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Start your company’s culture right My friend Brad keeps starting television networks. He’s become great at it. Years ago—when he was launching MTV Canada—he taught me a way to quickly capture a company’s culture. It’s called a brand filter. Starting a company can be chaotic! There’s so much happening all at the same time, and once customers show up it’s even more hectic. So we start moving quickly. It’s easy to lose sight of the big picture. How do we make sure that we’re on the same page with our co-founders? Let’s stop for a minute and consider what we’re building here: What are our core values? What’s important to us? How we want to feel while we’re working? How do we want our customers to feel? How do we explain our brand to a marketing or PR agency? How do we make sure that we’re on the same page with our co-founders? And how do we make sure those all-important first hires fit our vibe? In short, what is our company culture and how do we communicate it? This is the magic of the brand filter, and it’s deceptively easy: Pick five words or short phrases that describe your company.  Print this list out and stick it to the front of your computer.  Check what you’re doing against this list every time you create a piece of collateral, hire someone, design a new product or service, etc. Everything won’t match 100%, but you can quickly tell if you’re in the ballpark. And you can easily communicate your list to everyone else. Check what you’re doing against this list every time you create a piece of collateral, hire someone, design a new product or service, etc. If you’re flying solo, please take a few minutes and do this yourself. Here’s my list: Practical : I want my suggestions to be immediately actionable. What can we do right now with what we already have? Always Adding Value : I want people to feel like they’re learning from every conversation, and I always do what I can for people for free. Collaborative : I don’t have all the answers and I’m always looking for ways to include other people in what I do. Reliable : I want people to know that I’m always there for them, especially when they’re asking for help. Flexible : Part of the reason I like consulting is the constant innovation and the flexible schedule. Let’s always be learning and optimizing. My friend Rajan Chopra started a coaching business for successful executives (I've use his services myself!) and he came up with “The Five I’s:” integrity, intellect, insights, ideas, and inspiration. They’re easy to remember and it sounds like a company I’d like to work with. A new person added to a small team has the ability to dramatically affect the culture, and with a brand filter you can clearly communicate your expectations. As an entrepreneur I’m trying to create an environment that I enjoy working in. I want to be careful that I’m not creating a prison for myself. I want to ensure that my startup retains its culture as it grows and more people get involved. The only way to achieve that is to set a goal and navigate towards it. If you already have co-founders you can schedule an hour to build your brand filter together. Future decisions become much easier once you all agree. I highly recommend doing this exercise before making that all-important first hire. A new person added to a small team has the ability to dramatically affect the culture, and with a brand filter you can clearly communicate your expectations. Please post your brand filter in the comments! Featured Download: Grab my Brand Filter Guide to quickly establish and communicate your company culture with your team. This is the best way to ensure you’re building a palace instead of a prison. Mike Lingle  is obsessed with helping founders grow their businesses. I'm a serial entrepreneur, mentor, and executive in residence at Techstars and Founder Institute Check out Rocket Pro Forma if you want to  quickly create your financial projections .

Overview I help a lot of founders with their pitch decks. In fact, most of my startups were presentation apps ., and before I focused on financial projections I ran a pitch deck business. I'm not a graphic designer, but I've learned to make decent slides that raise money. In fact, one of the pitch decks I worked on last year was used to raise over $200 million. Here are a few best practices that I’ve established over the years when creating startup pitch decks: Google Slides is usually the best option Create slides that look good and are easy to update Reduce the amount of info on each slide Use larger text Use images, icons, and diagrams wherever possible Use animations to slowly introduce information Use the Theme Builder for colors, fonts, and slide layouts Pick the right colors Choose sexy font pairs Practice, practice, practice 1. Google Slides is usually the best option Pitch Decks are living documents that we need to update regularly—and often in a hurry. For the most part this means tasteful combos of fonts, images, and layouts (see below for my specific suggestions). We don't necessarily need the best graphic design and animations. For the most part I find that Google Slides is good enough visually. Google Slides also provides the best collaboration experience, along with killer version control (meaning you can roll back to pretty much any individual edit). Google Slides does have limitations regarding charts and smart art. PowerPoint is a close second. It offers a wider feature set, but a poorer collaboration experience. Keynote looks the best, but is neither portable nor collaborative. And I find that most pitch decks don't need whatever extra boost we think we're getting in design. The rest of this post will assume that we're using Google Slides, but the tips apply no matter which presentation app we choose. 2. Create slides that look good and are easy to update My goal is always to create slides that look great and that are easy for us to update ourselves. Remember how we need to update our slides all the time and at the last minute? 90% of the visual appeal is in the choice of fonts, images, and layouts. Be careful when working with graphic designers. They have a tendency to create slides that look spectacular...but can't be edited easily. I've found it's better to dial down the visuals a bit in order to keep the slide editable. For the most part this means tasteful combos of fonts, images, and layouts (see below for my specific suggestions). But first, here's a trick I use all the time: Cropping images with a shape can improve the visual appeal of slides. In Google Slides we can select the image, click the cropping tool, and then choose a shape to apply. Use both the yellow handle(s) and the cropping feature (double-click on any image) to reshape the frame. There is a limitation in Google Slides where rotating the frame also rotates the image (which can make it confusing when we try to change the image). For more complicated mattes, it may be best to use PNG layers to overlay photos with a transparent section. In this slide, the background image is sitting underneath editable text, circles with shadows, an orange line on the left, and a blue PNG splash shape on the right: We can then simply swap out the background without touching any of the layered elements. This gives us incredible power to quickly update our own slides: 3. Reduce the amount of info on each slide Determine the use of this Pitch Deck: 1) If the Pitch Deck will be emailed , then the viewer will read it on their own and therefore the slides require more text. In this case the slide needs to tell the story. 