Last week I wrote about getting your pitch deck ready, if you haven’t read that and would like to, see here. This week, as part two of three, I’m going to share some tips as to how I think a pitch should be structured. Now there are no absolute rules and each founder will do these differently, this is just a guide on how I think a good framework can be made which looks investor ready. So here we go!

Firstly, work out how much time you have. Most meetings with investors are one hour. Often, investors will have “new company day” and you may be back to back with other potential companies seeking the same investor. Some people, myself included like to schedule all pitches on a recurring day or day(s) in a week where possible so you should always assume that you are actually going to be compared with multiple other companies which are in the investor’s head, if not literally right after you in the same room.

So let’s walk through a timeline for the one hour. You should always assume that the VC will have to leave when they say they do, so if you have anything that is core to your proposition or that can refute objections it needs to be within that time – so don’t leave questions till minute 58. I like to tell founders to break this into eight sections – remember time is always ticking so make sure when you practice or are in the room you keep the ball rolling by looking surreptitiously at the clock and make sure you get through all eight. The only caveat here is if you think the investor is really loving what you are saying and you then may want to keep on that section for a bit longer, but don’t assume you can add an extra five minutes on to the back so you’ll need to cut something else down on the fly. The eight sections roughly look like this.

1. Small Talk and Setting the Scene – 10 mins
2. The Problem – 5 minutes
3. The Solution – 10 minutes
4. Why You? 10 mins
5. Unit Economics – 5 minutes
6. Your Vision – 10 minutes
7. The Ask – 2 minutes
8. Question Time – 5-10 mins

Bear in mind the first investor meeting is largely for the investor to get to know you and find any huge red flags. They will have looked at your deck, looked at your website, but probably not really gotten in depth into unit economics or the like. They may have a preexisting investment in the sector and if so they have probably asked them if they have heard of you and have any thoughts. The first investor meeting is not the place to be doing deep dives into due diligence questions – it will largely be high level and making sure that nothing sounds really out of place, that the team seems good and that they believe in your product and vision. You should not be, and are not expected to go through your financial model line by line in your presentation and I encourage you to stick with very simple math which I will detail below.

 Note in the below article I go through a bunch of slides which are an not exhaustive list of what you need, so I am just talking about the ones that often get spent time on in the meeting – there will likely be more slides you need in your deck which are not mentioned in here to illustrate your value proposition.

Small Talk and Setting the Scene – 10 minutes

So the clock is ticking. Remember most meetings don’t start on time, and make sure you are there early and with your presentation up and your demo ready if you have one so you can start as soon as the investors arrive. If you have people dialing in via phone your side, make sure they are on the line at least ten minutes before they are supposed to be so you can work out if the investor’s conference number works etc. At this point it is a very simple “great to meet you –  thanks for making the time, hope you’ve got the deck and had a chance to read it.” Always ask the investor that question as sometimes the response will be no. Bring extra copies of your presentation in hard copy to give to people if they don’t have one. Most investors will offer to talk about themselves, what they are looking for and their interest in the sector which you should accept but by the end of small talk, introducing everyone and this investor background we can be up to 15 minutes in length (i.e up to a quarter of the time). Make sure if you have more than two people attending that you either introduce by name and title instead of a full bio or literally a ten second bio like “Hi, I’m Peter, I’m the CTO and co-founder, and I’m ex-Google, and before that I started a machine learning startup”. The aim here is to get into your presentation as quickly as possible. Life lesson: in most meetings I have been to the first ten to fifteen minutes is always small talk and getting the presentation and/or phones working and everyone in the room if there are multiple people. So you probably only have 50 mins to shine.

The Problem – 5 minutes

This should be at most two or three slides (not including total addressable market). If your app is a consumer app or something which is more general than niche then this is typically a time to have a story. Emotional responses elicit more interest than logical responses. Typically this is a story about you and the problem you had which led you to found the business. If it’s not you then it should be your target customer persona “Lucy is a 25 year old professional who earns over $75,000 a year but does not have any savings”. The first 2 slides are generally questions, by question I mean “did you know that X% of 20-30 year old professionals do not have access to X”. If you are going to put any full colour pictures in your presentation this is often a light-hearted and fun way to start the pitch.

