Founders often ask me, what slides on my pitch deck do I have to make sure I get right? The short answer, all of them. Then again, if you’re focusing on all of them, you’re focusing on none of them. So I’ll break it down by fundraising stages:
- Pre-seed/seed (might as well include angels here too)
- Series A/B
Since I spend almost no time in the later stages, I’ll refrain from extrapolating from any anecdotes there.
If you’re using DocSend, you already have the numbers for your deck viewership in front of you. As DocSend’s CEO Russ Heddleston said in his interview with Jason Calacanis, VCs often spend ~3.5 minutes on your deck. Though I’ve never timed myself, it seems to be in the same ballpark for myself as well. After all, it’s the deck that gets the meeting, not the deck that determines if you get funding or not.
Nevertheless, I hope the below contextualizes the time spent beyond the numbers, and what goes on in an investor’s head when we’re skimming through.
Pre-seed/seed
Team
- What is the biggest risk this business is taking on?
- Is the person who can address the biggest risk of this business on this slide?
- And does this person have decision-making power?
Let’s say your biggest risk is that you’re creating a market where there isn’t one. Do you have that marketing/positioning specialist – either yourself or on your team – to tackle this problem? As much as I love techies, three CS PhDs are going to give me doubts.
Similarly, the biggest risk for a hypothetical enterprise SaaS business is often a sales risk. Then I need proof either via your network/experience or LOIs (letters of intent) that you have corporations who will buy your product.
Or if it’s a tech risk, I’ll be hesitant if I see two MBAs pursuing this. Even if their first hire is an ML engineer, who owns 2% of the business. Because it doesn’t sound like the one person who can solve the biggest risk for the business has been given the trust to make the decisions that will move the needle.
This might be a bit controversial, but having talked with several VCs, I know I’m not alone here. I don’t care about quantity – number of years in the industry or at X company. Maybe a little more if you were a founding team member who helped scale a startup to $100M ARR. I do care for quality – your earned secret, which bleeds into the next slide.
Solution/product
The million-dollar question here is: What do you know that makes money that everyone else is overlooking, underestimating, or just totally missed? If you’re a frequent reader of this blog, you’ll be no stranger to this question. I’ve talked about it here and here, just to name a few.
Or in other words, having spent time in the idea maze, what is your earned secret? Here are two more ways of looking at it is:
- Is there an inflection point you found, as Mike Maples Jr. of Floodgate calls it, in the socio-economic/technological trends that makes the future you speak of more probable?
- Is it a process/mental model that you’ve built over X years in the industry that grafts extremely well to an adjacent or a broader industry?
I believe that’s what’ll greatly increase the chances of your startup winning. Or at least hold your incumbents at bay until you reach product-market fit. If you’re able to find the first insight, then you’ll be able to find the second. And by pattern recognition, you’ll be able to find the third, fourth, and fifth in extreme velocity. It’s what we, on the VC side, call insight development. And your product/solution is the culmination of everything you and your team has learned faster and better than your competitors.
Of course, your product still has to address your customers’ greatest pain points. You don’t have to be the best at everything, but you have to be the best (or the only) one who can solve your customers’ greatest frustration. So VCs, in studying how you plot out the user journey, look for: do you actually solve what you claim this massive problem in the market is?
Series A/B
Traction
- What are your unit economics? I’m looking for something along the lines of LTV:CAC ~3-5x.
- Who’s paying?
- For enterprise, which big logo is your customer? And who are your 5-7 referenceable customers?
- For consumer:
- If it’s freemium, what percent of premium users do you have? I’m looking for at least a 3-5% here.
- If your platform is free, how are people paying with their time? DAU/MAU>25-30%? Is your virality coefficient k>1? 30- and 90-day retention cohorts > 20%, ideally 40%.
- What does your conversion funnel look like? What part of the funnel are you really winning? Subsequently, what might you need more work on?
The competition
95 out of every 100 decks, I see two kinds of competitor slides:
- 2×2 matrix/Cartesian graph, where the respective startup is on the upper right hand corner
- The checklist, where the respective startup has all the boxes checked and their competitors have some percentage of the boxes checked
Neither are inherently wrong in nature, but they give rise to two different sets of questions.
The former, the graph, often leads to the trap of including vanity competitors. For the sake of populating the graph, founders include the logos of companies who hypothetically could be their competitors, but when it comes down to reality, they never or rarely compete on a deal with their target user/customer. April Dunford, author of Obviously Awesome, calls these “theoretical competitors.”
A simple heuristic is if you jumped on a call with a customer right now and ask: “What would you use currently if our solution did not exist?”, would the names of the competitors you listed actually pop up during the call? Or with a potential customer, what did they use before you arrived? For enterprise software, Dunford says that startups usually lose 25% of their customers when the answer to the above question is “nothing”. When your greatest incumbent is a habitual cycle deeply engrained in your user’s behavior, you need to either reposition your solution, or find ways to educate the market and greatly reduce the friction it takes to go from 0 to 60.
The latter, the checklist, usually sponsors a second kind of trap – vanity features. Founders often list a whole table’s worth of “awesome features” that their competitors don’t have, but many of which may not resolve a customer’s frustration. And on the one that does, their competitors have already taken significant market share. The key question here: Do all features listed resolve a fundamental problem your customers/users have? Which are necessary, which are nice-to-have’s? Are you winning on the features that solve fundamental problems?
The question I ask, as it pertains to competition, in the first or second meeting is: What are your competitors doing right? If you were to put yourself in your competitor’s shoes, what did they ace and what can you learn from the success of their experiment?
Financial projections
- What are you basing the numbers off of?
- What are your underlying assumptions?
How fast do you claim you can double the business growth? Is it reasonable? If we’re calculating bottom-up, can you actually sell the number of units/subscriptions you claim to? What partnerships/distribution channels are you already in advanced talks with? Anything further than 2 years out, for the most part, VCs dismiss. The future is highly unpredictable. And the further out it is, the less likely you’re able to predict that.
I also say financial projections for Series A/B decks is because only with traction can you reasonably predict what the 12-month forward revenue is going to look like. Maybe 18 months, depending on your pending contracts as well. In the pre-seed/seed, when you’re still testing out the product with small set of beta users, it’s hard to predict. And pre-seed/seed decks that have projections without much traction are often heavily scrutinized than their counterparts that don’t have that slide.
In closing
Of course, that doesn’t mean you should neglect any slide on your deck. Rather, the above is just a lens for you to see which slides an investor might allocate special attention to. If you can answer the above questions well in your pitch deck, then you’re one step closer to a winning strategy not only in fundraising, but in building a company that will change the world.
Photo by Ricardo Gomez Angel on Unsplash
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