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  • Mike Lingle at Rocket Pro Forma

Pitch Deck Playbook, Part 2



Pitch decks are an important part of the fundraising process. I see a million of them, and I'm constantly thinking about what works well vs. what can be improved (You can also check out my first post on pitch decks here).


As entrepreneurs we tend to spend most of our slides talking about the idea and the product.


What investors value most, however, is the team, the traction, the customer acquisition, and the moat. Notice that I didn't list idea or product there—that's because your idea / product is one ingredient in some of the things the investor finds most important).


Here are some areas we’ll cover to make your pitch deck an investor magnet:

  1. Competitive Landscape

  2. Financials

  3. Market Size

  4. Marketing Plan

  5. Unit Economics

  6. Sales Funnel

Here's the video walkthrough:



Competitive Landscape

I'm looking at a pitch deck that states that:


“Barriers to entry are small to non-existent. Our company with its first-mover advantage can become one of the industry leaders.”

Yikes!


First, barriers to entry are important and investors want to see them. A barrier to entry is something your company creates that makes it harder for competitors to copy or compete with you. Remember I said that investors are interested in the moat you're building? Barriers to entry create that moat.


Second, first-mover isn’t an advantage. Just ask any company that’s been crushed by Apple or Microsoft. Or ask Clubhouse now that Twitter, Facebook, and LinkedIn are copying their audio-only format.


Jason Cohen covers unfair advantages in two great blog posts: No, That IS NOT a Competitive Advantage, and Real Unfair Advantages. These are two of the best articles I've ever read on this subject.


Second, investors usually like to see that there are other players in the space. If you're all alone there may not be an actual market there (I know that sounds counter-intuitive). Put together a list of your competitors. It helps to ask, "What are my customers doing to solve this problem without me?"


You'll want to position your product or service as better, different, and/or cheaper—both to find customers and investors.


I recommend using one of these two layouts for your Competitive Landscape slide, both of which provide a visual representation of this differentiation.


Gartner Magic Quadrant: The idea here is to pick two main characteristics as the X and Y axes, and position your startup in the top-right corner.


Competitor List: This is for companies that need more than two characteristics. Here you make a list and then check all the boxes for your startup.


Financial Projections

If you’re raising money and need investor-ready startup financial projections, please check out my Rocket Pro Forma template (and I’ve posted free resources for startups there as well).


Here are financial projections from a pitch deck I'm looking at:



First, I would indicate clearly that all numbers are in thousands—including downloads per year. It took me a minute to figure that out and I look at financial models all the time.


Second, I like the annual summaries, but I want to see monthly numbers for the first year. This is especially important for startups that plan to lose money—we need to see more granularity in order to properly plan our fundraising and cash flow.


Third, I like the base case vs. the upside case, although it’s probably not necessary in a pitch deck.


Now for the sanity checking. Getting 1.5 million people to download and use your app in a year is hard! And expensive!


Snapchat was incredibly popular in 2016, yet only 22% of people who installed the app continued to use it after 21 days. And if you're like Blippar, you might only see less’ than 1% of your registered users ever return after 21 days.



Your results will probably be somewhere in the middle.


For a consumer app, your paid CPI (cost per install) could be between $2 and $3, so 1.6 million installs would cost between $3.2 million and $4.8 million—but you’re saying your total expenses will "only" be $3.7 million.


That doesn’t leave you any money to pay salaries, rent, etc. so now I’m skeptical about your entire plan.


The scary thing here is that 1% active users of 1.6 million installs is 16,000 users. Worst case that means paying $4.8 million for 16,000 active users, or $300 per active user. Can your company survive on that?


Financial Projections, Part 2

Startups are all about innovation—but it’s not a great idea to innovate in the way you present your financials. I would stick to traditional layouts.


Here's an "innovative" layout I saw in a pitch deck:



You’re asking the investor to do a lot of work here:


  1. I want to see a standard spreadsheet view with revenue, cost of sales, expenses, and EBITDA.

  2. I also want to see expected unit sales, # of units required to breakeven, and headcount (so I can sanity-check revenue per employee).

