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:
Here's the video walkthrough:
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.”
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.
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: