So, you’ve got a solid startup business off the ground. Congratulations! Customers are satisfied, your team is in place, and you adopted best entrepreneurship practices to see some growth. However, there’s only so much you can do with your personal savings and the money you’ve been able to bring in through family and friends. Even if your sales are strong, a more prominent player in your industry could likely put you out of business if they wanted to. How can you compete with big corporations and other well-funded startups? You need to raise money from investors. In order to do that, you must put together a pitch deck. Don’t worry if you have no clue what that means – we’ll walk you through everything you need to include in your presentation.
What is a Pitch Deck?
Let’s start with the basics. A pitch deck is a presentation that entrepreneurs give to potential investors when seeking funding for their business. In most cases, the presentation is between 10 and 20 slides and covers everything from the problem your business is solving to your financial projections.
Think of it this way. When contestants go on Shark Tank, they have a limited amount of time to make their case to the investors (or sharks). In that short time, they need to explain what their business does, why it’s unique, and how it will make money. That’s essentially what you’re doing with a pitch deck – trying to convince someone to invest in your company, and you’re doing it through a short presentation.
When creating a pitch deck, avoid using too much text on each slide. You might be presenting in person, and you want the focus to be on you, not on your slides. Use images, charts, and graphs to tell your story, and use bullet points to highlight the most crucial information.
Thus, Powerpoint, Keynote, and Google Slides are all popular software options for creating a pitch deck.
What are the Major Components?
Due to its limited size, a pitch deck can’t include everything there is to know about your business. It isn’t a whitepaper or a business plan – it’s meant to be an overview of your company that will generate enough interest to get potential investors to want to learn more.
With that in mind, here are the key components you should include:
Market Analysis
The first step is to show that you understand the market you’re operating in. That means providing data on the market size, identifying your target audience, and showing how your product or service meets a need that isn’t currently being met.
Market analysis can be tricky, but there are a few key questions you should always answer:
- How big is the market?
- Who is your target customer?
- What needs does your product or service meet?
- Who are your main competitors, and how do you stack up against them?
- What trends are happening in the market?
Answering these questions will give investors a good idea of how well your business is positioned to succeed. Data is key here, so back up your claims with reputable numbers and sources.
How Much Do You Need to Raise?
Next, you must be upfront about how much money you want to raise. It’s essential to be realistic, as investors will think you’re either inexperienced or unrealistic if you ask for too much. Conversely, if you’re asking for too little, they may question your ability to scale and grow your business.
When determining how much to ask for, consider your burn rate, which is the rate at which you’re spending money. If your burn rate is high and you’re running out of cash, you may need to raise more money than you originally intended.
Remember that investors aren’t donating to a charitable cause. They’re looking to make money. The more money you ask for, the higher the equity stake or return on investment they’ll want to receive. A general rule of thumb is to give up 10-20% equity for roughly $1 million raised. Giving away more than 20% equity should only be done in exceptional circumstances.
Opportunity
The opportunity slide is often the most difficult to create because it requires a delicate balance. On the one hand, you want to be open about the potential for your business to succeed. On the other hand, you don’t want to oversell your company and set unrealistic expectations. Think about how your company is disrupting the status quo, and present that in a way that is respectful of your competition.
Investors are looking for companies with high growth potential, so it’s important to show them that your business has what it takes to succeed. Focus on your unique selling points, and explain how you plan to take advantage of the opportunity you’ve identified.
Maybe you have a technological advantage over your competitors or a better understanding of the market. Or perhaps your model is entirely new, but you have a team with a lot of relevant experience. Whatever it is that makes your company special, be sure to highlight it here.
Financials
Investors will want to understand your cash flow before throwing money at your business. How much revenue are you generating? What are your costs? Figures like churn rate and customer lifetime value are also important. These metrics are called key performance indicators (KPIs), and they’re essential for understanding the health of your business.
Keeping a balance sheet is a good way to track your financials and ensure you make the most of your money. Your potential partners will undoubtedly want to audit your finances, so be as transparent as possible from the start.
If you have any employees, you’ll also need to show how much you’re paying them and whether or not you can afford to keep them on staff. This can get complex, with things like equity and benefits to consider, but it’s essential to have a good handle on your financials before bringing in outside investors.