2) If the Pitch Deck will be presented live , then each slide needs to work as a platform for you to create a personal connection with the audience. In this case, it’s important for the you to tell the story. In this case, text on the slide competes with the your ability to tell the story. Every time you switch slides the audience will stop listening to you for as long as it takes them to read all the new text. So in live pitches your slides actually start to compete with you for attention. We normally don't have two separate versions of our pitch deck—one for email and one for live presenting—so I recommend using the least amount of text possible that still works for emailing. I avoid reading the slides to my audience when I'm presenting live. Find different words to tell your story. Otherwise you'll find that the audience gets bored because you're not adding value (they could just read the slides themselves). If I do have a text-heavy slide that I want my audience to read, I'll tell them, "Go ahead and read this slide" and then I'll give them 30 seconds before I speak again. This felt weird the first few times I did it (because of the long silence) but it works incredibly well. A good trick that I use when creating startup pitch decks is to do a brain dump and write really long, text-heavy slides. Then I go back and cut again and again until I get each slide down to just a few short bullet points. Here's an example of a slide that works for both email and in-person: 3a. Use larger text Legibility is important, plus we’re often trying to reduce the amount of text on each slide. Investors may skew older, in which case they do better with larger text. For these reasons, I recommend at least 18 point text wherever possible. 3b. Use images, icons, and diagrams wherever possible Visuals help people understand and retain the information that you're presenting. They make your presentation more entertaining and they break up monotonous text slides. Striking visuals are also what pop into viewers’ heads the next day—triggering a recollection of the entire presentation. People will spontaneously remember the perfect image hours—or days—later: This one's good too: Diagrams help people understand important points and user flows. The combination of a clear visual plus you explaining key concepts works wonders for establishing yourself as the trusted authority: 3c. Use animations to slowly introduce information We want to reduce the amount of new text appearing on the screen at any one time (remember that text fights with you for the audience’s attention). I recommend having each paragraph of text build on individually. This allows you to make one point at a time. You can also link image and icon builds to happen at the same time as each text element. In the diagram above, for example, I would build each icon and text box on separately. I would talk to each point before triggering the animation to bring on the next arrow, icon, and text box. In Google Slides, click the "By Paragraph" option inside each animation to have each bullet point build on separately: I usually stick to simple build animations. Anything more complicated—and more flashy—tends to be more of a distraction than a help. Remember that we're trying to create a connection with our audience, and we're trying to create a presentation that helps us do that, while minimizing distractions. 4. Use the Theme Builder for colors, fonts, and slide layouts Access the Theme Builder in Google Slides using the View menu: The Theme Builder allows you to standardize the fonts, colors, and slide layouts. This gives "future you" the power to make global updates, like changing a color in one place and having it change on every single slide. You'll thank me later: Setting your colors in the Theme Builder makes it easy to select them from the color palette when you're editing slides. And setting your fonts and layouts in the Theme Builder saves time and ensures consistency. 4a. Pick the right colors I've learned to limit the number of colors in my presentations. I typically use: Background color Text color Main highlight color Extra highlight color (maybe) I choose a light background color if I'm using a dark text color (and this combo saves the most ink if I'm printing the slides). Otherwise I'll choose a dark background color if I'm using a light text color. I use a lot of white, black, and dark blue for my background and text colors. I usually only use one highlight color—but sometimes I'll use a second highlight color. Adobe offers a free color palette tool at color.adobe.com (and there are a bunch of other options too if you Google "free color palette tool"). And that's it. Simple is best here. The only place where I'll use more colors is in charts—where I'll use shades of one or two of my main colors (in this case gold and navy, which you can see anchoring the corners): 4b. Choose sexy font pairs Serifs are the little points that stick off of letters. The New York Times logo is in a serif font—and serif fonts tend to point to the past. There are, of course, more modern serif fonts. "Sans Serif" means "without serifs," and sans serif fonts tend to feel more modern. This blog post is done entirely in sans serif fonts. The trick with startup pitch decks is to choose one font for the slide titles and a different font for the text. These two fonts should be complementary—even sexy. Try a free tool like FontPair.co to suggest pairs of fonts that work well together. I spend ten minutes choosing two fonts and that's it. I find that anything more complicated is both wasted time and potentially distracting in a startup pitch deck. I also try to use fonts which are available on Google Fonts —which means I can easily use them in my slides and online. Fancy rare fonts that I have to install on my computer tend to not work well on websites, which is a problem. Bringing it all together Here's the same slide with different colors and fonts. See how it completely changes the feel? Now you are a design ninja, but you're keeping it simple. 5. Practice, practice, practice I read an interview with Marc Benioff of Salesforce where he said that he needs to practice each presentation seven times before he feels comfortable. By "practice" he means running through it talking out loud clicking through his slides. Seven times. It's not a quick process, but it ensures that he feels comfortable when he finally steps in front of his audience. Remember that our goal is to establish trust by becoming the trusted authority and telling an authentic, informative, entertaining story. Practice is how we get there. I hope these startup pitch decks tips help you. Please let me know if you have questions. ### 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 .

Pitching investors? Here’s how to figure out your startup’s valuation in 30 seconds. 30-Second Startup Valuation Here's how to figure out how much your startup is worth before you start pitching investors. You’ll need these two things, which you probably already know: How much money you’re raising in this round (Cash Raised) What % of the company that “should” be worth (Ownership Percentage) according to you, your investors, or both (start with 20% if you're not sure—you can always change it later). The formula to figure out your startup’s valuation is: Cash Raised divided by Ownership Percentage = Post-Money Valuation. Now subtract the Cash Raised to get your Pre-Money Valuation (what your startup’s worth now, before the investment). Your Pre-Money Valuation is the answer to the question, "What's my startup worth?" Here's a short video walkthrough: Example: We’re raising $1 million for 20% of the company, so Cash Raised = $1 million and Ownership Percentage = 20%. $1 million divided by 0.2 (20%) = $5 million Post Money Valuation. Now we subtract the $1 million Cash Raised to get a $4 million Pre-Money Valuation. So our startup is worth $4 million now, before the investment. That’s it! That’s literally the only Pre-Money Valuation that gives you the cash you want while also giving the investors the correct ownership percentage. This works for equity / priced rounds, convertible note valuation caps, and valuation caps for SAFEs. Yes, you can use fancy spreadsheet models to calculate startup valuation based on discounted cash flows or net present value. The thing with early-stage