalist:
“We (investors) are looking to back teams that are solving a pain point around which a very widespread set of customers are desperate for a solution.” -Emily Close, VC @ AirTree
You can read the rest of Emily’s take on the problem slide here.
#3) Solution Slide
Clearly explain what it is that you do and the benefits of your service. Make sure this slide is answering the problems posed in the previous slide.
#4) Traction Slide
The goal of the Traction slide is simple: highlight the traction you’ve currently generated. This could be MRR, ARR, DAU, or any other standard KPIs that highlight traction. It’s important to be aware that you should avoid vanity metrics as they are not generally indicative of traction. If you’re unsure how to spot a vanity metric, just ask yourself “Is this metric misleading?” You’ll know when you see it.
Some early stage startups may not have little or no traction at all. You can really only raise capital before you’ve launched or after you’ve generated traction so in this case, it’s best to skip the traction slide altogether.
#5) Competitive Advantage Slide
Why are you better? What makes you different? Why should I invest in you?
Use this slide to explain what you're doing that’s different from other services currently in the market and how you’re making it better.
#6) Business Model Side
Explain to investors what you sell and how you bill for it. There’s no need to overcomplicate your business model, if you have a pricing page, this will likely do the job.
#7) Market Slide
This is one of the most important slides in your entire pitch deck. It allows investors to gauge the market size and the potential a company can have when entering the market.
The goal is to educate investors on the total addressable market (TAM) for the space you’re entering. Many companies simply google the market and calculate the total market size and then proceed to copy and paste that number onto this slide. This is called a top down analysis and it is NOT what you should do.
When calculating the TAM for your startup, you should use a bottom-up analysis because it’s more accurate and most investors have come to expect a well thought out bottom-up analysis on your market slide.
A bottom-up analysis uses your current business model to calculate the total market size by multiplying the current annual value of each of your customers by the total customers in the market.
Example of a bottom up analysis: You sell a pitch-deck service to startups for $100. A reliable study indicates there are an average of 100K startups in the US at any given time. $100 * 100K = $10mm TAM.
#8) Projection Slide
No investor expects your projection slide to be accurate but it helps to convey your goals to the investor. Are you trying to build a $100mm company? If so, that’s great! Investors want to see your vision for the future but be sure you understand your customer acquisition costs and lifetime value of customers. Investors will see it as a red flag if you can’t explain the reasoning behind the projections.
If your projections still seem unrealistic, you can outline the best, base, and worst case projections so that investors can get a more accurate picture of your projections. This has become a more common practice as it provides a broader picture, even Square used this tactic on their pitch deck.
If you’re revenue positive and have growth, that’s perfect! Use this slide to your advantage by extrapolating out current revenue growth to indicate where you’re headed in 5 years.
#9) Team Slide
The team slide is generally one slide that highlights the founders and explains why they’re the right team to take on this project. Make sure you don’t make it too long but it’s standard to list job titles, past experience, and to shed some light on each team member's role in the company.
DO NOT INCLUDE ADVISORS. Investors do not care about advisors, they care about the founders who are dedicating years to the company being pitched to them. If you’d like to learn more, NextView Ventures went into more detail on excluding advisors.
#10) Fundraising Slide
The goal of your closing slide to clearly outline how much capital you’re raising, what it will be used for, and where you expect it to get you.
Pre Meeting Pitch Deck (Short Deck)
It's also really common for investors to ask to see a pitch deck before meeting.
In this case it's best for you to have a second pitch deck, known as a short deck, to check that you can send over that showcases an extremely concise overview of your company.
Here are the slides that we recommend including in a pre-meaning pitch deck:
- Opener Slide
- Problem Slide
- Solution Slide
- Traction Slide
- Team Slide
- Fundraising Slide / Outro
You likely only have two minutes of the investors attention to get them interested in learning more about your company.
So, it's important to keep each slide focused and concise. This is especially true for your pre-meeting pitch deck.
If you want to learn more about this, we wrote an article on why you need a short pitch deck here.
Free Pitch Deck Template
If you need additional help designing a pitch deck, you can checkout our recommended Pitch Deck building software here.