So you’ve developed a game-changing product, formed a business with a killer team, quit your job, and are rolling the product out to market. Your business is the next unicorn, and all is good in the world. Fantastic. Now only one thing is inhibiting your company’s growth: you have no money.
For many founders of high-growth startups, bootstrapping has limits. Through self-funding and the family and friends round your startup can establish its place in the market, but significant scaling and growth will often require outside capital. While Gust provides the platform to find and engage with investors, it’s up to you to sell them on your product and vision. The best tool for communicating this? Your pitch deck.
Understanding how to structure a pitch deck and deliver a strong pitch is important to successful fundraising, and founders frequently ask us what investors want to see. Before we break down the contents of a good pitch deck, you should understand the distinction between two types of presentations. Your “info-rich” deck, like the one on your Gust profile, needs to demonstrate your startup’s value solely through the content provided in your slides. Your “in-person” deck, used when you’re making a pitch, should be visually appealing but textually sparse. Investors must be drawn to you, and it’s up to you to deliver. Both decks, however, follow the same general arc:
The initial moments of your pitch are critical to catching and holding investors’ attention—this can often make or break the deal. Begin by introducing yourself and providing an overview of the business: Who are you? What problem does your product solve?
The overview is about establishing context. Gust’s founder and CEO David S. Rose describes it as “a picture on the outside of a jigsaw puzzle.” It lets investors immediately connect your business to familiar sectors, businesses, etc., while also providing a starting point to reference once your pitch gets more detailed.
Some founders deliver the overview in two slides: problem and solution. Regardless of how you do it, show why the problem is worth solving, and why your company is uniquely positioned to do it.
Next, introduce your team. Who are you? What are your experiences? Have you worked together before? How do your talents mesh? Investors need to see that you know what you’re talking about and that your team is capable of executing your business plan.
At the heart of the pitch, you’re really selling you. Investors won’t give thousands of dollars to a company lacking good leadership. They have to believe you’ve assembled the right people to make the idea a reality and get a sense that you’re easy to work with. This slide is simple in form, but it’s necessary to show that you’re qualified for the job.
Detail the market you’re entering. How big is the market? How much of it will you target? Especially important to investors is the total addressable market (TAM). TAM is the amount of dollars spent in a particular market per year, and it shows the potential scale of your operation. As noted by David S. Rose in his book Angel Investing, if the TAM is only $20-30 million, it’s improbable that your service addressable market (SAM)—the segment of the TAM that your product can actually reach—will deliver a worthwhile return on investment (ROI). Investors typically prefer market segments with hundreds of millions, if not billions, in annual revenue. On the other hand, they will also be suspicious of a market so generic that it lacks definition. The market should have narrow parameters, but large potential.
Next, identify your SAM and the target market of consumers most likely to use your product. Within your SAM, how large is your service obtainable market (SOM)? This is the portion of the SAM that you can realistically capture. How does your product fit in the market? Do you have market traction? How much of the market can you realistically retain? At this juncture, it’s important to temper expectation with reality. This is where validators are extremely important. If you fail to support projections with evidence of legitimate traction, investors will lose interest.
Investors need to see what your product looks like and how it works. A live demo is risky, but provide screenshots of the product or do a short canned demo. An effective demo helps to legitimize your financial projections by quickly and clearly differentiating your product from competitors.
Once you’ve demonstrated how your product works to solve your customers’ problem or fulfill their desire, investors also need to understand how it reaches customers and is monetized. What’s your business model? How does it work on a per-unit basis? How do you acquire customers? Investors want to see your sales channels. You can’t expect to smoothly scale your operation—or get funding to do so—without knowing exactly how your company acquires and interacts with individual consumers.
To prove your product’s viability to investors, you must clearly communicate why and how your specific business model is well-positioned to turn a solution to a specific customer desire or problem into revenue. Investors prefer businesses that solve a problem to those that simply improve upon an existing solution. Again, market validation is the best determinant of your product’s efficacy and further potential and, ultimately, is the easiest way to draw the attention of investors.
Even if you’re competing against the “old way” of doing something, you can’t have a unique product without knowing what you’re up against. Claiming that you “don’t have any competitors” is a huge red flag for investors. Describe who or what you’re competing against. How do customers solve the problem today? What differentiates your product from the existing solutions? How does your business fit within the marketplace? Be realistic about your product’s advantages over competitors. For an example of how to represent this visually, check out this reproduction of AirBnB’s original pitch deck.
Investors will be skeptical of a product that’s easily replicated. Explain what prevents a competitor from launching tomorrow and eating into your market share. Does your company hold intellectual property rights? Be sure to describe any proprietary technologies and how they give your company a competitive edge.
Investors need to understand how your business works. What’s your burn rate? What’s your company’s track record? What’s your customer acquisition cost? Detail your company’s expenses and revenues and how they will scale.
Early-stage investors are particularly interested in short-term revenue projections. What revenue do you expect to realize in the next 3-5 years? The average holding period of an angel investment is nine years. In that window, angels subsidize failed investments with the few that bring large returns (ideally around 25-30%). Therefore, your projections must show them realistic returns within a five-year window. Investors realize your projections won’t be 100% accurate. That’s not the point. They want to see how your company will grow and that you’ve put in time and due diligence planning for it.
Drumroll please… This is the pivotal moment of your pitch where you tell investors how much capital you’re seeking and at what valuation. They’ll want to know your capital structure, who’s already invested in your company, and if you’ll be seeking further rounds of funding in the future. In the eyes of investors, your valuation is the product of a risk/reward analysis. If your company shows more risk, its valuation will be lower (and vice versa). The objective of your pitch up until this point? Temper the presumed risk of this investment.
Think of the life of your business as a stepwise trajectory. What’s the next step for your company? Specifically, what are your financial and sales goals, and what constitutes success? Break down your long-term vision for your company with defined, measurable milestones. Then, describe to investors what their money will be used for and how it will help you reach the next milestone. They will then decide whether the percent stake you are offering is “worth it” to them after an exit.
The final slide summarizes the important points of your pitch. You need to drive home why your business (and you) are worth the investment. Be sure to include a CTA (call to action) with your contact information. During your “in-person” pitch this should be the climax, not a boring recap. This is how they’ll remember you.
When making your pitch deck, be sure to continually think about these three question:
- Why is this problem worth solving?
- Why are you and your team the right people to solve it?
- What prior validation do you have to prove that your business can grow and scale?
Remember: the content of the deck is really only half of the equation. You’re selling yourself just as much as the product. Having the confidence and charisma to own your pitch and impress investors is the most important—and challenging—part of the pitch. After all, this isn’t a simple transaction; it’s the first step in a relationship.
For more on how to make a great pitch to investors, check out David S. Rose’s TED Talk, “How to pitch to a VC.”