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Many founders view the panacea to securing funding from VCs in the fundraise process as getting the first meeting; once they are in they will win! The reality in most scenarios is different, as what you do when you are in the room, and how you happened to get there (pitch deck) have already contributed to your odds.
Let me quickly touch on two fallacies here to illustrate the preceding paragraph.
Fallacy #1: I just need to get in the room
What do you think is going to happen when you are in the hallowed ‘room’ and the VC is already not interested? Not much other than a more developed relationship, which is of course not bad, but there is only so much time for that.
Let me give you one example. I have had founders reply “I get you don’t believe in our business model and the timing at this stage of the market is bad, but I am much better at selling in person, can we have a meeting anyway!”
In many sectors, I have already developed a thesis of what and when I want to invest in something, so selling me isn’t going to change anything. You are spending your time with the wrong investor and you could spend that time gaining more traction, which would change your outcome with me in fact!
Fallacy #2: Once I get in the room it doesn’t matter how I got there
How I came to know about your business does have an impact. If you got one (or ideally more than one) referral to me from someone I trust and has made useful introductions before (Many people send bad deal flow) then I will take everything more seriously.
If I already know something about your business, and have had the chance to talk to a sector expert, or research your business beforehand, then the meeting will be far more productive (read potentially more successful).
This leads to the point of this blog, why I want a pitch decks before a meeting in the fundraise process
I have been debating and analyzing the ‘end-to-end’ process of investing in companies, to not only make better decisions and offer a better experience to founders (e.g. How to respond faster), but to be more efficient and effective in the use of time.
Charles Hudson over at SoftTech just they about why he doesn’t generally look at decks before meeting, and whilst there are valid opinions, which I agree with, my view results in the opposite position.
I must emphasize that the views here are entirely my own and do not represent that of my partners. In addition this is the current state of my thinking, which as ever is open to be stand corrected. To founders, who I deeply respect, don’t find a reason to take offence. You need to have a thick skin and understand raising money is a game to be played to the rules of those who are setting them, and knowledge is power.
Let’s dig into decks first, as once we agree on what they are, are for, do and don’t do, we can better form a view as to whether they should be a prerequisite for a meeting.
What is a pitch deck?
A pitch deck is a short (10-20 slides) PowerPoint presentation (NOT a Word doc), which succinctly summarizes your business in order to communicate to investors that they should consider investing in you and ‘invest’ time to evaluate doing so. To be clear, this should actually be a PDF, converted from PowerPoint. It prevents system error and people changing your slides etc.
What are pitch decks for?
Decks are a ‘Teaser’ sales document to get you on the path to investment, nothing else.
- Communicate what you do and that your company fits into their investment mandate / investment interests
- Elicit preliminary interest in your company from investors, so they want to know more
- Opportunity to showcase your business and team on softer metrics
What pitch decks don’t do
Decks do not serve to communicate:
- The passion and energy of the team
- Each and every nuance of your business
- Quite how amazing the opportunity really is
- That an investor is going to invest on the basis of it
Types of pitch decks
It is absolutely imperative to understand that there are different types of pitch decks for different situations and to answer different questions.
Fundamentally there are two types of pitch deck:
- Situation: These are read primarily without founders.
- Form: There are typically more words per page and there are more slides.
- Objective: Founders are seeking to educate as well as communicate here.
- Number/variances: There will be multiple. Firstly is a teaser to get a meeting (I said it), secondly to support due diligence and thirdly to support any ‘nagging’ questions founders may seek to ameliorate (Such as details on their NPS to show customers love them).
- Situation: These are presented by founders in person and/or on a call.
- Form: They are graphical with fewer words. Founders are solely focused on communication, supporting what it is they are saying. The focus is on the founder not slide (hopefully)
- Number/variances: Generally founders will only have one of these, but they may have another if requested, such as to address questions that have arisen during the investment process
What I believe a good pitch deck covers
There are more bad pitch decks than not. For the purpose of this discussion I will talk specifically about the one I would like to receive before having a meeting in the fundraise process.
The key tenets of approaching a good first deck are:
- Keep it to the point and communicate the salient high-level points in a compelling manner
- Just cover the key aspects (See “What should be in a deck”). There should be a takeaway supporting each and every slide at the top or bottom of the slide, and the pitch deck needs a logical progression to a conclusion (Invest!)
- Put less faith in this document. This isn’t a silver bullet, so founders shouldn’t think “If I don’t put in these slides, I’m going to fail.” This is the key reason why I believe founders write decks that are too long
- Spend a lot of time making it pretty and readable. People don’t like to read ugly pitch decks and it says a lot about your attention to detail (Note: I am an ex M&A banker)
- Use images and a little humor, in most cases you aren’t talking to a robot. (Note: Most investors are actually pretty cool, not all)
What should be in a pitch deck:
- Overview: In two sentences, what is the business? Put the business in a box, even if it is not a perfect one. “We are Uber for toasters. We are the future of convenient toast in the morning for busy mothers”
- Problem: What is the fundamental problem you are solving? It needs to be a real one that a lot of people have and are not having solved.
- Solution: How are you fixing this problem and how are you approaching it?
- Market size/opportunity: How big is the market you are realistically going after. If you aren’t going to the US, I don’t want to see that on the slide, unless it is indicative of the market opportunity where you are focused. The opportunity size I am going to use to do math to figure out your potential exit value, so make it useful and reasonable (Note: I will always do a valuation exercise on a call with founders’ data points)
- Product: Show me pictures which illustrate use cases and benefits. Your product these days needs to be polished.
- Team: Pictures of the key team I am investing in, title and name, what they focus on, bullets/logos of prior and relevant experience. Key for me is answering the question “Why will this team beat everyone else and why are they the best team to back?”
- Marketing: Simply put, how are you going to get big? If your CAC is greater than your LTV, that is good to know too. I need to see that there are scalable, repeatable channels for you to grow.
- Traction: “Up and to the right.” What milestones have been achieved, what is the stage of the business?
- Numbers: What are your high level numbers? I want to know how big you are already as it is linked to your valuation and stage. It is not because I want to get confidential information (See above regarding valuation exercise).
- Funding and application thereof: How much money are you looking for, how long does it last and broadly what are you going to use the money for?
Hopefully you will have noticed that I haven’t asked for details of the ‘secret sauce’ so I can sell it to the Russians. This is high level. Also, if you are reaching out to an investor you should already be willing to trust them, otherwise stop spamming.
What do investors fundamentally learn from decks before a meeting?
Whether we are likely to invest. Simply put, decks go into two buckets which have binary outcomes:
- Good ones: Get founders a meeting and see if we will invest
- Bad ones: Pass
So what are the main reasons why I want to have a deck before a meeting?
Now we discussed decks, there are two main reasons why I want them before a meeting and they all come down to working smart, not hard:
- Do I want a meeting: If I don’t actually want to meet a founder, then why waste both of our time?
- There isn’t much new under the sun: There aren’t many fundamentally new business models. So with a few exceptions, I already have a view as to what I want to invest in broadly. I am also focused on South East Asia, where I actually prefer (again generally) non-innovative businesses.
- Founders never ‘spoil the surprise’: The punchline is important when telling a joke, not raising money. I want to know what it is I might invest in and whether I am interested. Founders can subsequently ‘surprise’ me with their energy and how committed they are when I ready to be excited
Form better decisions
- Create a ‘dot’ to form a line: Every interaction, whether email, material, call or meet is a data point or ‘dot’. Over time these dots line up to form a view or ‘line’ of the founders and the business.
- Make a meeting or call productive: I like to get down to it, so if I am interested in investing and I know something about the business,s the time spent with a founder is productive.
- Focus on talking not researching: I want to focus my grey matter on responding and challenging what founders are saying. If I am distracted, such as reading your deck or researching competitors then you don’t have me, and that is a very bad thing.
What do I do with decks when they are sent to me?
I get a lot of decks and never have the time to read all the ones which are inbounded (I mainly reach out to companies actively). Founders need to understand that it is not rudeness and they aren’t special. If investors don’t reply, sometimes it is literally because their email didn’t get opened and it is stuck in a massive backlog. Understand this simple truth, and follow up a lot.
- Quick read #1:
- I may not even read your carefully crafted summary email before double-clicking on your deck and firing it up.
- I press ‘down’ every 2 seconds to get a 50,000 feet on what I am dealing with and to see if I close it. That’s a 15 second exercise.
- If I am interested a will skim through, focusing on what ‘appears’ relevant, skip anything which ‘appears’ boring or too intense and then that’s that.
- IF there is something I notice where founders are teaching me something, you have my attention and I will read the whole thing in detail. That’s pretty rare, but we invested in a company that did that.
- Decide on next step
- Email not interested and delete email, or schedule a call. Regardless, I track pitches in a system and note whether I will follow up in future in case things change.
- Quick read #2 before a call
- Depending on how interested I am I will scan the deck again to refresh my memory of who and what I am about to talk about. I hate being inadequately prepared, so prep time is linked to how well I know an industry.
- Read whilst we are talking (more and less)
- I always have the deck open on a call or to hand if in a meeting. I look for stand out points I need clarified. If call is going well I don’t look at the deck again after 10 minutes and focus on engaging with the founder
- If there is a new, visual presentation, I still have the deck to hand to refer to (and will pick up on any discrepancy between the two of them)
- Share it internally if I am interested after a call and see about having a meeting. At that point I am really interested and any meeting is serious.
- I will circulate a deck to partners to get their view with a quick summary of our chat and a line stating whether we should push to get the deal done, or wait to monitor traction.
It is worth noting that for my fundraise process, I personally prefer to have a call before a meeting. I have a predilection to be amicable with people, so by having a call to review an opportunity purely on data and the founders intellectual ability to respond in active dialogue, without the opportunity for creating interpersonal bias, I believe is has weighted advantage.
What I don’t do with your deck
Now let me be clear about what I do not do with decks. Other commentators mention experiences of founders having emotional responses to the treatment of decks, I will get frank on those.
- Study it
- I almost never study a deck. If I need to, the founder has done something wrong by writing too much, or not being clear
- Think there is a correlation between founder feelings and my time spent looking at a deck, nor care if founders think I am lazy for not having studied it
- I am not being paid to read decks by founders and nor do investors have a duty of care to whom are most likely strangers having received an email. If that were the case, the spammed community would support more Nigerian princes with difficulties getting their money out of the country (Note: I have lived in Nigeria).
- Invest in a deck, I invest in the team and the general problem they are solving
- I am an early stage investor so I don’t invest in a deck, per se. The deck just says something about the team who authored it.
- Later stage investors will more likely emphasize a deck as you will have hopefully large and validated numbers. They are investing in the continued upside, not a new idea, and the team is likely fungible.
- Prepare a list of questions to ask founders
- I don’t sit down and compose a Q&A. If something sticks out as being amazing or odd, then I make a mental note. When I chat to a founder I already know all the key questions to ask, and the ones I don’t know organically arise in response to answers
- Share it with anyone other than within the firm
- If someone sends me a deck it is confidential. If I am helpful and make investor intros, I actually ask for permission.
Why a founder will get a yes or no after I look at a deck
Understand receiving a deck before a meeting is simply a ‘hack’ to spend more time looking for the next greater thing, or to allocate more time helping our portfolio, which we do a lot of. Therefore a yes of no when you email me a deck is based on a number of factors such as:
- Is your idea good or idiotic. Are you solving a real problem and will you be able to keep solving that problem whilst getting customers to pay you? Does your business have longevity; can you make barriers such as network effects?
- Is your solution awesome, or will it be with our help? Will you beat the competitions’ offers for your targeted market?
- Is your targeted market big enough to get an exit, or take a meaningful position? Will you be able to get a big exit for me to get a multiple?
- Do your team look incredible or at least good enough? If you are doing an enterprise data warehousing solution and none of the team have experience I will pass. If you have Tier 1 company logos for your experience you get points etc. Does your team cover all the important divisions (otherwise state you need to hire).
- Do you have thoughts on monetization and are they reasonable? If you aren’t Nielsen and you are going to make money from data, or advertising for that matter, I wont take you seriously
- How much are you raising? Are you too early or big for us to invest?
- What countries are you focused on and is the timing right? In SEA if you only want to do one country, this doesn’t work unless there are exceptional circumstances.
- What is the competitive landscape like? Can you win and what will it take? If there is a #1 twice as big but they just got bought by a corporate that will mess it up, I am still interested.
- How is the market going to move, and how long? If timing is bad, then I will pass.