startups—especially pre-revenue startups—is that all of the numbers in the spreadsheet are guesses. So in my experience that leads to weird negotiations with potential investors over made-up numbers. This is because no one knows the future. Not even Google, who just announced that they're laying off 12,000 people last week. I make spreadsheets for a living—and Rocket Pro Forma will calculate net present value—but trust me when I tell you it’s easier to focus on the two pieces of info you actually know: a) how much money you’re raising (Cash Raised) and b) what % of the company that % should be worth (Ownership Percentage). This seems too easy, but it’s how I’ve raised money in the past. Here's how: My Story My cofounder and I were raising a $2 million Series A round, and we finally found a VC firm who agreed to invest (our path to becoming investable is an entire story that I’ll cover in a separate blog post). We hadn’t really thought about valuation, but the investors said they wanted to own “about a third” of the company. Boom! Now we had the two pieces of info we needed to calculate the valuation: Cash Raised = $2 million Ownership Percentage = 1/3 or 33.3% (Dividing by 33.3% is the same as dividing by 0.333. Plug 2,000,000 / 0.333 into a calculator to see for yourself) Here's the math: $2 million dollars divided by 33.3% = $6 million Post-Money Valuation - $2 million Cash Raised = $4 million Pre-Money Valuation So our startup had to be worth $4 million pre-money. Wait, is it really that easy? Yes. The investors gave us a term sheet offering us the $2 million investment (Cash Raised) on a $4 million Pre-Money Valuation. This is called “two on four,” and it would create a $6 million company (because the $4 million Pre-Money Valuation plus the $2 million Cash Raised adds up to a $6 million Post-Money Valuation). The investors would then own 1/3 of the company, because $2 million Cash Raised divided by $6 million Post-Money Valuation = 2/6 = 1/3 = 33.3% Ownership Percentage. We thought about it for a day, and then we asked the VC firm for a $5 million Pre-Money Valuation (or a “two on five”). What would this do to the numbers? We would now be creating a $7 million company. because the $5 million Pre-Money Valuation plus the $2 million Cash Raised adds up to a $7 million post-money valuation. The investors would own 2/7 or 28.6%, because $2 million Cash Raised / $7 million Post-Money Valuation = 2/7 = 28.6%. By asking for a $5 million Pre-Money Valuation we were actually negotiating the Ownership Percentage. Our investors said yes and we did the deal. The result was that we saved almost 5% of equity, because 28.6% Ownership Percentage is 4.7% less than 33.3% Ownership Percentage (their original offer). At no point during those conversations did we ever have to “prove” that our startup was worth $4 million…or $5 million. Our Pre-Money Valuation was simply a function of both parties getting what they wanted: We got a $2 million cash investment (Cash Raised) The investors owned about a third of our company (Ownership Percentage) And we never had to negotiate made up numbers from our spreadsheet. Can we skip the valuation for now? One way to raise money is to sell equity at a specific valuation. This is called a priced round, and it's what we did in the story above. It requires you to come up with a Pre-Money Valuation—which is easy now that you know the cheat code, right? But what if you don't want to come up with a Pre-Money Valuation right now? The idea behind a Convertible Note is that you can delay valuing your startup, specifically until the next round of funding. The Convertible Note was created to help founders and investors move quickly, with the least amount of negotiation. The Convertible Note has a ticking clock, meaning the next investment usually has to happen within two years (or however long you and your investors agree to). After that it's supposed to convert to Equity (shares of stock). The SAFE is similar to a Convertible Note, but removes the ticking clock. So a SAFE can sit forever without converting. The thing with both Convertible Notes and SAFEs is that investors often want a valuation cap (here’s the full story on valuation caps from Y Combinator). So you’re back to figuring out what your startup is worth in order to create the valuation cap. Again, the 30-second method that I’ve laid out in this blog post is the easiest way to make everyone happy. Why have a valuation cap? Because it protects investors if you hit a home run. For example, if you raise $100,000 from investors using a Convertible Note and then create a $100 million company, their $100,000 doesn't give them very much of an Ownership Percentage. But you needed their money in order to succeed. So the valuation cap protects investors by saying that their $100,000 will convert to equity at no more than a $1 million valuation (for example). Trick Question If your investors put $200k into your startup (Cash Raised) with a $1 million Pre-Money Valuation, what with their Ownership Percentage be? Take a minute to think it through. Hint: Ownership Percentage = Cash Raised divided by Post-Money Valuation. Here's a walkthrough of your Startup's Post-Money Valuation (using different numbers so we don't give away the answer to the trick question yet): Definitions We’ve discussed enough things that we a list of definitions. You'll find every term in this list is capitalized throughout this blog post. This is your cheat sheet when you’re getting ready to pitch investors. Pre-Money Valuation is the answer to “What’s my startup worth?” It’s what your startup is worth now, before the Cash Investment. Post-Money Valuation is the Pre-Money Valuation plus the Cash Investment. You and the investors work together to create the Post-Money Valuation, because you add their cash to your existing company. Cash Raised is the amount of money being invested into the company. Ownership Percentage is how much of the company the investors own after they invest. It’s calculated as Cash Investment divided by Post-Money Valuation. Equity means shares of company stock that represent actual ownership. A Priced Round is when you raise money from investors by selling shares (Equity) of your startup at a specific valuation. This is how we raised money for our startup in the example above (My Story). A Convertible Note is a loan to a startup that will convert to Equity (shares of stock) within a certain period. It’s a founder-friendly way to raise money. A SAFE (Simple Agreement for Future Equity) is similar to a Convertible Note, but doesn’t have a time limit, and so may never convert to equity. It’s even more founder-friendly than a Convertible Note. A Valuation Cap is designed to protect your investors in a Convertible Note or SAFE if you create a high-value company without needing to raise more money. Answer to the Trick Question If your investors put $200k into your startup (Cash Raised) with a $1 million Pre-Money Valuation, what with their Ownership Percentage be? Hint: It’s not 20%. You'll create a $1.2 million Post-Money Valuation company ($1 million Pre-Money Valuation plus $200k of Cash Raised), of which the investors would own 2/12 or 16.7%, because $200k / $1.2 million = 2/12 = 1/6 = 16.7%. Answer: Their Ownership Percentage would be 16.7%. And this is why it's important to only talk about investor Ownership Percentage in relation to the Post-Money Valuation. Founders who accidentally talk about Ownership Percentage in relation to the Pre-Money Valuation end up with confused—and possibly disappointed—investors. That's it! Now you have everything you need to figure out what your startup is worth in 30 seconds. Mike Lingle is the founder of Rocket Pro Forma (financial projections for Web2 and Web3 startups), CFO at Security Token Group (digital asset securities on the blockchain), and an entrepreneur-in-residence at Founder Institute. He co-founded an online slide presentation app that was acquired by VMWare in 2011.

