THERMI GROUP has reviewed more than 3.000 investment proposals in the last fifteen years. It does thus possess expertise on how entrepreneurs should build their deck in order to better communicate their story and attract investors.
“You might be an entrepreneur with a strong scientific background or an amazing product or a tech team making-up great apps but are you also a great storyteller?”
Keep in mind that the best entrepreneurs are those who combine passion and expertise but are also excellent storytellers.
When talking about your startup/scaleup, the deck is your essential fundraising tool that needs to grab the attention of people so that they start a conversation about your business and hopefully invest in your company. At the end of the day, this well designed but brief and concise slide presentation, should provide your potential investors with a solid overview of your startup/scaleup.
The fundraising history of your startup/scaleup must begin with a clear idea that deals with a proven problem for which your startup/scaleup provides a solution. Half of everything then is to well-prepare a deck describing this story!
Essential topics that have to be addressed in a pitch deck are the following:
– The Problem
Clearly and briefly: After explaining your vision, without using heavy text, start with the core of your presentation by answering one simple question: Why all this has started? “To raise funding” is not the correct answer, while “to make money” is not a compelling answer either.
Explain in a few but clear sentences, which is the problem faced, having identified it, it is worth to be solved. In any case, use data, statistics and/or market research results to support your statement thoroughly.
– The Solution
Still, Investor’s interest is not triggered just because you have an idea that hopefully solves an actual problem but also because you are ready to share, full of excitement, your unique insight. The solution you provide has to be as specific as possible. It also has to prove sufficiently its uniqueness: the new way of end-users to do things in the respective market.
“No one said that it is going to be easy. In fact it isn’t! ”
– Market opportunity
Describe the market you address to. Show your candidate investors what’s going on by clarifying the market opportunity you are pursuing. It is important to clearly describe the market that your stsrtup/scaleup is placed in and the size of this market.
Use numbers to grab the attention! A small, shrinking market, does not motivate an investment decision. You have to prove that the market you are addressing is large and growing. This does not mean that you have to include unrealistic growth forecasts as this will grab the attention initially but in the longer term it may conclude with a negative impression about you and your startup/scaleup. The use of visuals is worth to invest in as long as they help in simplifying and comprehensively illustrating what you want to say.
- TAM: or Total Available Market is the total market demand for a product or service.
- SAM: or Serviceable Available Market is the segment of the TAM targeted by your products and services which are within your geographical reach.
- SOM: or Serviceable Obtainable Market is the portion of SAM that you can capture.
You have to illustrate exactly who is your product’s end-user and what the value proposition is for her/him. An essential communication tool you can use is to briefly describe a typical use case of the product, highlighting what it is that the user gains from the usage (money, time, less costs, entertainment etc.). Don’t miss to provide evidence of the value proposition of your product/service either by testimonials or by presenting low churn rates from your existing customer base. Last but not least, since what you are presenting is most probably an early version of your final product as you envision it, you have to present a coherent development roadmap so to permit your candidate investor gain insight on how your product’s value will evolve.
– Business model
Present a plan for monetizing your product and how much your startup’s/scaleup’s revenue potential will be in the next 1–2 years (e.g. until the next planned funding round). It would also be useful to discuss the endgame (e.g. self-sustainability) which would be the revenues 5–6 years ahead once you have captured a reasonable percentage of your market.
Include selectively comprehensive, big and clear charts and stats and keep complex product images, detailed descriptions, technical explanations, financial data, and marketing items in a separate supporting appendix section. Let a candidate investor explore that detailed information, should she/he chose to, and only after she/he gets the basics straight about your startup/scaleup.
Describe the competitive advantages of your product. List all your major competitors (direct and indirect), highlight their strengths and also their weaknesses as compared to what you offer.
– The Team
What is the story of the team behind your startup/scaleup? Why this team will be able to tackle the problem at hand and support the overall business effort? List the team, its relevant industry experience and its background. It makes a great impression if the founders have complementary skill sets and a history of working together. It is useful to stress-out what it is that qualifies the team to get involved in this specific business and explain the urgency of doing it now. In case you have any, list key advisors, experts or key stakeholders already allied with you.
– Funding details
When it comes to funding, you have to answer in two, rather contradicting, main questions:
How much money do you need?
How much of the company are you willing to give to get this money?
For the first one you must present a detailed use of proceeds board showing how the funds are going to be used in order to achieve the milestones you are targeting to. The pitch deck is either prepared for a seed round or a later funding round, milestones targeted however must always be clearly set and described because it is them defining the scaling ambition for the money requested.
An example of a summary of the use of funds and suggested milestone to be achieved could be: “We need 500k to reach a first commercial version (prototype) and support business development in order to hit the market and have 200 customers on board by Q1 of year 2”
For the question consider how much equity you are willing to give (a value of the percentage you are willing to part with). Usually, in case of a seed or a round A fundraising, 20% is a sensible percentage to part with as significant equity needs to stay with the founders and key employees so that they stay motivated while there is still enough room for future investors to join. On the other hand, you should keep in mind that in general, VCs are eager to invest if they can get a significant stake. Offering investors a much smaller percentage might compromise an investor’s commitment and might play against your startup/scaleup in their placement decision-making process.
Once the deck is ready, get feedback from any advisors and/or stakeholders involved and make changes to improve it accordingly. During the presentation keep your ears wide open, listen carefully to the feedback from the VC(s) as you pitch to them and take criticism openly. You should use this feedback to iterate and improve your deck for the following funding meetings.