And once again, you’ll need to simplify all this information for your presentation. Data is great, but investors will tune out if you start throwing too many numbers at them. Find a way to present the financials in a way that is easy to understand and digest.
Projections
Startups are in a tricky position when it comes to financials because they may not have much data to go off of yet. If this is the case for your business, you’ll need to make educated guesses about where you see things going in the future. Projections are essentially a roadmap for your business, and they can be beneficial in convincing investors to get on board.
This isn’t the time to try to impress people with big numbers – if your estimates seem implausible, you’ll lose credibility. Instead, focus on being conservative and showing that you understand your market well and what needs to happen for your business to grow.
It’s also important to be prepared to defend your projections. You may be asked how you arrived at specific numbers, and investors will want to know that you have a solid rationale behind everything.
For example, if you’re projecting a certain amount of growth, be able to explain the steps you’ll take to make that happen. Are you planning to expand into new markets? Invest in marketing? Hire more staff? Whatever it is, be sure you can articulate your reasoning.
Use of Funds
When asking people for money, it’s important to be clear about how you plan to use it. From a practical perspective, this means having a budget prepared. But it also means being able to explain your reasoning behind each expense.
For example, let’s say you’re planning to use some of the investment to hire more staff. Why does your company need more employees? How will they help you achieve your goals? Are you aware it would take away from other areas of your budget?
Being able to answer these kinds of questions is essential for convincing investors that you know what you’re doing. They want to see that you’ve thought things through and have a plan for how their money will be used.
An excellent way to approach this is to consider the risks and rewards associated with each purchase. By evaluating things from this perspective, you can make a stronger case for why certain expenses are necessary.
Competitive Comparison
Finally, you’ll need to show that you understand the competitive landscape and where your business fits. Identify your main competitors and explain what makes you different from them. While this slide might sound similar to your value proposition, it’s important to emphasize that you understand the competition and what they’re doing well (and not so well).
This slide is also a good opportunity to show that you’ve done your research. If you can speak intelligently about your competitors, it will go a long way in convincing investors that you have what it takes to succeed.
Note that potential partnerships can also be considered competition. For example, if you’re a new startup in the e-commerce space, Amazon would likely be one of your main competitors, but you might also consider working with them as a partner.
Who Do I Send it to?
Once your pitch deck is complete, your next step is to show it to others. It is a presentation, after all. But who should you send it to?
Leveraging Your Network
One of the best ways to get feedback on your pitch deck is to show it to people you know. These could be friends, family, colleagues, or anyone else who’s willing to take a look. The advantage of showing your deck to people you know is that they’re more likely to give you honest feedback. They’re also more likely to be gentle in their criticisms, which can be helpful in the early stage.
Of course, take any feedback you receive with a grain of salt. Not everyone will have the same opinion, nor will they understand the market as well as you do. So consider all feedback carefully before making any changes to your deck.
Sending it Out to People For Feedback and Advice
Another option is to send your deck out to people you don’t know. You can do this via email, social media, or even in person. The advantage of this approach is that you’ll get a broader range of feedback, which can be helpful in spotting any potential problems.
From attending industry meetings and conferences to posting on relevant subreddits and forums, there are several ways to reach out to people for feedback.
Asking People in Your Network to Share it With People Who Might Be Interested In Investing
After some fine-tuning, you’ll want to start getting your deck in front of people who might actually be interested in investing. The best way to do this is to ask people in your network if they know anyone who might be interested. This could be a friend of a friend, a work colleague, or even someone you met at a conference.
Keep in mind that you shouldn’t just send your deck out to anyone and everyone. It’s important to be strategic about who you’re reaching out to.
Crowdfunding Options
Finally, you might also want to consider using a crowdfunding platform such as Kickstarter or GoFundMe. These websites allow people to post projects and solicit donations from the general public.
Crowdfunding can be a great way to get feedback on your idea and raise some money for your business. However, it’s important to remember that not all projects are successful. In fact, most projects fail to reach their fundraising goals. You’ll need a sizable following and a great pitch to make your project stand out from the rest.
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