Your next slides will be more serious and have graphs, data and market sizing assumptions. They generally reflect a series of initial and then follow on markets with concentric circles with the first circle being your current market and expanding outwards. I typically recommend people to not have “Global” or “Worldwide” as the last circle and try to have the circle size being large but not ridiculous. Remember, the investor is testing both a) is this a big enough problem and b) could you be the market leader i.e greater than 50% of your market. Also remember that your model and business plan needs to correspond to this, and you need to have sufficient market share of your market in your plan to lead it. One of the first things the investment analyst at the firm will be asked to do is test the market assumptions (i.e do the market stats seem correct) and work out who else has what share in their market. So if the market leader currently has 10% and you are projecting 30% in two years it will look very odd unless you can prove a data driven thesis.

Generally, unless your stats are very off, or someone has an investment in this field, you will not get strong push back in the meeting because people will want to get into the unit economics and the like.

The Solution – 10 minutes

Depending on how complicated your solution is, this is either a very quick or potentially more lengthy scenario. At a minimum the first slide of this section is “So we created X, an [app] that does Y”. You should have a one or two-line vision statement and or value proposition on this slide.

Slide 2 is a value chain diagram showing exactly what you do and what you don’t do. People often forget to include this slide but basically the investor really wants to know at what point does your product start and other products end. Draw a big box or otherwise colour code what you do in the diagram. Unless you really come from a fintech background or have a special reason to do so, investors want you to focus on the stuff that is differentiable. Unless you have a specific reason to do so, there is no reason to build say a payments engine for example and you will see Stripe or Pin (a shameless plug for one of our investments) or other payments providers in this slide.

If you have a demo or MVP this is the time to bring out screenshots, your app or the demo. You generally spend 5 minutes explaining what you are trying to achieve and then 5 minutes demoing the MVP, app or the above. While you demo you should point out how it solves specific pain points identified in the problem section. I always encourage people to have a video as backup if for whatever reason the internet, your page, wifi etc goes down and your product demo doesn’t work etc (happened twice last week at pitch day).

You will end this section with a slide or recap highlighting the key benefits to reinforce this. This should largely mirror how you sell the product to customers. If you have net promoter scores or testimonials from customers e.g screenshots of emails etc or logos then you can add this in here as well.

I note you will probably have a pricing and “tier” (e.g free, standard, premium) slide in here, but I like entrepreneurs to talk about this later on in the presentation in depth. You should mention who your target market is and contract size etc but note you will talk about unit economics when you get to the slide.

 

Why You? 10 mins

There is no right answer to this section and a lot of founders rely upon traction to answer this question. Examples include a slide full of your logos that you have to the extent you have big customers. Normally the pitch is something like “we believe we are going to be the pre-eminent solution in market X because” and then a list of your key product / business highlights. You then may have a few supporting slides such as

• Slide 1) user graph or user and revenue graph over time plus other relevant operating metrics which may include churn / typical contract length and stickiness etc
• Slide 2) our clients
• Slide 3) Competitors and their product versus your product on a tick and cross system. I note that almost every deck we see that has this has the company presenting with all ticks and everyone else at significant crosses, so just assume that people will discount this if it isn’t actually the case.

Further slides contain anything specifically special, patents, technical diagram, commercial test results or industry benchmarking, partners etc.

If you operate in an industry where regulation is key, you should have a regulation slide (e.g medical, deposits, insurance etc) and how you are addressing key regulatory issues which are often a good “moat” or why you have a competitive advantage.

Note at this point we are over halfway through the hour and we want to make room for questions and we haven’t even explained how the business model works. So try to not get drawn into too much debate in the first sections, and take questions offline where it is hard to answer and commit to answer them via email later.

Unit Economics – 5 minutes

I encourage all founders to have a unit economics slide or slides. This should set out your proposed cost and revenue structure, and/or your actual cost or revenue structure if you have customers. This should at a minimum have

• How much is your product?
• How much does it cost directly to serve your product (i.e hosting, other direct costs). Note this does not include say marketing or your salary this should be the direct cost of providing each additional contract as a MARGINAL basis. Revenue minus direct costs of goods sold equals the gross margin. For software (excluding amortisation of software development costs) this can be 70-90%. If your gross margin is 30% and none of your competitors are, do not assume you can convince anyone this will change over time
• Fixed costs base / opex per marginal transaction.
• Customer acquisition cost (CAC)
• Life time value of your customer
• Projected churn rate of your customers

For the last three we don’t have enough time to go through this in this post but see this link here. Assume any VC will ask you to step through in detail your assumptions around this if not in this meeting then in the next. So proactively address that question by saying something like “so my contract is X dollars per month, it costs Y dollars per month to serve and then my operating / acquisition costs are Z which means that for every new customer I aim to make Q dollars per customer or a gross margin of R% and an operating margin of S%. That translates to targeting a 3x LTV:CAC ratio on the CAC of P dollars I mention and a payback period of 9 months”. If you can’t accurately articulate these numbers you need to get these sorted before you talk to institutional capital.

