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Looking for investment? Here’s what you need to include in your pitch deck
There comes a time in the lives of many start-ups when they need to tap investors for funds to grow.
They may need to bring on board expertise they haven’t had by hiring new talent, buy equipment or move out of the garage and into office space.
Whatever the reasons, they need to pitch their business to investors and outline why they should part with their money and take a slice of the company.
A critical part of any pitch is the pitch deck, a slide show that outlines the essential details of what the business is about.
For Gavin Appel from venture capital firm Square Peg Capital, it’s important that entrepreneurs look professional without going over the top with information overload when it comes to pitch decks.
“A simple slide deck outlining the key points that investors want to see will lead to sparks of interest and engagement in a conversation to learn more,” he tells StartupSmart.
We asked three leading venture capital investors, Appel, Anne-Marie Birkill from OneVentures, and Benjamin Chong from Right Click Capital, what are the key things they want to see in any pitch deck. Here are their responses.
Appel says a key question is what is the specific problem a business is looking to solve?
“What makes them unique in their approach, how defensible is it, and what does the competitive landscape look like.”
Chong says investors wants to know whether the problem is real.
“Investors want to know if the problem you’re solving is a big one. They want to know if it’s a large market. They want to know who your customer is. Some investors are very keen to know if it’s a global problem you’re solving.”
Birkill says investors want to know how an entrepreneur’s solution will meet a market need.
“It is important that the company has a solution that stands well ahead of its competitors to give it the best chance of capturing market share,” she says. “We also need to have a realistic understanding of the state of readiness of the product, as obviously this impacts on the capital requirements of the company.”
Birkill also says she wants to see how the solution sits alongside competitive solutions.
“I like to see a simple matrix that compares the solution against competitors based on key characteristics that are important to future customers,” she says.
Chong says investors want to know if a solution will really solve the problem and if it’ll be difficult for competitors to replicate it.
How big is the market opportunity?
Birkill says answering how big the market opportunity is, why it is unmet and what portion of the total market a business can address should be part of a pitch deck.
“We aren’t interested in investing to address niche markets – we want to know there is a significant market opportunity and that this has been validated through thorough market research,” she says.
“We don’t want to hear motherhood statements like `the market opportunity is $1 billion and if we just get 2% of that …’ We want evidence that there has been a thorough and considered evaluation of the market to give us confidence that the opportunity is significant.”
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Appel also says market size is important.
“Outlining the size of the market the entrepreneurs are targeting and whether they have a vision for local or global growth will help investors understand the size of the opportunity in front of them,” he says.
Is the business already making sales?
Chong says investors want to know if the company is already taking cash from customers.
“The more cash you’ve taken from customers the more validation you’ve received. They’ll want to know how you’ll keep making sales and the channels of those sales,” he says.
Appel says whether the business’s product is in research and development or has been commercialised will determine what stage it’s at.
“Based on the stage, outline the key metrics which will vary for each business demonstrating traction achieved and how sustainable the model is,” he says.
Traction could also incorporate elements of the company’s business model.
“We need to be able to see that the product or service can be delivered into the market at good margins and at volumes that drive a profitable business,” Birkill says.
“Too often we see businesses with good traction in their target market that have little prospect of making a profit because (for instance) they don’t understand how to cost their overheads into their pricing model.”
Who will deliver the business? Who are the management team and what’s their track record? Appel says it’s important to outline to investors who the team is that’s building and running the business and why they’ll succeed.
“We are investing in the entrepreneur’s vision, passion and their ability to execute, which combined, are critical elements in our assessment process,” he says.
Birkill says that assuming a business’s market opportunity is real and the technology solution is solid, team is most important consideration.
“We need to feel we really ‘gel’ with the key managers,” she says. “Does the team have the right skills and experience to deliver the business? Are they passionate and motivated? Can we work together over the next two to five years in a collaborative fashion?”
Chong asks how team members will help a business get to its destination.
“I like teams with technical and business backgrounds,” he says. “I also like teams where there’s someone who has domain knowledge expertise – they either know the industry or have experienced the problem first hand.”
Birkill says these should be “top level” in terms of detail and include key assumptions around things such as market penetration, pricing and staffing.
She says this section will also include how much money the company is seeking to raise.
Appel says it’s important to understand where the funds raised are going to be spent.
“Is it growth capital, in which case the funds will be spent on product development and international expansion,” he says. “Or is it to be focused on marketing to build awareness for customer acquisition? The answer to this will depend on the stage the business is currently at.”
Chong says there should be “a clear ask”.
“Investors want to know how much money you want and what you’ll use it for,” he says.