I’m launching a startup to solve traffic. It’s called rShare (get it?), and it’s a mobile app that rewards people for not driving alone: In real life, the first version of the game encourages people to share rides or take public transit—where more passengers in a vehicle earns more rewards. In the game, the points you earn can either be used to improve your experience, or withdrawn to your bank account. I’ve created a pitch deck, and thought you might want to see it. I’ll walk you through my pitch deck strategy, as well as each of the slides. You can flip through my pitch deck right now if you want I’ve created a ton of pitch decks, both for myself and for many of the founders I’ve worked with over the years. It helps that many of my own startups were presentation apps—I’ve spent my entire career crafting narratives, making slides, and working with graphic designers. I may do another post that details my process for creating individual slides in this pitch deck. It’s helpful to see the progression from too much text to (imho) well-designed slide. Short story: I do a brain dump of every possible fact first, and then I pick out the narrative that investors want to hear. This pitch deck is for an idea-stage startup that’s looking to raise a pre-seed round. Later-stage companies with active users need to include more metrics in their pitch decks, although the basic structure is similar. I’ve ended up creating two different versions of my pitch deck: the first version is for emailing to people (shorter, without animations); and the second version is for presenting live (more slides, with animations). I’ll discuss why below. Watch me present my pitch deck (with animations) Here’s what I’ll cover in this post: My creative process Keeping slides simple The story Investor questions Slide-by-slide walkthrough Which slides aren’t in this deck (yet)? My creative process I worked with the immensely talented Marlon Portales, an artist I know here in Miami, to design the cover page art and the car game pieces These now form the core visual identity for rShare. I then worked with a separate graphic designer (the also immensely talented Martin Rainone) who brought all of the slides together. He’s now helping me think through the UX / UI of the rShare mobile app. Please see my article for non-designers about pitch deck design to learn my process for making my slides look good visually: Top 5 Pitch Deck Tips for Non-Designers My process was: 1. Wrote out a long-form description of my business plan, which became the Litepaper (which is the current website at rShare.wtf). My secret to success with creating pitch decks is that I always have to word vomit first in order to eventually get to simplicity. 2. Worked with Marlon (artist), who created the car game pieces and the cover art. 3. Drafted the pitch deck using Marlon’s art plus my own (adequate but not awesome) slide design. Here’s what that looks like (you can compare this with the finished slide 9 in my pitch deck walkthrough below) ^ The slide I created ^ vs. after Martin helped with the design: 4. Worked with Martin (designer), who ran with the design concepts and created much better slides. 5. Created my own slide layouts that took the best of Martin’s ideas but focused on: Professional look and feel (I didn’t use the handwriting font that Martin recommended, for example) Dialed in the color scheme throughout 6. Started running my deck past as many people as possible in order to improve it rapidly. I’m focused on the questions that people ask, where they get confused, and where they suggest changes. One example: a friend suggesting that I move the two slides about creating a sustainable economy into the Appendix. A related example is me using that slide in every pitch, and then moving it back into the main flow of my pitch deck ;) Keeping slides simple I work hard to keep text off of my slides. I’m always trying to cut down the amount of content. One trick is to use large fonts that force me to use fewer words. People are often afraid to present without a bunch of words, but I suggest the following: 1. I know that any words written on my slides will compete with me for my audience’s attention. In fact, people will stop listening to me for exactly as long as it takes them to read any new words on the screen. I want to be the hero of my pitch, so I try to use the fewest words possible. 2. People don’t want to hear me read sentences off of the screen. I try to have just a few words for them to get the point—and then I use different / more words to tell the story while they listen. 3. My slides still need to work when I email people the slides, so I use just enough text—and especially images—for people to be able to understand the story without me. 4. I don’t really need the slides to tell me what to say, since this is my story. I also practice, practice, practice—both with and without the slides—so that I’m comfortable in any situation. I pitch without slides at least half the time. 5. Images are worth a thousand words. I’m always looking for the right images and diagrams to allow me to remove words from my slides. 6. I use animations to reveal text one sentence at a time (see point #1 above). This gives me time to explain each point without overloading my audience with a full slide worth of text. I did learn a big lesson during the time it took me to write this article, though. I’ve been sending a link to potential investors that allows them to flip through my pitch deck. Someone finally told me that the animations were annoying people who were reading on their own. Potential investors want to move quickly to decide whether to book a meeting. So I took the animations out of the version I’m emailing out. However, I’ll keep the animations in the version I present live, for the reasons I’ve stated above. 7. I use informative slide titles, rather than simply using “Problem Slide,” “Solution Slide,” etc. The story I want to point out something important about the flow of this pitch deck: In general, I’m a builder and most of the entrepreneurs I work with are builders. We builders have a powerful urge to talk about the problem—and the product or service that we’re building to solve it. Investors, on the other hand, want to hear about how this is going to become a profitable business. Investors therefore want to hear about team, traction, and customer acquisition. In a weird way, the problem and solution don’t matter as much to the investors. Therefore, I’m always trying to keep the problem and solution section of my deck as short as possible. I’m always going to focus on customer acquisition, team, and traction in order to get best results from my investor pitches. In fact, I’ve kept the entire deck as short as possible. It’s 16 slides for the main pitch, and I’ve moved everything else into the appendix. That being said, I’ve given my pitch five times this week and I haven’t ever had time to get through all 16 slides. Does my pitch deck need to be shorter? Maybe. I also have some extra slides in the appendix. I found myself using the last two slides a lot, so I moved one of them back into my main flow. These talk about existing Web3 play-to-earn games and how they boom and then bust. The final slide is key to our pitch because it explains our strategy to succeed past where most games stop. My co-founder talked me into moving it to the appendix, but I’ll move it back into the main pitch if I find myself using it in most of my pitches. It’s also possible that it belongs in the appendix when I email the pitch deck to someone, but that it belongs in the main pitch when I’m presenting in-person. Investor questions Potential investors ask me questions every time I give a pitch. Best practice is to write down all of the questions—either during or immediately after the meeting—and then look for patterns. When I hear the same question a few times, I update the deck to answer it before it’s asked. Pitch decks (and financial models) are living documents. I’m constantly tweaking my slides. Sometimes these are minor edits. Other times these require more work. For example, last week Apple changed its rules around using NFTs in apps, which required a 2-hour session with my development team and then significant updates to some of my slides. When we raised our Series A round for a previous startup, we pitched 40 or 50 investors over 8 months. That gave us a lot of time to evolve our thinking, our metrics, and our slides. Slide-by-slide walkthrough Slide 1: Cover slide Marlon did a great job here! I asked him to