The fundraising documents you need to pitch venture capitalists

Tl;dr: You are fundraising and you want to know what you need to prepare. What fundraising documents do you need? I’m going to tell you. The three key ones are a pitch deck, a financial model and a forwardable email. There are others, but they are optional.

Firstly, don’t bother with raising till you are fundable in the first place. You are either fundable or you are not fundable. As a founder you need to be aspirational, you just don’t want to be ignorant!

I had a consulting call with someone recently who said she is raising $100m. No product, no traction, no nothing. I cut the call saying we can’t work together like this. She was adamant about the $100m. So was I that she would be lucky to get $1m.

Now that is over, let’s get into what you need IF you are ready to raise.

What do I mean by ready to raise?

At the minimum these days you need to have a product with some traction and a decent team. It’s gotten easier to launch startups, so the bar is getting higher and higher from investors.

But moving on…

The basis for this blog was jacked this from my free pitch deck thinking course. I said why not spell it out. I tell this to founders every time I write decks at Perfect Pitch Deck and teach them how raising works, so why not spare my parrot talk and put it in a blog?

The material you need (and don’t)

Let’s go through the types of material you need in a raise, including the stuff you don’t need as I don’t want you wasting your time.

Teaser (Don’t need)

A teaser is a super high-level overview of what you do, the market (target customers and geography), stage and how much raising, team, key metrics, how you are special, etc. There is nothing confidential in here at all. You’d probably be happy to post it online?

This is maybe two pages, typically made in Word but converted into PDF. The idea is to give investors a taster of the opportunity without sharing too much.

I dislike Word for most things other than writing, but it works for teasers. You can see the example I made for VCs which was made in Word: Venture capital LP one-pager for fundraising

This is the one I did for VCs so you get an idea of what I am talking about. Obviously, it’s not designed for startups. These seem to be normal for VC raising as I have seen large firms use them.

Fundraising companies and investment bankers use them when doing outreach:

Fundraisers use them to try hide the name of the company to keep their privileged relationship as long as possible. I don’t really like fundraisers at an early stage, though I do this for later stage companies myself. Read: Should you use a professional fundraising advisor to raise your startup round? They are basically going to spam a lot of people in the hope someone is interested and then they provide more information. As a founder, you want to have a much more targeted approach.
Investment bankers use them because they aren’t a joke and want to keep the name of the company quiet so the company doesn’t appear to be “in play”. In banking land when you work with public companies that is of import. I’m not getting into the mechanics of public markets as you likely aren’t public. All you need to know is that being in play is not a good thing.

I need to get this out of the way. I hate teasers. I never use them. It is ok for VCs and big companies, but not for startups.

I personally think you should skip this and just send your deck.

If you send me a teaser I won’t read it. I always respond ‘just send me the deck‘ as I want to save time and I can skim decks really fast (if they are well structured).

The only people that want teasers are retarded angel investors that don’t get startup. I’ve worked with some companies in the UK that raised from angels and introducers and they have asked for teasers. I generally just think these people are ignorant, but if you need the money you do it, right? I don’t sit in an ivory tower and dictate to the unwashed. You do what you have to to get the round done.

Forward-able email (Need)

This isn’t strictly material, but you need one. It’s important.

You want to get warm introductions to investors (read that on how to) since how you get in the investor’s room matters a lot. This involves you reaching out to your network and asking people to make an intro. Now, people are lazy. Anything which involves work reduces the likelihood that you will get an introduction, which you want to avoid! The best way to reduce friction is to make it easy for the introducers to do so.

What’s easier than no work and pushing a forward button in Gmail?

So, imagine you reach out to me to make an intro for you. I like you, I know what you are doing is legit, but let’s face it, I don’t really know that much about you and how to sell you. You know how to sell you, so why take a risk on me selling you poorly? If you are smart, you wouldn’t want to gamble. You want results. So spoon feed me and by proxy the investor. And as I was saying, don’t make me do work!

You reach out to me on facebook, linkedin, email, whatever. You say:

“Hey Alex, how well do you Jim at Index? We are raising a $1m seed for out SaaS company and I think he would like what we are doing. Are you best placed to make an intro for me?”

I will respond one of two ways:

Negatively: “We met in the toilet at Disrupt and added each other on Linkedin. I don’t really know him” or “We used to be friends and we don’t really talk anymore. I’m probably not the best person for you!”. In either case, you don’t want them making an intro. Find another person
Positively: “Sure. Send me an email at xxx and I’ll ping him”. This is what you want to hear.

Then you write me an email (but it’s actually for the investor you want an intro to) and get the process going.

