Pitch Decks
It is a truth universally acknowledged, that an investor in possession of a good fortune, must be in want of a deal.
Few people realize how many gazillions of startup companies there are with great solutions to important problems that they could build if only they had enough money. It’s astounding. If investors put more money into venture capital investments, the world would be a better place. Unfortunately, investors only put enough money into venture capital to enable a small portion of the potential great startups. VC inventors’ jobs, roughly speaking, are to allocate the limited money to the startups that will produce the most wealth.
Gazillions of startups competing for limited money means that investors get enormous numbers of pitches. Investors have very little time to spend on each startup in a first pass of filtering. Pitches usually come to investors in the form of a deck of slides that should be self explanatory. It is important that the slides are self explanatory.
The purpose of a deck is not to persuade investor to invest or to provide the information needed for an investment decision. The only purpose of the deck is to ensure that when the right investors see it, they will request meetings.
Below is a thought process for entrepreneurs to use when constructing a clear pitch deck. This is not a list of slides or their order. It is just a thought process.
1. Customer: Who will pay most of the money you earn?
2. Solution: What do you provide to those customers in exchange for their money?
It’s surprising how many entrepreneurs don’t seem to know these first two questions.
3. Problem: What would the customer want if you didn’t exist that they won’t want because you do?
Global warming, an inefficient health care system, and an ineffective education system are big problems. But those everybody problems are not the specific problems that startups solve in exchange for their customers’ money.
4. Competition: How would a clever customer solve the problem in the future if you didn’t exist?
This probably includes other comparable companies. It might also include other very different approaches that will be preferred by some of the startup's potential customers.
5. Market: How many customers will buy your solution and how much will they pay on average?
Top-down TAM/SAM/SOM numbers are essentially meaningless to investors. This is partly because so many entrepreneurs misunderstand or misrepresent the problem. The bottom-up approach of (number of customers times amount they each pay) typically arrives at a more realistic estimate than the top-down estimate.
6. Traction and Forecast: How much revenue have you earned in each of the last few years or months and how much will you earn in the next few years (if you aren’t acquired)?
7. Why now: Seems like a great idea. Why didn’t somebody do it already?
8. Barrier to competition: What will stop somebody from copying you?
9. Team: Why should an investor support this team instead of some other team of smart people who could also build the solution?
10. The Ask: What round, amount raising, equity terms (pre- and post-money valuation) or debt terms (cap and discount)?