You may have some slides here showing key contracts and how much they make and/or potential contracts to show effect on cash to the bottom line which you can talk to. “This shows that if I get these two next contracts I am close to winning I can expect an additional $x per month in cashflow and we have seen that once people go through the freemium product over 30% of people upgrade and then stay for at least 12 months”

You should have a marketing slide in here which shows your channels and assumptions on channels to the extent they are relevant e.g Social, direct sales, reseller sales etc. Showing maturity of thought by segmenting CAC per channel and marketing spend per channel is key here for a more mature product if you are raising at a valuation over $5-10m pre money, you may get away with it as broad assumptions under that valuation.

Your Vision – 10 minutes

At this point often we are running out of time but a well thought out pitch will go through two slides here, business plan and technical roadmap.Technical roadmap is typically first. Here is what I have built and here is what I am building. You should include somewhere a simplified diagram of your technical architecture which includes the main things that people may want to know so that you can get through the section a bit quicker e.g hosting, platforms / languages used, geographies etc. You should also make clear in the diagram what you own or are developing and what you are licensing or using.

Business plan discusses the next 12-36 months and where you see the business heading. You should generally talk about this while the financial forecast is on the screen (they are two separate slides but you can do the talking on the second slide with the financials). The financial forecast should have some operational metrics below so that you can correspond them to the business plan e.g “you can see in Y2 we aim to have 10% of market X which corresponds to Y users. So therefore you can see that at an average contract value of Z per year that equals my revenue of U dollars you can see in 2019”. Try and do the math for the investors so it is easy to follow as that is one of the most things that impresses me about founders – those who can show the math simply and can show you insights at a simple level and that they understand it “you can see in Year 3 we stop spending so much on development because our CRM module done and we start turning that into additional money on sales and our cashflow statement reflects that”. If you can demonstrate that sort of insight as a founder you almost always get the investor to take a further look at the information because it demonstrates you understand how the levers for growth in the business and how you can make money for them.

The Ask – 2 mins

As I said in the last post – you need to end strong. So this is typically saying you need $X at $y pre-money EV and the round has Z dollars remaining with U dollars taken. You can also describe here the specific synergies and reasons you think they should invest including focusing on your slide I mention in that post which shows a potential opportunity for the investor’s portfolio company. Be as personal and tailored as you can about why they (specifically) or their investee companies could benefit (specifically) from your company.

 

Question Time – 5-10 minutes

Question time should be two way, no matter if you think this is the investor you really really want and no other investor makes sense. I usually encourage people to start with “do you have any initial feedback at this point or are you happy to take questions”. 90% of investors will start with questions, so remember to go back to initial feedback if you don’t get any.

At the end of this a good founder will ask, so what would be the typical next steps from here and the typical diligence requirements. In almost all cases where the investor is interested the next step is to send across an NDA if not already signed and give them access to more data. You should agree who is doing that and when you will send it, and when you expect to grant them access and for how long. You should also be clear as to what your timing is and ask the investor how long their total DD period is. We typically like to get an informal two way check every say five to seven days during a DD process where both parties confirm they are interesting in continuing and if anything has changed. In my personal experience DD usually falls apart at the beginning rather than the end so you usually should have some inkling early on if it will not make sense for either parties.

Other Things Which May Come Up

There will obviously be other things that come up in the deck which may or may not get airtime. Capital structure will get some airtime if you have other institutional investors or a weird capital structure and you should have one of those slides. I note that typically companies don’t put their round history in there but I ask for it in every meeting i.e when did you raise last and at what round so it should either be in your slide or you should have those numbers in your head.

Team and team bios may also offer discussion if you didn’t go through them in the Introduction s section. As may specific contracts, names or logos in your deck. If you have something in your deck and it is a metric, you show know as a founder where that metric comes from and how it was calculated (i.e if someone asks you how installs are calculated one of the worst things you can do is say my CTO does that). You should assume that whatever you show in your deck will be specific metrics the investor will diligence later including the robustness of the calculation and/or data set and the ongoing tracking. Again a red flag is metrics that are made ad-hoc for the deck and have no other tracking. So if you are not tracking metric X, then either start tracking metric X or remove it.