I am just literally going to forward that email to Jim as is with some friendly message at the top such as:

“Hey Jim- Hope the kids are well. Know you love SaaS automation atm. Think you will like this. Have a read. Deck is attached. Hugs and kisses, Alexander“

So you add at the top of your template email something like

“Hey Alexander, thanks for offering to intro us to Jim. Really appreciate it. Here’s some information about STARTUP you can pass on to Jim. Much appreciated, Mary”

Then you have all your blurb about you, in the same manner, you would with a cold email. Let me know if you want me to write a specific blog on this?

Do you get how this is a forwardable email now?

You can see an example from a guide I wrote on raising. It’s a bit on the short side, but you get the point. I also wrote a long ass blog (6k words) on cold emails which has some examples here: Writing a Cold Email Template for Venture Capital Investors. There’s an example of a cold email I wrote at the very end. The forwardable email just has a blurb on the top which is to me, but it’s really just a template for me I can send without any effort! Simples!

Read the cold email blog as the format applies. You want to make a forwardable template which you customize for each investor.

This is a key part of your fundraise process so put in the time to do it right. Do not do the “sorry I wrote a long email, I didn’t have the time to write a short one” thing. You want to be really on point here. Less text is more. It’s you starting to escalate commitment.

Short deck (Need)

This is your ‘deck’ as I and anyone else would term it.

This is the first ‘deck’ you send investors. You skip the teaser and send this instead (my preference).

In my experience, the deck is 17-22 slides. It is never 10 slides. It covers all the key things that matter (There is a list). It’s made in keynote/ppt (I recommend PowerPoint). You may prefer not to post it online when you think about the contents. There is NO super confidential info here though (You don’t spell out something that is patentable. You allude to the cool tech). You should assume your competitors will read it. NEVER write a ‘business plan’ in Word. Never.

Want to emphasize this. There are VERY FEW occasions that there has ever been anything that confidential in a pitch deck I have seen. Chill out! I get people asking me to sign NDA when I do decks and I’m like ok. Then there is a bunch of boring stuff about food delivery. No metrics, nothing. Founders need to chill out on thinking they have some confidential stuff. They just don’t. Ok sure. Later stage companies have a lot of metrics, but it’s still not the end of the world if a competitor sees them. And come on, people are generally too busy to read your deck anyway.

The only thing I tell enterprise type companies is don’t put a list of the names of companies that are in your pipeline, as that is sales sensitive. Justs write “Enterprise”, “Healthcare company”, “Hospital”, whatever. You can mention the companies in a meeting. Investors can see the $ value of the pipeline on a no-names basis. That’s totally fine!

Writing a good deck is hard. I’m serious. Decks are a huge pain in the ass. I know as I write them all the time from scratch at Perfect Pitch Deck. They are always a pain in the ass. Just, when you know what you are doing the pain lasts less long and you get results. I really know what I am doing and I lose the will to live too 😉 Hey, I keep shizzle real! You are going to lose the will to live, but trust me. For material, the deck is the one thing you really want to spend time getting right.

I get a lot of clients emailing saying they want an awesome deck. That’s not the right way of thinking about decks. There is no such thing as a Perfect Pitch Deck (Irony alert). There is fundable and not fundable. Decks are binary. You want a fundable deck which makes the investor say/think:

“hmm, that’s interesting, I would like to know more”.

That’s literally all you are aiming for.

If the bar is “I want to know more” you might wonder why decks aren’t 10 slides. That’s because your deck is critical to getting the meeting. If you have enough to cover all the boxes investors mentally tick in their head, you are more likely to get a response.

Don’t always expect a happy ending. I sent a deck to a friend who is a VC in SF this week and he responded with something like “My partners are covering for me but it didn’t excite them enough to warrant a meeting“. Game over with that investor. But that founder has had meetings with a lot of top VCs, so who cares. No is the norm.

Anyway, this isn’t a guide to writing decks. It’s important, so do it right.

Information deck (Optional)

Investors don’t care about you till they do. At the start of a raise, the investor does not care at all. As they spend more time with you they care more.

If you send a 40-page deck off the bar, there isn’t a chance anyone will read it. It’s a duck in cricket terms (you’re out on the first ball). When you have had your third meeting and the investor is thinking about doing a deal, they want as much info as they can get their hands on to get comfortable and a lot of pre-prepared information makes life easier for them.

The information deck is something I came up with that I am sure a lot of people do anyway. If you have made 50 decks, this is basically all the relevant slides that you would want to show an investor. You share it when the investors are a little bit pregnant and thinking of doing the deal and are really digging in. At this point the investor is pretty committed, so more information is useful to help them wrap their head around the opportunity. Other material like broker notes could be shared. Anything you make especially for an investor can be chucked in here (like SEO analysis on keyword search volume, in-depth analysis on the market, customer avatars, whatever). You want to help them spend less time thinking so you can get to a YES faster.