- How are you going to get big? Do you know how marketing is going to get you there? Do your unit economics allow you to shrink the market and take a large share, for example?
- For the length of time you have been operating, what traction have you got? Results divided by time matter.
Does how it came to be we are in contact change my view?
There are some arguments for not receiving a deck before a call/meeting in certain scenarios. Personally, I prefer a standardized process where all potential investments are addressed in a fair and consistent manner. There is a lot of art to investing, so where I can apply even a weak-form science, I think it is advantageous.
Whether I get a cold call, referral, met someone at an event or even it is a friend looking for funding, I treat everyone the same. Yes, if friends reach out formally for investment rather than to meet up for advice, I insist on treating them the same way.
If I am sent a nice summary email instead, is that ok?
No. Yes, I would like a summary of the opportunity, in bullet-points, but I want the deck to be in that email.
How I think during a call or meeting is key to this analysis
To understand why I have formed my view (Other than time allocatin), it is critical to understand how I think and what I am trying to achieve in a dynamic interaction. There are four points here:
- I need enough information to ask the right questions to allow founders to shine and to ensure we end a call on the same page
- See if you know the industry in and out
- See if you are doing the right things, or what additional things you can do and for us to debate them there and then
- See how you think about the opportunity
- Do you think big enough, are you ambitious?
- Are our aspirations aligned? If you want to make a $20m business, that’s great, but it generally isn’t for me
- I need the founder to help direct my thinking and bring up my comprehension (AKA what I can’t Google or don’t have the time to)
- I expect you know your business better than I do. There is a short period of time for me to get close to sharing your vision
- If you can talk me through your competitors’ strategy and positioning I can get certain that there is a good chance of you being #1, which is key
- Are these guys going to beat everyone? Do I want to win with them?
- I like to have beer with nice, smart founders, but I want to invest in founders who will win. I want to focus on challenging founders to see how great they are.
- I only really start to care about whether I like founders and can work with them once they help me get past my ‘crocodile brain’, the ‘fear gatekeeper’. I can focus on rapport then and dreaming of the potential, how I can help them achieve it.
- I want to put you in a box fast to understand the world you are in
- I read a lot and talk to a lot of people, so I have seen most things before. Putting you in a box, even if it is not the right one, allows me to focus on the differences, by removing the similarity. Pattern recognition is key to being able to understand the nuances, and the devil is in the details. I want time to get into those details, not the basics
The benefits and considerations of my approach to receiving decks before meetings
- Save time
- Does the startup fit our investment mandate and interests? If not we aren’t going to invest anyway
- No wasted meeting if there is an obvious portfolio conflict
- I read faster than people talk, so reading a deck before a call means more time spent on the value add bits
- Avoid uncomfortable situations
- If founders know I always want a pitch deck, than founders who don’t like sharing decks won’t contact me or will adjust their pitch deck before sending to me. Either way there are no situations I have to say ‘do or don’t, up to you’ which is not a nice thing to do.
- Better outcomes
- With enough lead time the subconscious processes the opportunity
- More productive, focused calls lead to better decisions
- Do not have meetings where competitive information will be inappropriately shared (I expect the deck not to be sharing competitive information and founders should already know why we invested in)
- Apprehension of entrepreneur to share
- Founders may not want to share pitch decks and sometimes will ignore request for decks. May miss out on an opportunity, though I think the better founders know that execution matters more than ideas so will be happy to share their pitch deck
- Missed opportunity to network
- In many cases it matters more who you know than what you know. It is always great to meet people and exchange ideas, if you have the time.
- Form opinions
- There is the potential to form inaccurate and damaging opinions of a startup which creative cognitive bias. No one can truly be unbiased and zen when listening to people. Whether reading a pitch deck accentuates this bias is a fair question. If one is too biased you may think that Uber is just another taxi company not solving a particular problem
- Some people cant write pitch decks which may mean missed opportunities
- Tough, you need to sell and the quality of your pitch deck often links to quality of your product. In the Valley there may be a lot of tech only teams who somehow can make a beautiful product but not enunciate their business to VCs, but with my focus, I invest in balanced teams which can communicate not only to consumers but to me.
If you are a founder looking for an investment from me, please respectfully send me a deck before you ask for a meeting. I am open to changing my view, but I have one at present. I think this is the idealised start to a fundraise process.