Good luck!

I mentor a number of startups here at Tank Stream Labs and a number of other worthwhile programs. Check out Tech Ready Women if you are a female entrepreneur who wants to get into startups (also blatant plug). One of the most common questions I get is how should I pitch my startup to investors.

Answer – pitch like Chamillionaire. Rapper, grammy winner, entrepreneur in residence, investor, singer of Ridin’ and subject of multiple panda memes. You may have seen this video on TechCrunch a couple of months ago where he fronted his new app Convoz. I think the general impression of most people that saw his pitch it was that it was good. Not just good. Excellent even. You should watch the whole thing if you want to see a good piece.

Therefore I thought I’d do a three part series where I go through what I like to recommend early stage companies do before the presentation, at the presentation and then post presentation. Without further ado, here is part one – my ten tips for getting you and your deck ready pre-presentation.

Pitch deck- you need one!

If you are going to pitch to institutional capital or venture capital you need a deck.  That deck should answer at a minimum 4 questions

• What’s the problem I am trying to solve
• Why is that problem big enough
• What’s the solution to that the problem
• Why am I the person(s) who will solve that problem and providing a continuing solution to that problem for the future

Your deck should look good

Your deck will benefit from looking good. As in it should be correctly formatted, have nice pictures, screenshots and / or video.  It doesn’t have to be a masterpiece or professionally designed (coincidentally all 3 pitches I saw at a recent event were all professionally desktop published) but it shouldn’t detract away from your product if your deck doesn’t look great. So if you are producing a new AI model that is 10x faster and can talk about that in depth you can have the worst deck in the world and you can get funded. If you are building a two -way marketplace for goods and you are using Comic Sans then it is going to be tough to get your point across and you will have to start from a handicap. So don’t start from a handicap. All decks should typically be in PDF for this reason, never send in PPT or in some sort of weblink, it just annoys VCs and often the formatting is off.

Identify and resolve potential objections before pitching

Think about all the things you think someone could say as to why your idea doesn’t work and try and proactively include this in your pitch. If you think there is a risk the market is too small you can include on the slide that you aim to start in market x, dominate it then move to y and z where the total addressable market is more. If you don’t have a CTO and you aren’t technical you should include the fact that you are in the middle of recruiting that person. If your platform is based on access to a technology you should include that you are negotiating contractual terms on that access for the next x years. Obviously there is a fine line between future looking and exaggeration but there is no prize for exaggeration because often these become conditions to investment you have to fulfil. So if you aren’t a week from hiring your next R developer, don’t promise that you are – transparency works both ways! If someone tells you an objection in the pitch the only way in which you shouldn’t have an answer is if it is a really obtuse one. Assume there will always be questions about

• Size of your market
• Your unit economics
• Your competitors
• Your value proposition
• Your ability to scale
• Company X that the person already invested in

You don’t have zero competitors

I am always very concerned when someone in the pitch says they have zero competitors or pulls out a slide which shows them as the only product in the top right quadrant and everything else is in bottom left.  The biggest thing that derails a pitch I have seen is where the startup is in a diverse industry (consumer, social, e-commerce) and the slide goes up with 3 competitors and the investor asks “how are you different from X, I already invested in that” or “I passed on that”. If you don’t know don’t guess or try and make it up on the spot. Obviously ideally, you have researched broadly into the space so you would know- but if you have no idea, just table that for discussion afterwards by saying “happy to take that on board at the end of the presentation if you send me some materials I will provide a detailed comparison post this meeting”. Note that in your preparation for an investor pitch, no excuses for not knowing something in their current portfolio or that was recently exited (and ideally you’d look at their past investments section which is on most websites). When you have zero competitors you have no spend associated with your product. Investors immediately think this means very high customer acquisition dollars and marketing spend and this will be uncharted territory.

Understand your unit economics – are they reasonable?

The main thing an investor is looking for is some understanding of the actual or proposed marginal product unit economics. So what is the fixed cost base you need to survive and then post that how much do you make for each marginal product. If you are in an industry which has unicorns as your competitors (versus traditional business) you will find it very hard to pitch VCs a negative unit economic market share model for a winner takes all market e.g like Uber. You should make sure that your product pricing slide has a positive unit economics for each marginal product. The flipside of that is that if your marginal profit is $1 before fixed cost operating expenses and you have a fixed cost base of $2m then investors will naturally ask you how long and what is the plan to sell 2m products (and also is there are market for say 20m products). If you think that you can’t sell 2m products you need to rethink your pricing and / or market.

