If you are an entrepreneur, you are probably familiar with the 10-14 slides that comprise a typical investor pitch deck. But do you even know why you need a pitch deck in the first place? Or what you should include in your deck to increase your chances of getting funded?
Malcolm Lewis - a serial entrepreneur (6 startups in 18 years, 3 public company acquisitions, 1 $BB IPO, and 2 TBDs) and a startup mentor/adviser - has provided a comprehensive guide on what your pitch deck should include, along with plenty of examples. Malcolm has also served as a Mentor for the Orange County Founder Institute.
The post, "The Pitch Deck: Why You Need a Pitch Deck and What to Include in Yours, or Everything You Ever Wanted to Know About Pitch Decks But Were Afraid to Ask", originally appeared on Pitch Deck Coaching. An excerpt has been republished below with permission.
What Do Investors Want to See in Your Pitch Deck?
To answer this question you need to understand what investors are trying to accomplish when they read or listen to your pitch deck. But before we get into that, let's pause for a second to consider what you're up against.
Here's some recent data from Andreessen Horowitz (a16z), one of the hottest VC firms in Silicon Valley right now. Each year, 3,000 startups approach a16z with a "warm intro" from someone the firm knows (read Pitching Hacks for more advice on warm intros). A16z invests in 15 of those 3,000 startups. Which means they say "yes" to one in every 200 pitches, and "no" to the other 199. So the odds are against investors saying yes to your pitch. But don't despair. Approximately 4,400 startups did get funding in 2014 so it can be done.
So what do you think investors are looking for in those one-in-200 odds-defying pitches? Here’s a clue: they are investors. So, like any investor, they are evaluating your pitch in two areas:
- Return: The potential return (aka upside) on an investment in your business
- Risk: The risks that might prevent them from getting that return on their investment
An investor's job is to find businesses that offer the highest return on investment with the least risk. Your job is to convince them that your business offers a greater return, with less risk, than all the other businesses they are looking at.
Regarding return, remember that most investors are looking for at least a 10-20x return on their investment in a business. (And in their dreams, they are hoping you will be the next Google or Facebook or Uber and drive a 1,000x return.) So you need to convince them that you can grow your valuation at least 10-20x from its current baseline.
Setting tech bubble valuations aside, business valuations are typically driven by revenue and profit multiples, so you need to show how your product will dominate a huge market and generate the revenue and profit growth required to drive a 10-20x increase in the value of your business.
Regarding risk, understand that when investors read or listen to your pitch deck they are trying to assess your investment risk in three key areas:
- Market Risk: Are you addressing a large, growing market?
- Product Risk: Can you build a compelling product with sustainable competitive advantages?
- Execution Risk (aka Team Risk): Can your team acquire and retain new customers profitably, at scale, and transform your opportunity into a substantial long-term business?
Market failure is usually driven by a product in search of a market that doesn’t exist (“the dogs don’t like your dog food”) or is too small to be interesting to investors (i.e. there’s not enough potential revenue to generate the 10-20x return they want). Startups led by engineers can often fall into this trap.
Product failure is typically driven by a product that is not useful, not usable, or simply not competitive.
Execution failure is generally driven by some combination of inexperienced leadership, ineffective sales and marketing, and poor financial management.
Note that some initial traction (e.g. several months of accelerating customer adoption and revenue growth) can go a long way toward minimizing market, product and execution risk for many investors. It will certainly greatly increase your chances of getting funded. More on traction later.
What Should You Include in Your Pitch Deck?
Now let’s take a look at what you should include in your deck and why. First, remember that your pitch deck is a visual summary of your business. So it needs to address every aspect of your business that you might include in a business plan.
There are many opinions on exactly what 10-14 slides should be included in a pitch deck, and in what sequence. For the sake of argument we’ll use the slide titles and sequence (flow) I use in a sample pitch deck I have created for my pitch deck coaching business. I'll use screenshots from the current version of this deck to illustrate some of the information you should consider including on each slide of your deck.
Before we get into details, here's the outline:
- Cover: Announce your big idea. The one thing you do better than anyone else. You have 10 seconds to engage your audience.
- Summary: Summarize the highlights of your business/investment opportunity as a teaser.
- Problem: The problem you solve, who you solve it for, and the reasons why your target customer/users are frustrated with current solutions.
- Solution: How you solve the problem and the benefits of your solution.
- Product: Your product and how it works in three simple steps.
- Business Model: How you make money.
- Market Opportunity: How much money you could make if you dominate your target market.
- Competition: Your competitors and why your product is better than theirs.
- Growth: How you will acquire and retain customers, profitably, at scale, and keep your product competitive.
- Traction: Tangible proof that your customers love your product and are happy to pay for it.
- Financials: Your current best guess of how much money you will make in the next 3-5 years.
- Team: The team that has the experience and expertise to transform your opportunity into a large, profitable business.
- Funding: How much money you need and what you will do with it.
- Summary: Summarize the highlights of your business/investment opportunity as a closer.
- Appendix: Not mandatory, but feel free to include a few slides with positive press mentions, happy customer quotes, a summary of your technology stack, your detailed financial model, etc.
Okay, so that's the pitch deck outline. Now let's take a look at each individual slide and highlight some of the important things you should include. (Note that you can find these slides on Slideshare if you want to see the entire deck without my notes.)
How Much Content Do You Need on Each Slide?
Note that you'll need two version of your pitch deck. The "read me" version and the "listen to me" version. Many investors will want to see your deck before they agree to meet you. This means your "read me" version needs more detail so it can stand alone. Your "listen to me" version is the one you use when you can present in person. You need fewer details on your slides because you replace them with speaking points. This ensures that investors spend more time listening to you and less time reading your slides. Think Steve Jobs, the Zen master of the "listen to me" pitch.
You can find some great examples of founders giving their "listen to me" pitches on the various incubator websites such as Techstars. Just remember that these decks are their "listen to me" versions. In case it's not obvious, you should start with your "read me" version and then edit out the detail as required to create your "listen to me" version.
Use this slide to introduce your big idea. Your goal is to grab the investor's attention in the first 10 seconds so you have their attention for the next 20 minutes. Describe what you do in a simple declarative statement. Eg: “Mint is a quick and easy way to track your spending online.” Or use a well-known company as a comparison. Eg: DogVacay is “AirBnB for dogs.”
Include a statement of the primary benefit for your primary customer/user if you like. And add a simple image if it reinforces your big idea without distraction.