Be careful to not give too much information as they might feel compelled to read it. This could delay your round or serve to raise questions you don’t want them raising! There’s no rule around this, so use your judgment. The safe approach is to ask what information they would ideally like to have to hand to aid in their due diligence of the industry and your company. Anything you have to hand you can send over. Then say, we can spend some time making answers to some questions, but only things that are critical as you have a company to run. Good investors will get this and won’t take the piss. If you find yourself getting asked too many questions, just call bullshite and say that’s all there is. Don’t be spineless. You can stand up for yourself.

Financial model

Once investors have met with you and are interested, they’re going to ask for a financial model (Here are some templates) to dig into detail with. I’ve explained how I look at a financial model as an investor (Read: Why you are making a financial model for your fundraise is wrong). Similar to a pitch deck, investors want to be able to see the key details and then dig into more details, so make it easy for them to follow.

Your financial model is an Excel document that lets investors understand how you think about your business model numerically. Ideally, the investor can also play with the model to see what happens. Unless you are talking to a tiny firm (or a new one), it’s not the investor who is going to be playing with the model. It’s an analyst or associate. Once you make Partner, you don’t want to see excel files anymore! Well, for the most part. Everyone is different.

Financial models are technically hard to do (unless you are an Excel nerd like me who does it for fun), but they aren’t hard to do in a business sense. There’s just a lot of stuff you need to know. If you know all the inputs it’s just donkey work filling in the model (if you have a template). If you don’t know your business then sure, they are a pain. You basically need to make a load of assumptions which are ideally benchmarked to something to look as plausible as possible.

A larger model is not larger for the sake of it. It forces you to think about all the aspects of your business. From there, if an investor asks you something specific, you can point to the key drivers and explain why something will happen. If you have high growth, it likely means your burn is high. You can show where you are spending money and say “It’s driven by high marketing spend to acquire recurring customers. We will see that for a period of 18 months we lose a lot of money, but the recurring income starts adding up and we reach profitability in 24 months” or something like that. That’s a fairly basic answer, but you get the idea.

If you are doing a SaaS, enterprise SaaS, ecommerce, subscription ecommerce or App/social type business I’ve made some badass templates. They will be a pain to fill in, but you will get a curious sense of satisfaction and newfound understanding of your business. If you can model like a boss, then build your own. You need a model one way or another. For early-stage companies, they can be smaller, but for larger raises, you want to have numerical backing to show you can scale with positive unit economics. Unless you are in SF and then investors love wildly unprofitable unit economics… it would appear (Cough, Uber).

Business plan (Don’t need)

Business plans are crappy, verbose Word docs which can be 100 pages. It’s what people used in the 1980s. Ignorant people still write them.

No VC will read them. Read that again.

They want a normal pitch deck. Ain’t nobody got time for some meandering prose. PowerPoint has a great forcing mechanism to focus your thoughts and communication. Word does not lend itself to brevity.

I can keep writing, but seriously, don’t waste your time. The only people that might want one are the people that ask for teasers… Screw them. I would make a teaser for some muppet, I would NOT write a business plan for some numpty for love or money.

Business model deck (Optional)

This is something I invented when doing a fundraise, so you will not have heard of it.

Basically, no one likes financial models and what matters (At the early stage) are the key drivers/assumptions. In the business model deck, I map out all the key revenue and cost assumptions and say “Yes, we have a financial model, but I’ve mapped out all the key assumptions here in this doc. All that matters is here. If we can agree on what matters, then the model just supports it. Let’s have a chat about what we see as our key drivers.”

It’s typically around 10-20 pages, but can be more (for complicated businesses such as enterprise, they could be 40, with pipeline analysis, multiple scenarios, etc). The quality is more important than the length here. By the time you are presenting this, investors actually are thinking of investing.

It’s formatted a bit like a pitch deck, but it’s much more pragmatically focused and everything is supported with numbers.

I’m an excel and business model nerd, so this is something that isn’t hard for me to do. It just takes time. I think it would be hard for most to do unless you were a consultant or banker, in which case this is your wheelhouse. It’s a lot to do with being structured.

I don’t have an example to share. I might write a blog on how to do it, but it’s honestly so business dependant I’m not sure how I could easily make one. I’d have to make a model for a fictional business and then write one. Frankly… I don’t have the will to do so. #honest. If someone has the balls to do one with me so I can share it, sure. Whatever. Let’s do one.

