This is a follow up to my most recent post, Strategic vs Traditional Investors, and I would like to discuss the key differences between the content required for a strategic vs. traditional investor pitch deck.
First, it may be helpful to provide a bit more background on investor pitch decks in general. Why are they so important and what are some general items to consider?
In short, your deck is the first impression investors will get of your company and is therefore a representation of both your idea and of you. All investors want to be swept off their feet by a compelling story and having a clean, easy to follow deck is a one of the best places to start. Below we provide our top 5 tips that we feel can be used for almost any investor deck.
1. No more than 15 to 20 slides: If you have more than this, it might be better to include it in the appendix or keep for the next meeting. Also, your final pitch should stand alone as a leave behind piece that does not require much explanation.
2. Start with the why: We regularly meet with companies and often see companies rush into the “What” and “How” before even explaining why someone would use the product. Therefore, consider starting by explaining the need for your idea. If it is an enterprise solution, describe the pain of the customer and if consumer solution, describe the need. When Wonolo, the on demand staffing platform, raised their Series A round earlier this year, one of the things that really stood out was how the team early on in their pitch deck, outlined why their product is both great and relevant at this point in time.
3. The Power of Ones: Convey one key message per slide and if possible with no more than one illustration. Make it as simple as possible to understand.
4. Show is better than tell: Especially in early stage ventures and initial meetings, your product is your pitch. Get to their product demo as soon as possible. One of our portfolio companies, Winnin, which helps users find the best videos on the web rated by people and not machines, is starting their fundraising process soon, and despite a compelling pitch deck, we found that given how addictive the videos can be, a demo is worth much more than a 1000 words.
5. Pay attention to format: The format is as important as the content. Create a clean, easy to read document. Avoid tiny fonts, bullet points, and mix of fonts/color/sizes. Create a light sized PDF (usually not more than 2MB) that you will be able to send via email.
Now that we have covered some of the basics around pitch decks, let’s shift focus to some key differences we feel founders should be aware off when preparing a pitch deck for a strategic vs a traditional VC.
VC’s see a large number of pitches and are excellent at pattern recognition probably because most pitch decks follow the Sequoia pitch outline. However, most strategic investors have different objectives and therefore to help make sense of the information, will focus on a few different items. We list our top 5:
1. Executive summaries: VC’s will ask for an executive summary before taking the initial meeting. This document is normally 1 to 2 pages and is essentially your pitch deck summarized in written format. However, strategic investors are more interested in a 5-7 page pre-read deck outlining the opportunity and how it could be relevant to them and a 1-2 minute video, because most internal discussions and presentations are done this way especially in a marketing focused company like Coca-Cola.
2. The market size: VC’s will want to know the market size & potential share you and your team will be able to achieve. However, strategic investors care less about the market size and are more about protecting the moat that they have developed over the years. As such, in our experience rather position your solution in context of how other players in the industry are addressing this issue and how your solution will create barriers to entry.
3. Selling your dream – When pitching to VC’s what you are actually selling is not really an idea or a share in your company but a dream! That is why it is important to ensure that underneath all the slides there is a great story and something that will spark their imagination. However, with strategic investors, it comes down to budgets and therefore most company executives think in terms of how the solution can help their enterprise make more revenue or reduce costs. Our advice is to address this early on in the conversation based on your results to date.
4. The team behind the idea – Traditional VC’s will want to know about the team’s unique set of skills, past experience, and company vision. With strategic investors and especially with big companies like Coca-Cola, they tend to think more about implications to the current brand vs the people involved. Our suggestion would be to skip this page unless members of the team have worked in corporates before which would help build a connection.
5. Financials – As Brad Feld and Jason Mendelson state in their book Venture Deals: Be Smarter than your lawyer and venture capitalist “the only thing we know about financial projections of start ups is that 100% of them are wrong” and “the earlier stage the start up the less accurate any predictions will be.” However, most strategic investors will want to see a forecast of three years with details and explanations into total sales, total customers, total expenses, and preferably profits.
In summary, a good investor deck, tailored to your specific audience, will help leave a good first impression with any investor. If you can combine the deck with a compelling story, it will significantly increase your chances of obtaining future fundraising.