Also as another tip, the long term customer acquisition cost (CAC) in your B2C startup is very unlikely to be $5, no matter if that’s what your first 1000 customers are! Again a subject for another topic but great founders will understand that costs are likely to trend to the industry average unless you can demonstrate a particular value proposition. So therefore if you are comparing yourself against an incumbent and they have a CAC of $100, you are unlikely to have a long term CAC of less than $50-75 unless you can specifically show data or you have a systemic advantage. Unless you have genuine virality and user metric growth in a dashboard, plugging that gap with “social media” or “user referrals” is immediately discounted by investors.

Practice, practice, practice

You should have presented the pitch at least 10-20 times before you go to the investor. In the valley I’ve heard 50 times before the investor you want. Practice to yourself, with timing. Record yourself, play it back. Practice to your friends, family all you want but hopefully you will get to practice to friendly investors, your peers, advisors or other startups. Ask for feedback and iterate that feedback into your deck. If people lose interest ask them specifically where they lose interest. Often the areas which founders spend a lot of time on have no interest to the investors. It’s great to hear 1 mins about how you came up with the idea as you were biking around Costa Rica, but less fun to hear ten mins.’

Also legitimately at least 50-75% of product demos I see do not work in some way on the day. So I’d have practiced your product demo on the day at least once. Ask to come in 15 mins early so you can setup. Bring your own internet and be prepared to connect to it. Bring an HDMI cord for your laptop.

Cut unnecessary slides – less is more

Team should be one slide, I’ve seen up to 5 slides with full colour pages of the founders headshots as the entire slide. Unless your team has a specific advantage (first person to crack SSL encryption etc) you should assume that the default assumption is that you are all competent unless something goes very wrong in the pitch. If you think there is a specific disadvantage that you need to overcome in the deck e.g you have no technical co-founder or you will be seen as “too X” then you can create wording around that. I would try to keep to one slide though. Other slides which often go on for too long are below

• Mission – one slide max
• Market – two slides max
• Timeline – one slide max
• Logos for partners – one slide max
• Press clippings – one slide max
• Almost anything else is unlikely to need more than 2 slides! One slide is better!

Financials and tech roadmap – the sad forgotten cousin of full colour product shots

You always see these tucked away at the end of the deck. A sad little 3 statement revenue to EBITDA forecast with no assumptions that gets zero time in the presentation. Or a picture of a computer stock graphic with “AI-centric design roadmap”. The more you can take investors on the journey with you by showing them what underlies the financials (who doesn’t like to make money) or the roadmap (how we can get better together) the better it will be. As I’ve said in a previous post, you need to ensure that the first 12 months of your forecast are pretty well locked in, you have pretty good confidence (i.e good rather than ok) about doing 75% of the next 2 years and better than not confidence for half of the total forecast revenue you show.

On the roadmap, pet personal peeve – don’t include AI or blockchain unless you really know how AI or Blockchain helps your product. There are too many people including it as a buzzword so investors are generally sceptical if there is a sense it is an “add-on” rather than core to the final product. So if you don’t know anything about it, it will reflect very badly on the presentation if you get asked something about Tensorflow and you don’t know what that is. Buyer beware!

Bring Snoop Dogg!

Chamillionaire brings out Snoop Dogg at the end of his pitch. I encourage you to bring Snoop Dogg if you know Snoop Dogg. But for most of us, that means end strong, end on a high note and leave them with something they didn’t expect to see. Most pitches start really strong then peter out by the end. The last 2 mins of the pitch are very important. It should be a call to action “who’s ready to come join this journey with us” or humour or try to have something other than “so that’s the end of my presentation” – which I actually hear about 40% of the time. End strong and leap into a positive discussion!

What’s in it for me?

Everyone talks about the “internet of one” i.e the webpage you see should be different to what I see. In the same way you should adopt the “investor of one” concept. If you really want someone to invest ask “what’s in it for them”. Do they have a company that would have a great synergy? Do they have a track record of investing in this type of companies? Is someone they know already on your board that they can connect with? Are you just about to launch something that will require further investment? Can you give them good publicity in your article on TechCrunch etc? The best pitches are tailored to the investor, but often you may not have time to change every slide. So therefore try and include one slide which is an “investor” slide e.g it outlines a potential commercial partnership with one of their investee companies and how much that opportunity might be worth split 50/50.