Due diligence room (Need)

Now the last thing you will need to do is to create a ‘data room’ for investors to do due diligence. This isn’t super important when you are really early, but the larger you are, the more DD that can actually be done.

I recommend you actually start a DD folder when you start up and add as you go, so you don’t have to deal with all this really dull stuff. There is a detailed guide and template DD list here. Funnily enough, most of the people who download it are lawyers and investors.

Due diligence or DD as cool people like me call it (FML) is what investors do before they invest in you. You create what is called a DD room. This harks back to the M&A days when there literally would be a DD room poor bastards would live in for a few days and parse everything. The company would give up all the goodies and the onus is on the bankers to ensure they didn’t miss some deadly gem. The seller could always say it was provided and it’s your fault you didn’t notice we are up to the hilt in debt…

So big deals are a nightmare. Startup land is easier. It’s more like checking there are IP assignment agreements, checking article/memorandum of incorporation, staff contracts, patents, and all that good stuff. Small companies just have not had the time to create damage, so DD is short. Larger companies have been around longer, so there is the potential for hidden demons the founders are not forward in saying. Yes, there are dodgy people about.

It’s often lawyers who will deal with this, but if you are early then you are going to take point.

What you are more likely going to come across, if you are a real tech company, or healthcare one, is that the VC will hire an expert consultant for a pretty penny to audit your code and make sure what you said is real. This is super common. So remember how you talked all that shite about the machine learning you were allegedly doing? Now the VC will find out if the emperor is wearing any clothes! Whoops.

I’m a director of a new VC fund with a penchant for biotech. I’m like “how the hell do you know if the crazy medical stuff is real?” Well, we just have super nerds on hand with lots of letters after their names who tell us. That simple.

There are examples of companies like POWA technologies that weren’t wearing any clothes and still got funded, but that’s because the investors didn’t do any DD. I shite you not! It happens. But not often.

So read the blog above. There is a DD template of stuff investors might ask for. Start with the basics. You want to do as much as is reasonable ahead of time if you are under the gun and need money. If you need 3 weeks to pull it together, well, that’s another delay of 3 weeks. Duh.

A shite load of knowledge! (Need)

Finally, you need to know a lot! Again, this is not tangible material you need to produce. It’s the study you internalize to regurgitate in a structured manner to investors (Read: Think better: Rule of three).

What happens when you get in the room is what matters. If you struggle to get the right info in your deck, you are going to tank your pitch. VCs will pick stuff to put under a microscope and you need to have plausible answers, within reason. You need to know your revenue numbers off by heart. You don’t need to know the cohort value in January last year for churn, though you need to be able to present that in a chart when VCs care enough to see it.

You really need to know your industry. If you have been doing it for 5 years, then sure, you very likely know everything. You are cool. If you are a year in, you need to proactively study to know the industry.

VCs don’t really need the answers to your questions. They want to know that you know the answer. They are giving you the money to execute on your business. They aren’t going to execute for you.

Someone once said to me “Give everything you know for free on your blog. People don’t want to learn, they want to know that you have the answer so they can hire you“. His point was there is no point in holding back. At the end of the day, how you execute is always specific and people want the result, not just the learnings. I believe the same applies when pitching investors. Investors don’t want to copy your idea, they want to know that you know the answers and what to do so are safe hands if they fund you.

The more you know and the better you can communicate it, the more trust you build with the investor. Trust is critical.

I get a lot of clients saying “I need an amazing pitch deck”. I always say augment your expectations. Decks are binary- fundable and not fundable. There is no awesome deck. You get funded in person, in the meeting you hope to get. The deck just gets you the meeting.

So study your ass off!

I’ve composed some questions and answers to help you think about what investors will ask:

Conclusion on fundraising documents

That’s all the documents that you need. You want to prioritize them in this order:

Pitch deck. You need it before you can talk to anyone. It takes time.
Financial model. You can pitch without a model if you need to. It takes time but you can work hard whilst you are at initial stages of pitching. You need to get it done… eventually.
Forwardable email. You need this to get emails. You can do before a financial model, only why create to-dos when you need to be pitching your ass off?
DD room: Ideally you build this as you start your company, but as you seem to get closer to a deal you can prioritise time on it. You can also delegate it to a minion. As a CEO, I wouldn’t do this if you have a capable minion.
Study/business model deck: You need to know your business. If you do already, you are fine. You can consider making a business model deck if you have the time and ability. It won’t close the deal, but it can make you look like a pro

Cool? Ok, get on with it. Any questions, sound out in the comments and I’ll get back to you.

The fundraising documents you need to pitch venture capitalists