Over the past few years, there has been a lot of conversation around pitch decks. It has become an integral part of starting up and remains so throughout a company’s journey from a brilliant idea to going public. They have become so vital that founders work on creating a pitch deck even before they have a lot of other things figured out around their business. And this is not entirely counter-intuitive. A pitch deck is not only essential for communicating how different aspects of your business are tied together and raising funds, but also provide a solid and structured ground for brainstorming ideas. Ideas are often complex in one’s mind and communicating them through a structured approach not only makes the pitch effective, but also helps in developing a short to medium term vision for the business. As a business evolves, it keeps generating data points which convey the health of the company and hence makes it easier to communicate the same to various stakeholders. However, in early stages there is a lack of qualified information around the business and hence it is mostly speculation. This is where a structured pitch deck can help communicate that story effectively.
So, we thought we would look at early stage pitch decks of some of the most successful startups in recent history and see if we can identify some patterns. And we did. The pitch decks we analyzed had a lot of things in common and followed a similar structure to communicate different aspects of their business.
Pitch deck is the Tinder profile of your startup
On an average, a pitch deck is 16 pages long. Whereas an investor spends an average of only 4 minutes reviewing it. This implies that they spend an average of 15 seconds on any given page of a pitch deck. Hence it is extremely important to concisely and effectively communicate the information on that page using visual cues. At the same time, typically less than 2% pitch deck emails receive a response from an investor. To bring some perspective to this number, the average match rate on tinder is around 3.5%. So, if you thought finding matches on Tinder is difficult, then raising funds is a tad more challenging. With a pitch deck acting as your Tinder profile, you need to put your best foot forward and ensure that your profile comes across as an organized, uncomplicated and forward thinking company to get that date with an investor.
Our analysis and recommended structure
For the purpose of this study, we analyzed the structure of early stage pitch decks of 30 multi-billion dollar startups from before they turned into a unicorn. These startups are now industry leaders and represent a diverse set of industries. The pitch decks we analyzed as part of this study were used for their pre-seed and seed fundraising.
As mentioned earlier, investors do not spend a lot of time on initial review of a pitch deck. Hence, it’s important to keep the deck concise and to the point to make the most of their attention. They need to process a lot of data and information, so it’s important to communicate the same through simple infographics and keep it short. The pitch decks we analyzed had a median of 14 slides.
We further analyzed the contents of the pitch decks and recommend including the following sections in the deck:
1. Problem: The problem that you are trying to solve forms the basis of your pitch deck as all the other sections need to explain why and how you would be able to solve that problem. In most cases, founders miss out on explaining the problem areas comprehensively, which reduces the investor conviction that they would be able to solve them. A good problem statement should convey what the problem is, who is facing that problem and what is the impact of that particular problem on the stakeholders involved. Quantification of the impact helps in understanding the scale of the problem.
2. Solution: The solution slide of the deck helps the investors understand how you intend to solve the given problem. This section should talk about the value propositions of the intended solution and should be directly linked with the problem areas. At the same time, a frequent question asked by investors is why a solution like this has not been implemented so far. Or why is it a good time to implement it now? The answer to such questions should point to the challenges that existed up till now to implement such a solution and how you plan to alleviate them.
3. Market & Opportunity: This section gives you an opportunity to explain the potential of your startup to the investors. The market size for a particular business indicates the potential scale it can reach. Investors are generally looking for companies that would provide them with 100x returns, so the market size becomes an important piece of information around the possibility of that happening. Most founders end up putting some random numbers here picked up from the internet. However, you need to be able to justify those multi-billion market size numbers and explain how your solution caters to such a large market. One of the most common ways to depict the market size is through the TAM/SAM/SOM analysis. The total addressable market (TAM) indicates the entire market your solution can potentially cater to. The serviceable addressable market (SAM) indicates the immediately serviceable market with your current offerings. Lastly, the serviceable obtainable market (SOM) is the share of the market that you can capture right away. Breaking down the market into smaller parts also conveys to the investors that you understand the market you are operating in.
That being said, the market size number alone only gives half the picture. Another important metric to be provided here is the growth of the market. While you may be operating in a large market, if it is not growing at a steady pace then it might not be as lucrative for investors. At early stages, a small but growing market might be more promising than a large stagnant market.
4. Product/Service: This section is the extension of your solution and should talk about the products or services built around the proposed solution. You can get into the details of your offerings here and the specifications of the product that you plan on developing. It is a good practice to provide use-cases of your products / services to help the investors’ and other stakeholders imagine the practical application and implementation of the same. At the same time, if you have visibility on how your product evolves over time, you should present a product roadmap as well. This allows the investors to gauge if you have a long-term vision for your business and can plan for the future.
5. Business Model: The business model section is where you need to explain how you will be able to monetize your services. You may have a solid solution and a well-planned product roadmap to implement that solution, however if you do not have a way to monetize your products / services, then there is no business. An ideal business model should cover the products or services that you intend to monetize, who would be paying for those services, and what they would be paying for the same.
6. Go-to-market Strategy: This is one of the most important sections of the pitch deck and at the same time one section that founders struggle with the most. A go-to-market strategy need not be some shiny slide with fancy text and graphics. It needs to be a simple plan to take your products and services to your intended users. There are three primary elements of any comprehensive go-to-market strategy. The first one is well-defined customer segments and personas. Second, a pricing model for each of the segments. Third, relevant channels to reach out to the intended audience. Once you have these three things in place, tying them together creates your go-to-market strategy.
7. Traction: Up till this point, all you have is a plan in terms of a proposed solution, a good market, products and services, a business model and a marketing plan. The next step is to show that this plan actually works and there is no better way to showcase that than by showing the customer and usage numbers. Traction could be depicted in various forms depending on your product and business model. The most common way to depict it is using the number of users and customers your business has acquired. Other ways to show growth are through partnerships, usage metrics, revenue, etc. You should also use this section to show the planned milestones for your business so that investors can align with similar business or financial goals.
8. Competitive landscape: Every business at some point or the other goes through a competitive analysis. It could have happened while reading up news articles about your competitors or planning your products and services or actually doing an in-depth analysis to identify gaps in the market. This section also becomes important from the perspective of communicating to the potential investors that you know your market and what you are getting into. There are various ways in which you can depict the landscape depending on your market. However, just listing the names of your competitors doesn’t suffice. You need to explain your moats or your competitive advantage against similar players in the market. The moats can be in terms of low-costs, high switching costs, network effects and intangible assets like IP, patents, etc.
9. Team: This is the most straight-forward section in the pitch deck. No research or analysis required. Presenting the details of the founding team in the pitch deck tells the investors why you are the right set of people to be doing this. Things that should be highlighted here are your past experience in the given market, your academic credentials to help you come up with ingenious solutions and key insights that you might have about this space. In addition to this, putting up faces behind the company on a slide also helps in communicating that your company is something beyond data and figures with real people building real things.
10. Financial projections and ask: This is the section where everything culminates. If you are able to hold the investors’ attention till now, then you have already done better than 99% of the pitch decks. Prior to this section, you have explained all the different aspects of your business and tried to communicate why this is something exciting. In this section you have to talk about hard numbers and figures and show the investors why this is going to give them that 100x return on investment. You should try providing two to five years of financial projections to give them visibility over different revenue streams and cost centers. Based on these projections, you should provide your fundraising ask in terms of the total funds you are looking to raise in this investment cycle. Lastly, you should provide a use of funds in terms of where major expenses will happen till your next fundraising round. If these numbers look believable and achievable, the investors would not want to pass up on the opportunity to invest in you and your company.
Happy pitching!
We have worked with more than 20 early-stage startups to help them with fundraising collateral, creating and overhauling their pitch documents, market research, financial planning and business design. Please feel free to reach out to us at contact@parati.in if you need help with your fundraising strategy and documents.