“Guys, we will get this last one, the VC has cash and over the phone, they seem to like us already,” said the CEO to his team. “Well, yes, but you said the same thing on the past 9 presentations that you have had, didn’t you? Maybe something else is wrong!,” the CMO replied facing the team. Shirin, an intern that does content for our startup mumbled…, “guys, maybe what we are showing them is not clear, or attractive enough. Can we all take a look at the deck?” The CEO’s eye opened wide, “yes, yes, why not; let’s rebuild our pitch deck fro the ground up together”.
For many startup teams, the pitch deck is the very first document that is generated in the company. Some find it tough, as in 20 pages you need to discuss the problem, the solution, the business model, market, the advantages of this startup, financial plan, rivals, and a lot more. It is a tough job, some say that art, intellect and business should settle well in this document.
The pitch deck is often the very first step in the communication between the startup and the investor; of course after exchanging an NDA/CA. There are more than 1000 active tech startups in the Iranian market, competing for a small pool of capital. The deck has the power of giving a strong first impression to the investor, so why not taking the opportunity to provide a clear, rational, digest, and informative deck to the investor right off the bat.
What content should be on a deck?
There are about 10 areas of information that an investor expects to see about a business to assess if this is a good fit for his or her portfolio. You need to elaborate about the customer problem and the solution that the startup proposes, the size and segmentation of the target market, who are the other competitors in the niche and how the startup differentiates itself, the team, their background, the track record of what they have achieved collectively, the business model, the key stakeholders, how the value is created for the end user, the timelines that the team is following, for example the priorities and plans over the next 6 and 12 month, the legal stand and the intellectual property (if any), the investment opportunity, in the other word the amount of the asking fund, and the valuation of the startup. Investors would love to see the content structured in not more than 20 pages.
But what about the graphs and numbers, what kind of content should be provided in the deck under each topic? It is to startups’ advantage to provide a right balance of graphs, numbers and words in the slides. The content about the market, financial stand and plan and other content that have numbers behind are better to be expressed in charts and graphs.
Obviously, no investor can be expert in all industries. So, receiving a copy of your market research reports from public domains about the niche, links to content that validates and supports the assumptions of their market size and their input/output of their business plan are greatly helpful.
Need a sample? The Internet is the best place to find samples. A Google search will lead startups to tons of good samples.
So, let’s say you have developed your pitch deck, presented to the team many times to get ready for tough questions. Now, should you send the document to the investor right away?
Actually, no. A rational next step to the startups is to sign a non-disclosure agreement (NDA) first so their intellectual properties and plans are bind by a confidentiality agreement with the investor. Then you forward the deck to the investor. Always follow up through emails to make sure if there are any questions you could address. A Skype meeting right after your submission is a good approach.
But how an angel investor judges your pitch deck? Well, an experienced investor can say a lot from a deck. They look at the quality of the content as well as the quantity of the information. Stick to mono-tone images and graphs, spell check all pages, see if the flow of the content makes sense. If there is any discrepancy in the numbers, use single currency unit in all slides, spell out the opportunity and what you need from the investor on the last slide.
A clear, digest and crisp deck can have a very good impression on the investor. Ultimately, you want the investor to connect with the opportunity, indeed through your deck; you are selling the investment opportunity to them. So the deck is a selling package; it has to be informative, clear, related, carries not too much and not too little information, and professionally presented.
How healthy are the pitch decks from Iran?
We receive a couple of decks every week from Tehran. About a third of the pitch decks that we receive from Iran are missing or suffer from incomplete content in areas such as business model, competition, marketing strategy, financial plan and the first 6-12 month priorities.
When you are in the startup mode the funding becomes part of the routine. Even Uber at $65 billion valuation is still in the market for funding. It is very normal that about 30 to 50 percent of the CEOs or the founder’s time is spent on fundraising, directly or indirectly. It is not a phase in the startup; it is more of a continuous process. You think this is too much of the CEO’s time to spend on funding? Well, the time that the CEO or the founder of a startup spends in the money market is not only for the money.
Let me explain it a bit. Investors are in touch with the ecosystem and talk to different stakeholders all the time. They have to be aware of dynamics of the market and how niches evolve. A wise CEO would spend a good few hours in a week meeting with angels, VCs, industry experts and other stakeholders to gain insight. Even if a CEO doesn’t need money for his/her startup, staying in touch with the investment community would help build relationship and rapport. On the other hand, each funding is usually good for 6 or 12 months (rarely beyond 18 or 24 months). Practically, each fundraising would take a 3-6 month, so you realize that fundraising process is not a gateway that you do it over a 2-week timeframe and when done, you could close the chapter until the money is low in the bank again. Rather it is an ongoing process in the startup world.
Should startups make a different deck when pitching to angels investors versus VCs?
Not really, a pitch should be complete and representative for any audience. However, there are reasons to go after angels versus VCs and vice versa. Angels usually invest at the early phase when there is an MVP, the product is being tested in the market and hopefully a little bit of cash flow. Angel’s investment can be as small as 50 million Tomans (12 thousand dollars) at pre-seed, to a couple of billion Tomans when angels invest collectively. VCs often step in when the startup is in the growth phase. In the other word the product is out in the market, few rivals are chasing you and you need to secure market share pretty fast. Some founders prefer angels, especially those who could bring in business acumen and strengthen the team, often referred to as smart-money.
But, what is the fundraising in essence? Sourcing funding is a relationship building process, which is crucial for the success of the startup. Founders need to be assertive; they are not pitching to a bank for a loan. You need to be able to build a long-lasting relationship with your funder.
Smart founders are clear on what they need besides the money. Try to target those investors who can bring money, and network, and business acumen, and other solutions/resources that your startup needs. For example, an Iranian startup that interacts with customers outside Iran needs a credit card processing gateway. In such a case, an investor with resources outside of the country would score higher. It is a good practice for the team to enlist the items and capabilities that they wish the investor to bring in in the pitch deck. This indicates their approach to funding is professional and thoughtful.