  3. I want to see annual summaries and a monthly or quarterly breakdown for the first year or two.

  4. That dark blue line is expenses, but it makes it look like the company doesn’t need to raise money. Meanwhile the entrepreneur is asking for $2 million. So I’m confused.

Please see my article on the slide layout that I recommend for your Startup Financials Pitch Deck Slide. This is also a great financial dashboard for running your business day-to-day.


Market Size

I'm looking at a pitch deck with some market size info for a dating app:



In general, investors want to see that your startup is positioning itself to benefit from a big trend, so this info is great! You’re telling me that dating apps are hugely popular, the market is growing, and 85% of potential customers are waiting to be signed up.


Good to know, and now I’m interested.


Here’s the market size info from another pitch deck:



What’s missing here is the growth rate. I don’t just want to know the size of the market, I also want to know how quickly it’s expanding. A rising tide lifts all boats.


I think of these as the top-down market size, and investors want it to be so big and growing so fast that any idiot can make money. That's the backup plan, but you're not an idiot ;)


Which brings us to your actual universe of customers. We call this the bottom-up market, and this is the section of the larger market that you're going after first. Remember that Amazon started by selling only books. Targeting specific markets allows you to be efficient with your marketing spend. You can also get the language and the feature set right for your target customers.


I find myself recommending this video all the time by Steve Barsh where he walks you through how to calculate your bottom-up addressable market size.


Marketing Plan

Here’s the marketing plan slide from a pitch deck that someone sent me:



This is a great start but it doesn't give enough info. Has the company tried any of these things? Which are working / not working? What is the customer acquisition cost for each?


Most companies attempt some combination of these initiatives, but each requires work and it's unclear which will be effective until you start testing. This slide basically tells the investor, “We’re planning to spend a bunch of your money on marketing—but we're not sure whether it will work.” That's usually not what investors want to hear.


Instead, investors want to hear that you have a big potential custom base and that you're already good at acquiring customers. You'll be using the investors money to increase the rate at which you're already acquiring customers.


It’s helpful to bring some data into the pitch deck:



This tells me a few things: first, you’ve done a bunch of testing so you already have an idea of where best to spend your investors’ money.


Second, you’re running experiments and learning from the data. This is exactly what investors want you to be doing, since no one can predict the future.


Unit Economics

I also love it when your pitch deck gives me your unit economics. This tells me that you’ve done your homework and that investors can trust you with their money.



It also shows me that you have the potential to make real money because your cost to acquire each customer (CAC) is dramatically less than each customers lifetime value (LTV). The rule of thumb is that your net LTV should be at least 3 times your CAC.


Here's a video I put together on unit economics, CAC, and LTV.


Sales Funnel

This pitch deck also includes the actual sales funnel metrics. I love it when startups are already selling!



I’ve hidden the revenue number, but this gives me enough info to plug in my educated guess at cost per click (CPC) and compare it to the revenue generated.


This lets me do the same thing as comparing CAC to LTV above, where I can estimate how profitable this business can become.


I’ll also sanity check this against the market size since there won't be an infinite number of customers—unless you’re Google or Facebook (and even they are hitting the wall so they're trying to figure out how to bring internet service to developing markets in order to sign up more users).


Summary

Investors hear lots of ideas, so your idea usually isn’t enough to convince someone to write a check—unless they’re friends and family and/or you've already been successful.


Your pitch deck needs to tell the story of your vision, why you’re the right team to do this, the trend you’re benefiting from, and the work you’ve already done to support your claims. You'll also need to cover the topics that investors care most about:

  • Your team,

  • Your traction

  • Your addressable market and customer acquisition

  • Your moat / competitive advantage

Successful pitch decks are about more than just ideas. The best entrepreneurs are always moving the ball down the field regardless of whether they've raised money yet, and investors want to bet on the best entrepreneurs.


Join our free workshop if you have questions or want further guidance on your pitch deck.


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Mike Lingle is obsessed with helping founders grow their businesses. He's a serial entrepreneur, mentor, and executive in residence at Babson College and Founder Institute. Check out Rocket Pro Forma if you want to quickly create your financial projections.


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