If you’ve ever attended a startup networking event geared toward entrepreneurs you know what it can be like. There are a lot of interesting people doing cool stuff.
But there is also that founder that will talk your ear off about his company. He will tell you all about the product they’re building, its technical specs, why it’s better than all the other players out there, etc.
We all get it. He is excited and passionate about his idea; which is great. But after everyone left the circle to talk to other people you are stuck listening to this guy ramble. It’s too much.
That is the same mistake I’ve seen with pitch decks. They focus too much on the product and gloss over what’s most important to investors. Anyone can have a great business idea but without the right team to implement it–it doesn’t matter. The business needs to make business sense for a VC.
When you create your pitch deck pay special attention to the team, market and financial plan slides. The information you share here will make or break your chances at landing an investor.
The team is the most important part of an early stage company. Could anyone build your company if you shared your plan? No, probably not. Early stage investors are investing in the team and their vision. They need to feel confident your team can execute on your vision.
Investors like to see teams that have worked together before and have a track record. A team with a track record is gold to investors. Teams that have worked together before give them proof they work well together. Although everyone needs to start somewhere, if someone on the founding team has already built a company it is a bonus. It reduces risk for the investor.
If no one has built a company from the ground up, that’s okay. But try to incorporate experience that supports your ability to do it. For example, have you launched a new product at an already established company or were you instrumental in building a startup as an employee?
How to improve your team slide
- Put it in the beginning. The only reason to put the team slide at the end is if your team is weak and everyone knows this trick. If your team is weak, you will want to address the weaknesses head on.
- Add relevant experience. Avoid adding extraneous information here. People are prone to listing accomplishments that add no value to building their startup. Focus on the team’s relevant experience: skills, industry, etc.
The market size is important for all businesses but it is even more important for a VC-backed company. This is essential because it’s how the VC model works. A venture capitalist invests in unproven and riskier companies for the chance of a higher return. They can only get a higher return if the market size is really big.
How to improve your market slide
- Work on a big enough opportunity. Make sure you are diligent when sizing your market. “VCs pass because of “market size” all the time. It’s maddening feedback for entrepreneurs, because no one likes to think they are not working on a ‘big enough’ opportunity.” You can use number of possible customers and the dollar amount spent on services in your area. Of course billion dollar markets are most enticing to VCs, a hundred million dollar market will also work.
A lot of founders have not studied finance and accounting. So terminology, like GAAP and accrual can get confusing. But this doesn’t mean you should have crappy financials.
A VC will only invest in you if you can paint a picture with fast growing revenue. If they invest they’ll expect you to penetrate your market and grow as fast as possible.
How to improve your financial plan slide
- Create an industry standard P&L. Your projected Profit & Loss (P&L) statement should mimic the format of a public company in the same industry. This will show that your financials are industry standard.
- Create five year projections. Five years is the standard for financial projections. Show historicals if you have been around for more than a year. Five year growth will show an investor the type of year over year growth you anticipate.
- Don’t worry too much about projecting negative Net Income. VCs are looking for huge opportunities and it can take much longer than five years to grow to the high tens of million in revenue and be profitable.
VCs meet with hundreds of founders and judge startups quickly. There are a lot of things that a VC might not like about your business that you cannot and should not change. But focusing your pitch on the wrong areas should not be one of them.
Katie Bronnenkant is the Principal and lead VP, Finance at KB Consulting, where she and her team work with early stage VC backed companies to help get them to their next round of funding. She has helped startups raise close to $200 million in equity financing. Connect with @BkatieA on Twitter.