Art of the pitch deck: How to nail what matters - Part 2
This is Part 2 of a blog series on strategic guidance for building pitch decks that get funded.
In this post, three more tips on nailing the aspects VCs care most about!
Before diving in, a quick overview of the tips in this series:
Shrink your pitch
Prove the Jockey, the Horse, and the Track
Prove you’re not a fake
Light your problem on fire
Make a bet
Make it “Just add money”
If you’re building a pitch deck and this is the first time you’re reading this blog, you might want to start with some foundational reading to round out your overall approach:
Now, without further ado, rules #4 through #6 on building a pitch deck that actually gets funded!
#4 - Is your problem on fire?
If you’ve done your homework from my first post and read How to Build Your Seed Round Pitch Deck (or you’ve had some exposure to popular VC pitching methods) then you’re familiar with the concept of the Problem Statement.
A brief summary of the concept: Every startup exists to solve a specific problem for its customers. The problem you solve is your Problem Statement.
Investors like being introduced to startups using Problem Statements because it clarifies who you will serve, what you will do for them, and gives them an idea of how compelling your product will be based on how painful or widespread the problem is.
If you want your idea to get funding, you can’t just solve any old problem; you need to solve a burning problem. In your pitch deck, your goal should be for the problem you’re solving to be as burning, dire, widespread, as please-god-just-take-my-money of a problem as it can be.
You want to think about doing this in 2 ways: 1) Do your Math 2) Make it emotional.
Doing your Math means you need to do a little market sizing to check that the problem you’ve picked is actually a problem that enough people have, and that it’s actually severe enough for a large portion of those people to buy your product, and that the cost to build the product will be significantly less than the revenues you could get from selling it.
For example, say your product will take 3M to build, it solves a problem for an industry that only has 10k customers in it, and only 1% of them will buy your tool. Each one of them would have to pay at least 30k for it just to break even. And VCs, who expect a 10X return on their investment, won’t want to touch it.
Now, if the problem is so dire that you think 90% of the industry will buy your solution, and they’d all be willing to pay $20k/year for it, you might be going somewhere. It’s even better if your addressable market is currently 10k but growing 50% per year. That’s a future unicorn.
Once you’ve checked your math, you need to Make it Emotional, meaning you need to find a way to express the severity of your problem to investors by tapping into their emotions. Make them feel the burning pain!
A few clues on how to do this: First, the problem needs to be understandable (high-tech, security, biomedical entrepreneurs: ELI5). Next, it needs to be extreme. If you’re using data, pick the boldest indicators of the problem that you can find. If you can use a vivid image to convey your problem, do it. Drop any “might, may, could” language and don’t be afraid to make bold declarative predictions, especially if you can back them up by data. Appeal to base human emotions like fear, ambition, frustration, etc.
#5 - Make a Bet About the World
Does your startup make a prediction about what will happen in your market over the next 5-10 years? If it doesn’t, you’re not presenting a very strong case for investment.
Investors make money based on the valuation of an exit event in the next 5-10 years. In that time, they’re targeting a price that will give them a 10x return on their money. In order to get there, your startup will have to be successfully competing in a great market.
Given that long-term goal, your task in your pitch deck needs to be this: Sell your prediction of the future where your startup is perfectly positioned to capture a trend no one else saw coming.
Look for what other companies aren’t looking for, see the opportunities they’re not seeing, and focus on the bet they aren’t making. This is how you demonstrate what makes you different. Your difference is the reason you’ll have the market to yourself, and be perfectly positioned to reap the rewards of being a market leader when the world turns your way.
Positioning your company this way in your pitch deck sets you up for the long-term position that all investors want you to have: The unicorn startup that generates billions by having a market monopoly.
Look for ways your pitch deck can convey what you see that others don’t. What is the next trillion-dollar market no one else knows about yet? What do you think will happen to the world that others aren’t anticipating? How will your product perfectly address this situation? Why is your team perfectly suited to capture this opportunity?
Making an exciting bet tells a great story to investors, and it aligns your priorities with their payoff timeline.
#6 - Make it “Just add money”
It’s well-known in the VC-backed startup world that an investor isn’t just there to give you money. They provide so much more.
The investor you pick should be a partner you want to work with that will help you every step of your journey. They’ll provide sage guidance from having been there before. They share network connections to push your business forward. They can give you a list of trusted vendors when you need to work with external consultants. They even have departments to provide shared services like legal, HR, and accounting.
All these things are true.
But so is this: In a perfect world, investors would prefer to just give you money… and nothing else.
The first reason for this is a time vs. money tradeoff: VCs are busy and their labor is expensive. They meet with startups, meet with LPs, review pitch decks, research the market, close deals, secure funding, and argue endlessly with other partners of their firms. All of this is incredibly time-intensive, and little of it can be farmed out to inexpensive talent (even those junior researchers probably have an MBA from a top 5-10 university!).
VCs’ discriminating behavior might give you the false impression that their funds are the most precious asset of their companies. In fact, the money is the cheap part. Time is a much more precious resource. Any startup that needs hand-holding to succeed will be a costly pain in the butt to work with.
The other reason for making your pitch “Just Add Money” is because it signals an effective team and an efficient business model.
The more expertise you have in your startup team, the less help you should need. A startup that’s “Just Add Money” has everything it needs to succeed. In other words, the team is solid.
On the business model side, free or cheap shared services can be helpful to any growing company. But if you’re planning to really rely on those things for your company to work, it may be a sign that your overall startup’s model isn’t lean enough. Most small startups don’t need a dedicated HR team - they can hire and manage employee issues on their own or with PEOs. Most can get away with cheap lawyers and accountants. If you can’t pay for these things without breaking the bank, it might be a sign that your costs are too high in general.
So how do you prove to VCs that you’re a low-maintenance winner?
Emphasize your team’s clarity, hustle, and industry experience. Teams that know what they’re doing, are results-oriented, and have the connections they need can operate mostly independently.
Share a clear, simple plan for how you’ll use the investment. Simple plans are easier to pull off. Unclear complicated plans can be a sign of incompetence.
Choose the smartest most obvious plan, given your pitch and progress-to-date. An out-of-left-field plan is often another knock against your competence. If you’re going to do something creative, make sure to lead up to it in your pitch.
Ask for the money you need, plus some buffer - no more, no less. Again, this shows you know what you’re doing and that you’re seeing this investment in the right way; as a tool for getting where you need to go.
You have the tools - what else do you need?
And there you have it: 6 tips for building decks that get funded!
Shrink your pitch
Prove the Jockey, the Horse, and the Track
Prove you’re not a fake
Light your problem on fire
Make a bet
Make it “Just add money”
Got an amazing business idea? Half the battle of building a great pitch deck is just getting the idea out of your head and onto paper. With the tips shared here, plus the vast ocean of helpful templates and information available online, you should have everything you need to take the plunge!
Already got a deck but need help getting it to shine? Book a Pitch Deck review call or join for our Group CFO Office Hours to get your questions answered!