create an image of a car with two people in a city with no other traffic. I specifically wanted a man and a woman in the car, and I wanted them to be visibly enjoying the open road. I ended up creating the temporary rShare logo. Martin and I have been experimenting with other options—including pixelated throwback video game fonts—but we haven’t found anything better…yet. I always want a pitch deck cover slide to explain what the project is. I’ve settled on “Earn rewards. Solve traffic.” for now. This helps people understand first what’s in it for them, and second what the goal of the project is. Some other good options for the investor-facing pitch deck would be: “A mobile app that rewards people for solving traffic” “A mobile app that rewards people for not driving alone” "Profitably solve traffic" I want to give potential investors an idea of exactly what rShare is from first glance. And I want to make them feel a burst of excitement when they look at this slide Slide 2: TL;DR / Summary / Quick Pitch Mission accomplished! I found a way to include the sentence “We’re building a mobile game that rewards people for not driving alone.” I just added this slide after a few weeks of pitching. I want to give investors the overview to save everyone time: Investors can quickly decide if they’re interested, without having to read the entire deck I’m finding that I can’t even make it through 14 slides in my investor meetings, and this one slide is exactly what I want to talk about in our limited time together This also lets me talk about our experienced team up front, without having to start with the team slide. Slide 3: Traffic… We can all agree that traffic is a problem. I chose this full-screen image of a traffic jam because I think everyone has an immediate emotional response. My first two slides are as much about emotion as message: the cover page is joy and freedom, while this second slide is frustration and helplessness. Do I have your attention? Slide 4: Traffic…Is getting worse What’s worse than being stuck in a traffic jam today? Being stuck in an even larger traffic jam next year! This problem is only going to get worse. Slide 5: Opportunity: A profitable economy to solve traffic The whole point of this startup is to create a sustainable economy that: Solves traffic Drives real-world value into the wallets of everyone who contributes. This is what elevates this project from simply being a game. It’s also what’s different about rShare vs. most Web3 projects. I was inspired by my conversations with David Katz of Plastic Bank. He’s created a for-profit solution (ie- a sustainable economy) to stop plastic from entering oceans. Plastic Bank profitably boosts the economies of third-world countries using money from large global manufacturers, and cleans our planet in the process. I temporarily moved this slide into the appendix, but found myself using it in most of my pitches. So I’m bringing it back into the main flow. Slide 6: We earn subscription revenue, and… Now we’re shifting gears to talk about revenue. I originally had this slide later in the deck, but I know that investors want to talk about revenue—and this is part of our secret sauce. Our baseline is that we’ll earn money from subscriptions. A crucial part of our strategy is that people who play our game are doing valuable work that we can monetize in the real world. This is different than most games, which is why we’ve given it an entire slide. When I design pitch decks I often give big ideas their own slides with just a bit of text and a powerful image. This is how I focus the audience’s attention on what’s truly important. Slide 7: Our revenue model Now we’re into the revenue model, and this is the most information we’ve had on a slide so far. I use builds to reveal one layer at a time when I’m presenting it. I’ve used color to highlight our in-game revenue vs. the additional diversified revenue streams that we’re planning to bring in. Every investor wants to know how the business makes money, so this slide ends up being a long discussion in every pitch. I’ve also found that some investors have pet peeves. One person hates selling data, while another hates advertising. I find it’s best to let these people vent, acknowledge them, and move on. I’ve been positioning the diversified revenue streams as experiments instead of being set in stone. Slide 8: Earn rewards for not driving alone This slide starts the big reveal of the solution we're building to solve traffic. There’s some complexity here, but I’ve boiled it down to a few quick slides. One big secret to a short pitch deck is that I’m okay leaving details out. The potential investors who are interested will have multiple conversations with me, so I’ll have all the time in the world to give them the full story. I worked with an artist (Marlon Portales, who also designed the cover slide) to give the car game pieces a ton of personality. Again, I want the audience to feel emotions—and I also want to give them a taste of how the app will look. I originally had a ton of text on this slide, but I’ve revised it probably 10 times trying to reduce the text and pick just those words that make the point. Also, I’m hiding something on this slide: We don’t have a mock-up of the app yet (yes, we’re working on it). This slide will be more powerful when there’s a phone screen that shows the layout of our game, where this car will be just one element. It’s coming soon… Slide 9: Basic game play (Remember the early version of this slide I showed you above? Here’s what it became after Martin the designer helped me out) Now we’re into the game mechanics. I want this slide to say 3 things: People have to work together to not drive alone More passengers in a vehicle = more rewards, so this scales up from cars to public transportation Our app is inherently viral because people have to work together (see point #1) Remember that Investors care about two things: revenue and/or growth. This slide is all about growth. Slide 10: Simple Onboarding I find that a customer journey slide helps investors visualize how things work (remember that a picture is worth a thousand words). This map has seven steps, and it’s told as a story. The most important feature in any app—yet probably the least talked about—is the onboarding: How easy is it for me to invite you to join? How hard is it for you to get up and running? This slide makes the point that we can onboard new users without them having to install our app. They earn points and they get to experience the game, which is designed to hook them so that they want to do the install. Slide 11: Who’s our customer? We’re going after a young crowd because they care about sustainability (which solving traffic affects), they love mobile games, and they want to be part of a social movement (“We’re working together to solve traffic!”) At the bottom, I’m using STEPN’s 4.7 million registered users as a starting point, which I’ve narrowed down based on age and geography (people who live in cities are most likely to care about traffic). Don’t know what STEPN is? You can read my deep-dive (“Is STEPN Actually Web3?”) or just take my word that it’s an incredibly successful rewards-based game for walking. STEPN is a double-edged sword, though, because a) many people are nervous about Web3 in general, and b) pay-to-earn models are out of favor…precisely because none of them have created sustainable economies yet ;) Honestly this slide is still weak without some customer validation. Our next step is to run tests using a landing page to: Target our initial user base Confirm that they will sign up Test if they will pre-pay Calculate our customer acquisition cost These experiments will not only help us feel confident in our approach, they will give investors real data they can use to make a decision. It also puts us face-to-face with our audience so that we can learn their language, how they think, and why they say yes or no. I’m re-reading The Right It by Alberto Savoia. It’s one of my favorite books about customer validation—and it’s been transformative for my approach. Slide 12: Example City: Miami I plan to use Miami as a launch city—partly because I live there and also because I’ve already built all the relationships as part of a city-wide competition to solve traffic that I helped my team win a few years back. Miami’s ranked #43 in population in the US, and the top 100 cities in the US are good targets for rShare. Why does this slide have a gray background? Mostly just to keep it fresh. Martin suggested using both gray and