So you’ve got an idea for a business and you get to work to realize it. You find a co-founder/s you trust to work with you and divide responsibilities. You figure out your market, product/service specification, and start building your company. You work hard to get everything in order and gain traction. For whatever reason, you get to a point where you need a capital injection to keep your business growing. It’s time to find investors who can do just that.
Before looking for investors, and especially before approaching investors, it’s a good idea to make a pitch deck first. Every aspiring founder and entrepreneur knows the importance of a compelling pitch deck when looking to find investors for funding.
In this article, we will go over what a pitch deck is, how to build one, how to use persuasion in your pitch deck, and the key difference between a sales deck and an investment deck. With valuable input from Scott Hindell, who has over 20 years of experience consulting budding entrepreneurs on building strong pitch decks, you will takeaway key points on how to synthesize a pitch deck that can articulate the makeup and strengths of your startup.
Scott Hindell is an Innovation and Entrepreneurship in Business and Custom Programs master instructor at UCLA extension and Lead business coach at M Accelerator.
What is a pitch deck?
At a high level, a pitch deck is a set of slides that are presented before investors when seeking funding. The pitch deck goes over what your product or service is, why it’s needed, what size of market exists for it, how much money you’re asking for, what you need the funding for, and who your team is.
A Pitch Deck is traditionally used to raise capital. But it isn’t the only use. We put a lot of emphasis on the Business Model. The problem with business models is that most people can’t find the words to properly communicate.
The pitch deck is a way to articulate your business model using vivid and tangible words that help people relate in a meaningful way to your project. It is a clear, concise, and profound way of talking about your project.
The true test is if the audience wants to know more about your business.
After your pitch do you have a lot of people coming up and talking to you?
A pitch deck in our program is first and foremost a way for you to find the words to paint something unique and help people in the most efficient way to understand your project.
It also gives you an incredible direction, it’s not a road; it’s a way that helps you make decisions even after.
How do you start a pitch deck?
Before getting into the nitty-gritty of the pitch deck, it’s important that you go into it at the right angle. Just like with anything, having a clear idea of your goal and tools is important for execution.
Investors receive hundreds of pitch decks each year and according to a study by DocSend, investors look at pitch decks for just an average of 3 minutes and 44 seconds so it’s important that you position yourself for success when it’s your turn under the spotlight.
Keep your pitch deck between 10-15 slides and don’t include the deal terms within. You should give that separately to investors.
Most people don’t start their decks in the right way. If you go to events, you find people starting by saying what they want to do and following with why they should be able to do that.
This method isn’t very effective because you can’t start delivering a presentation with a new idea and then attempt to reconcile the distance between you and the listener with a typical approach like that.
We take a much more natural approach, first by illuminating something in the world that previously wasn’t very clear, and then making it clear by framing and zooming.
Then we build-up to the pivot point for your business, or “what it is missing”.
By that point, the listeners understand the problem you are solving and they are engaged with the solution.
How to build a pitch deck
It’s important to be strategic when making a pitch deck and implementing important persuasion techniques in order to strengthen. Although there are certain things that can vary as to what a pitch deck requires depending on the business type, there are some basic principles that are important to follow when building a pitch deck.
The most pertinent features of a pitch deck are the slides that answer the questions of what your product or service is, why it’s needed, what size of market exists for it, your revenue model, how much money you’re asking for and why, and who your team is.
DocSend’s study indicates that investors focus two times more on finance and team slides so it is important to be extra diligent with those sections. The team section especially because it can really be the difference between whether you receive funding or not.
This is where talk about the background of your team members and is important for building ethos.
You hear all the time that investors will invest in people, not businesses. This isn’t an exaggeration by any means. Putting extra emphasis on the team slide will develop your story and maximize the potential of your pitch deck.
A study by GreekWire analyzed the content of successful pitch decks, like Airbnb and Uber, found that 82% of decks featured product visualization in their presentation deck. This makes sense as we as people love visual things, show not tell often stands true. They also found that
- 59% of the pitch decks showcased customer logos
- 31% showcased testimonies
- 27% showcased case studies
- 10% showed their pipeline.
In the finance and revenue section, they found that the median amount of months for growth projection was 36 months. Remember that investors gave two times more attention to finance slides and team slides.
Another important section to have is a competitive analysis slide. The competitive analysis slide should explain who your competitors are, their strengths and weaknesses, and what gives your business an edge over them. GeekWire found that the median amount of competitors included in the pitch decks they assessed was 8.
The main purpose of a pitch deck is in unsophisticated terms, to ask for money.
The slide where you go over how you’re looking to receive is called the “ask slide”. It is important to be as deliberate as possible in this section. It’d be a shame to fumble funding in this simple but important section.
GeekWire found that 67% of pitch decks provided a dollar figure ask and from this group 70% gave an absolute target and 30% gave a range.
Be sure to include metrics on your users, if applicable, especially any prominent customers.
How to use persuasion in a pitch deck?
Persuasion in a pitch deck is nuanced, but it really starts with a polished composition. Once you get all the sections in order, make sure to fine-tune according to what the data says.
Doing all the little things like making sure to put extra effort into the finance and team slides will make your pitch deck compelling.
The slides that go over what your product is and why it is needed, “the problem”, can be very useful for delivering with persuasion.
Make sure to deliver the market opportunity in a way that will click with the investor, this can mean simplifying where you can especially if you have a technical proposition.
Another big part of persuasion is making full and efficient use of an investor’s time.
Since investors will often not look at a pitch deck for more than 4 minutes, it is best to keep your pitch deck to 10-13 slides.
The difference between a sales deck and a investment deck
If we are considering the strategic persuasion approach, there isn’t much difference between an investment deck and a sales deck. The same persuasion techniques can be used in a sale, a capital raise, or a negotiation with your landlord.
At the end of the day, when you are trying to persuade someone you are giving touchpoints that collectively help the other part to see something it wasn’t easy to see before. People like to discover things, not necessarily to be told.
Whether a prospect or an investor is the same, you are trying to help them to easily and intuitively discover a solution that goes in a common direction.
How long will it take to secure funding after making a pitch deck?
Now that you have an idea of what you need to build a compelling pitch deck, what you need next is fortitude and patience.
Fundraising can take quite a while and you should be prepared to be at it for something like 3 to 4 months.
The study from DocSend estimates that of the startups that failed to successfully raise funding and gave up, did so after an average of 6.7 weeks. That’s not even two full months compared to the expected timeline of 3 to 4 months.
In addition, they found that businesses needed an average of at least 40 investor meetings to secure a fundraising round. Research by Toptal, a platform that connects businesses with software engineers, designers, and business consultants, found that the average series seed raise requires contact with 58 investors, 40 investor meetings, and over 12 weeks to close around.
So you’re going to have to trust the process and keep chugging along; luckily you can only get better at delivering your pitch deck presentations as you progress through your fundraising round. Securing funding doesn’t just mean putting together a great pitch deck.
You must also put yourself in a position and context where your pitch deck will work. Understanding your context is very important for weathering the difficulties of fundraising.
In addition, understanding who you’re looking to get funding from, such as Venture Capital firms or Angel investors, is important. TechCrunch says the average amount of time it takes to raise from VCs was four weeks shorter than the amount of time it takes to fundraise with Angel investors.
However, raising with VCs is more competitive with “rounds that were led by firms tended to be 36.8 percent oversubscribed while angel rounds were 18.9 percent oversubscribed.” VC firms invest in one of 400 pitch decks they receive, while angels typically invest in one of 40.
This ratio is confirmed by the VC firms in our network making 3-4 investments out of 2,000 applications they receive every year.
Another point worth noting is that an individual angel investor can be expected to give between $25,000 and $100,000 in a round. While VC firms might invest between $250,000 and $1M for a seed company.
Scott Hindell leads coaching on business design and pitch deck composition at M Accelerator and remarks on our program’s process that extends to pitch decks:
Our process is a little different from most programs, unfortunately, today it is very common to believe that using a pattern or a template is a good approach to build a business. The result is that most startups end up having their components structured as functional silos without a unifying aspect.
We believe in solving problems in exceptional and useful ways. That’s the foundation of our program.
We have a design approach that is based on gaining a very informed level of understanding of several elements of the business.
Our program isn’t a course, we don’t complete these components as sections, instead, we create a workshop environment with many learning loops. Our program is organized in weekly workshops (sprints) and at each session, we have multiple learning loops.
The program has a great dynamic flow, and everything happens in a short time. The validation and confidence build up over the weeks and each week we have a portfolio day, with our participants presenting their work.