green backgrounds occasionally, and I liked the idea. Slide 13: Why us? The team is consistently ranked as the #1 thing that investors care about. The fact that we’re experienced and have multiple exits between us is key. I also want to highlight: I’ve helped launch a similar company in the past (after winning that contest to solve traffic) Our CTO is great at building tech We have a development team already working on our app—even without funding I’d like to add a marketing co-founder to the team. Especially one with Web3 and/or mobile app experience who can give input to the product design. I’m being told that I need more advisors. As that starts to happen, I’ll probably move them onto their own slide. The two advisors that I have so far cover exponential growth and data strategy. I’d like to add government, carbon credit / net zero strategy, gaming, rewards, and Web3. Slide 14: Wait, did you say game piece trading fees? The truth is that NFTs are going mainstream, even in this bear market. Did you know that Reddit just launched NFTs—although they don’t call them that—and within a few weeks already have more NFT wallet holders than OpenSea? (OpenSea is the leading NFT marketplace, and it launched five years ago). Starbucks is about to launch NFTs into their loyalty program, which has 27.4 members. And STEPN is a mobile app that you’ve probably never heard of, but it's grown exponentially in under a year. STEPN has sneaker NFTs that trade like crazy, making them both profitable and popular. The point of the last two slides is to show that NFTs are a massive wave that’s growing even in this bear market. I want to make investors feel comfortable about this part of the pitch. Slide 15: Why now? There comes a time when things finally work, even if they didn’t work before. Uber is a great example of using new technology to unlock a new revenue model at exactly the right moment. I love pitch deck slides that show how we are riding several powerful trends. The goal of this app is to nudge the behavior of undecided commuters to reduce traffic. We certainly won’t influence everyone. This is basically the same strategy as influencing elections by nudging the undecided voters (am I allowed to say that?) Traffic will get worse, plus it generates a big chunk of emissions. One of my favorite things about rShare is that everyone agrees that traffic is a problem, regardless of their position on emissions. I tried launching a similar business a few years ago (rewarding people for not driving alone), and it didn’t work for a few reasons. And then Covid took every car off the road for a while—who knew that “global pandemic” was the answer to solving traffic? This summer, as I was stuck in traffic every day driving my kids to summer camp—and as I was watching the amazing success of some NFT-based apps—I realized that Web3 unlocked my old idea for solving traffic. But Web3 is a double-edged sword. I see how it works, but I get blank stares or even discomfort from other people (“I don’t understand this whole NFT thing”). I’m still trying to find the right way to deliver the NFT message. Slide 16: Milestones I like to leave this slide up at the end of every pitch—especially when discussing next steps with potential investors. It’s designed to create FOMO (fear of missing out) by showing: How hard we hustle, even without funding How much we’re raising What we’ll accomplish with the money (very different than how we’ll spend the money, which is covered in the Use of Funds slide in the appendix below) Appendix Slide-by-Slide I leave all the other slides in the appendix. I find that I use them sometimes in my live pitches, but not all the time. If I find I'm using a slide all the time, I'll promote it to the main flow. Slide 18: Use of funds Some investors want to see how we’ll spend the money. I actually find this less interesting than “What we’ll accomplish with the money” on the Milestones slide above. This is because “How we’ll spend the money” is always some version of: Growth Product development, and Hiring. Of course we can discuss the percentages allocated to each category. But no startup ever has an issue spending the money. Slide 19: Spending rewards This slide talks about some of the gameplay elements of our app. I haven’t ever used this slide in a pitch yet, so I may take it out. I do get comments from potential investors who read the pitch deck before our meetings. People definitely like the idea of casting spells. Slide 20: Wait, did you say Web3? I get a lot of pushback on the Web3 / NFT part of my plan, so I’ve de-emphasized it in my pitch. However, I view the NFTs as a critical component—precisely because I already tried launching a similar company without them. What we’re really talking about here is ownership, and aligning incentives. I think this message will resonate with investors because they are also looking for ownership in order to align incentives. This slide is my new plan for discussing NFTs, and we’ll see how it goes. My pitch deck is constantly evolving, so I reserve the right to change my mind at any time. Slide 21: Web3 with a twist We’re pitching a range of investors, not all of whom are comfortable with Web3. You’ve already heard me wrestling with the messaging around the NFTs. This slide goes down the rabbit hole a bit for anyone comfortable with Web3, so I’ve left it in the Appendix for now. We have some standard Web3 features, like NFTs and a DAO. We’re also doing certain things differently, like earned NFTs, infinite NFTs, and not launching our own cryptocurrency at first. You can read my deep dive on STEPN (“Is STEPN Actually Web3?”) where I explain how they launched several of their own cryptocurrencies to use as rewards points—but it appears to have put them in direct competition with their users. Slide 22: Our sustainable economy is our advantage This was originally one of the first slides in this pitch deck, but… I’ve been told by my cofounder to move this to the appendix. I’ve been told by someone else to not badmouth STEPN and Axie. And yet I find myself jumping to this slide in many of my live pitches because it comes up in the conversation—and this insight is key to our strategy. I’ll probably take this slide out of the pitch deck that I email to investors, but I like having it in for live pitches. Update: My co-founder just told me to take this slide out of the Appendix in the emailed version because he thinks it doesn't have enough context. So I'll only use it in my live pitches from now on. This is one of the main reasons I started rShare: I see an opportunity to build a better mousetrap. Our sustainable economy is our advantage. Which slides aren’t in this deck (yet)? Competition Slide I’m only half-joking when I say that I can’t figure out who we’re competing with to solve traffic. There are government and business programs to promote carpooling and public transportation, but they’re going to become our customers. We can operate as a rewards-as-a-service layer that sits on top of existing programs to make them even more appealing. I’ll figure out what to put on this slide if investors want it, but so far no one has asked. Buzz Slide Social proof is powerful, and investors want to fund buzzy startups. Our startup has zero buzz so far, since we’re in the idea stage, so I’ve left this slide out for now. I always recommend that startups get customer testimonials, or even prospective customer testimonials. These work well with investors—plus they force valuable conversations with potential customers. Getting some buzz is on my short list of things to accomplish. Once we have buzz, I’ll immediately add a buzz slide. Financials Slide Are you surprised that I haven’t made our financial projections yet? I mean, I make startup financial projections for a living. Next steps I’m emailing this deck and doing pitches every day, so this pitch deck probably will have already evolved by the time you read this! Again, if you want to see the presentation: You can flip through my pitch deck (without animations) Watch me present my pitch deck (with animations) Have questions? Want to learn more? Want help with your pitch deck or financial projections? You can connect with me at RocketProForma.com ### Mike Lingle is the founder of Rocket Pro Forma (financial projections for Web2 and Web3 startups), CFO at Security Token Group (digital asset securities on the blockchain), and an entrepreneur-in-residence at Founder Institute. He co-founded SlideRocket, an online slide presentation app that was acquired by VMWare in 2011.

Philosophical question: Is STEPN actually #Web3 if they made $122M in profit while user rewards went to zero? Here's what STEPN says on their website: "All assets in the STEPN app are owned by individual users and [the] majority of [the] earnings in app are made by users." But is that what actually happens? Let's take a look... What is STEPN? How successful is STEPN? Is STEPN easy to use? Does STEPN put customers first? Is STEPN actually Web3? What about those tokens? The good, the bad, and the ugly The three pillars of a sustainable economy Short story: I use STEPN all the time and I think they do an amazing job nudging me to walk every day. However, I think they have two massive problems. First, STEPN's proprietary tokens (GST and GMT) put them in direct competition with their customers—which is the opposite of the Web3 ethos. Second, they've failed to build a sustainable economy, in the same way that all P2E games have failed at this so far (I'm looking at you, Axie Infinity). The three pillars of a sustainable economy are 1) New money always coming in from outside, 2) Contributors create real value through their work, and 3) Contributors participate meaningfully in the monetization. In this article I lay out a framework for building a sustainable economy. Hint: it's not about forcing users to spend all of their rewards points inside the app. A healthy Web3 ecosystem should be able to share revenue with its contributors. Even YouTube—arguably Web2—shares more than 50% of revenue with creators. STEPN's proprietary tokens (GST and GMT) put them in direct competition with their customers—which is the opposite of the Web3 ethos. And if you're launching your own NFT project, check out my NFT budgeting tool for your calculating income from your mint, revenue from secondary trading, how rarities affect income, staffing, expenses, and tokenomics. 1. First of all, what is STEPN? STEPN is an app where users equipped with NFT sneakers walk, jog, or run outdoors to earn rewards in the form of two (!) different proprietary cryptocurrencies. These tokens can then be used to level up and mint new sneakers—and may also be converted to crypto or cash. You can read the STEPN litepaper for more info (go ahead...I'll wait). Or maybe you want to watch their promo video instead? The key thing is that to get started with STEPN you have to purchase a sneaker NFT. When the app first launched the most affordable sneakers were $1,000+ (!) Since then the prices have dropped to about $50 for an entry-level sneaker NFT. The NFT sneakers are completely virtual, so they only exist in the app. Welcome to the future ;) 2. How successful is STEPN? STEPN launched their beta in December of 2021. Seven months later they announced $122 million USD in *profit* for Q2. Along the way in March 2022 (four months after launch) their NFT marketplace reached an all-time high of 264,000 sneakers in *daily* transactions. STEPN launched two tokens: the GST utility token for earned rewards and the GMT governance token (which can also be earned once you level-up your sneaker NFT to 30). In July 2022 they launched their own in-app DEX (decentralized token exchange) because their two tokens represented 75% of the volume on Orca (one of Solana's largest DEXes). Messari reports that STEPN accounted for 20% of Solana’s total users at its peak in May. From a personal standpoint, STEPN has been successful in getting me to walk for 30 minutes every day. I definitely enjoyed it more when I was earning $40 per walk (!) instead of $2 per walk—but I've embraced the behavior change even after the crash in STEPN's token and NFT prices (we'll talk about that in a minute). 3. How easy is STEPN to use? STEPN is incredibly *difficult* to set up! Remember that you can't use the app until you purchase an NFT, which requires you to transfer in crypto from your MetaMask or Solana wallet. Here's the workflow: Download the STEPN app and create an account. Go to the STEPN's in-app marketplace, choose a blockchain (Ethereum, Solana, or Binance) and pick a sneaker you want to buy—even though you have no idea which attributes are important and the prices range from $50 to $20,000. Make a note of the cost of the sneaker NFT you choose. Connect your existing crypto wallet to the app and transfer in enough tokens to purchase the sneaker + extra to pay for gas for all of the in-app transactions you'll need to do in the future. Wait a really long time for your transfer to go through, even on a fast blockchain like Solana. This is *scary* if you've chosen an expensive sneaker and you don't know where your money is or when it will show up inside the app. STEPN requires two separate in-app wallets—so now you have to transfer your crypto to the other (in-game) wallet. Again wait a really long time for your transfer to go through. Again, it's scary when your money just disappears for a while. Also, you have to pay a gas fee to transfer the funds between the two wallets inside the app. Go back to STEPN's in-app marketplace, see if the sneaker you want is still available (remember they were selling 264,000 NFTs per day at one point, so chances were good your sneaker would have sold already), and purchase it. Exit the marketplace and go to STEPN's main screen to start your first walk. See that you need to wait 24 hours for your energy to refresh before you can take your first walk. Close the app and wait. Maybe you'll remember to open it 24 hours later? Wow that was exhausting! STEPN is incredibly difficult to set up. It's only for crypto and NFT experts. I asked one of my super-nerdy-gamer-crypto-developer friends to check it out and he came back and said he couldn't figure out how to get started. There's no way average people—like my wife, or my parents—could figure it out. Getting started in STEPN is only for people who have been knee-deep in crypto + NFTs for a while. Once you're in the game, however, it's easy. You just press the Start button once per day and either walk or run, depending on your shoe (you did pick the right type of shoe for your movement speed, right?) 4. Does STEPN put customers first? STEPN has the single worst tech support I've encountered in 2022. Especially when you consider that many of their customers have spent hundreds of dollars buying sneaker NFTs. My experience was that after a few months my NFTs started disappearing every time I opened the app. I submitted a bug report on June 7 through the app but received no response. My only other option was to post the bug on the "newbie" channel in Discord. This was kind of a free-for-all at the time, although it's slowed down considerably since the crash (more on that below). I did receive responses from the chat moderator, but they were unwilling to do any kind of deep dive on my problem. I ended up getting better advice from other users on the chat. Two weeks later on June 21, I finally received an email reply that said "Let me help out...we will be CLOSING all currently open support tickets...we encourage everyone who are still currently experiencing issues to please resubmit their concerns using the new process." That's not helping out. I'm writing this 3 months later and STEPN still hasn't fixed my issue. Most times when I launch the app my NFTs are missing and I have to quit and re-launch a few times while turning my iPhone's WiFi on and off to get my NFTs to show up. This is only the tip of the iceberg about how STEPN treats its customers. Remember the part about the "majority of earnings in app are made by users?" 5. Is STEPN actually Web3? My understanding of Web3 is that users participate meaningfully in the monetization: We're all owners! Finally! Well...not so fast. Here's how STEPN's two tokens have performed since launch (I've lined up the months in the two charts, since GMT launched a few months after GST): Notice how they earned $122M in profit at the same time the value of their tokens was crashing? STEPN took all of the value for themselves! My experience as a loyal STEPN user was that: The rewards I earn each day crashed from $40 to $2 The value of the NFTs I had bought dropped by 95% Messari reports that daily active users have dropped by 80% and new users have decreased from 20% to 5% of STEPN’s total user base. Ouch. Honestly STEPN feels like Facebook all over again—where they're monetizing me—except that in STEPN's version of Web3 they ask their users to pay hundreds of dollars to buy in first. Double ouch. Honestly STEPN feels like Facebook all over again—where they're monetizing me—except that in STEPN's version of Web3 they ask their users to pay hundreds of dollars to buy in first. The STEPN users who made money are the ones who either a) got in early before the in-game economy collapsed, or b) made money selling high-value NFTs. It's hard to tell how much the volume of NFT sales was, but if we assume that at least 70% of the $122M is from 7% royalties on NFT sales...that gives us $1.22B (billion with a "B") in NFT sales in Q2. Some users made money—although many, including myself, lost money on their NFTs. We're back to the ponzi construct. 6. What about those tokens? I've been thinking about this a lot: Does it make sense for an app to launch its own cryptocurrency (or two)? The dream is that this provides "free" money to pay out rewards to users. Because rewards are expensive! They reduce your gross margin, and they sit on your startup's balance sheet as a debt obligation until your customers either use them or they expire (which is why rewards often expire). Another benefit is that you can give investors tokens instead of equity (The Block reports that STEPN raised $5M using a SAFT: Simple Agreement for Future Tokens). This is great for your cap table since you're exchanging actual investor dollars for crypto tokens you minted out of thin air. However, there are a few major problems with apps launching their own tokens: Pretty much all tokens crash Proprietary tokens force users to become currency traders A proprietary token puts an app in direct competition with its users! The first problem is that pretty much all proprietary tokens crash. This punishes your users—plus it hurts the reputation of your project. Everyone starts calling your app a ponzi scheme...because it usually is. Let's agree that a ponzi is a system that always requires more money to come in to keep it afloat. This is definitely one part of a healthy ecosystem, but it will always fail eventually if that's as far as it goes. Hal Press, the founder of crypto hedge fund North Rock Digital, says: Crypto broadly is net-income negative and needs to fund this negative net income via token sales which creates net structural outflows. Crypto needs active buyers every day to keep prices from going down. Press goes on to point out that, "The S&P, on the other hand, is net income positive, meaning its expenses are lower than its revenue. As a result, the S&P has buybacks every single day and has structural inflows every single day. I have some thoughts on how to build a sustainable economy that I'll share in a minute. Axie Infinity is another famous blockchain game that launched their own token. Does this chart look familiar? The second problem is that proprietary tokens force users to become currency traders. I'm constantly trying to predict when both GST and GMT will crash or pump. The value of my rewards changes constantly, so there's no ability to bank my gains. It's exhausting and frustrating. It's a very different experience that airline miles, which basically hold their value over time. Proprietary tokens force users to become currency traders, which is exhausting and often expensive. It turns out that I'm not a great currency trader. I've lost a bunch of value trying to preserve the value of my STEPN rewards. And in my opinion the biggest problem is that a proprietary token appears to put the app in direct competition with its users—which again is the opposite of my understanding of Web3. STEPN's main focus has become to keep as many tokens inside the game as possible, so they've implemented all kinds of extra costs. They simply don't want users to cash out their rewards for fiat. For example, you've always had to pay to repair your shoes after each walk. They recently rolled out an additional pay-to-repair requirement called HP. So now you have to repair your shoe NFTs twice. And fundamentally, the app punishes users for not walking every 24 hours. If your energy recharges fully and you're late walking, then you permanently miss out on those potential rewards. They've added a seemingly useless subscription for $19.99 per month. Do these 3 items seem valuable to you? My favorite is the chance to permanently improve your chance of upgrading gems. Level 1 gems, for example, have a 65% chance of self-destructing when you try to upgrade them. STEPN wants me to pay $1352 to turn my 65% chance of losing my gem during an upgrade into a 64% chance? At the time of this writing, 2000 GMT tokens are worth $1352 USD. So let's review: STEPN wants me to pay $1352 to turn my 65% chance of losing my gem during an upgrade into a 64% chance? 7. The good, the bad, and the ugly I'm an avid STEPN user, and I've walked pretty much every day since I first installed the app last April. I've covered over 200km in 162 walks. And I've used pretty much every feature: I've bought and minted NFTs, leveled up multiple sneakers, earned and opened a ton of mystery chests, upgraded gems, supercharged abilities, and more. What I love about STEPN: They successfully got me to permanently change my behavior. I now carve out 30 minutes each day to walk. The gamification is world-class. I love earning points and using them inside the app to improve my NFTs. They've made infinite NFTs work—vs. typical projects that limit the number of NFTs to 10,000. Some people argue this is deflationary, but I think you need infinite NFTs if you truly want to onboard all of the world's walkers. What I dislike about STEPN: Their customer service is inexcusably bad, especially for a company that's earned so much money. Their tokens are a mess. Maybe they could have managed a single token, but it's too expensive and complicated for them to properly support more than one. They seem to be more focused on extracting value from their users (extra fees, expensive and useless subscription, crashing token and NFT prices) than they are on treating their customers like true Web3 collaborators. And most importantly, STEPN has failed to build a sustainable economy. The fatal flaw is that it's completely reliant on new money always coming in from the outside—ponzi—which stopped happening after the crash. 8. The three pillars of a sustainable economy: A functioning economy is a flywheel with more than just new people buying in: New money always coming in from outside (this is what STEPN and Axie Infinity focused on, but they never solved #2 and #3 below) Contributors create real value through their work (STEPN fails here because no one but me cares if I walk or not today, and my walking data isn't valuable) Contributors participate meaningfully in the monetization (STEPN earned $122M in profit while user rewards and NFT values crashed 95%) The three pillars of a sustainable economy are 1) New money always coming in from outside, 2) Contributors create real value through their work, and 3) Contributors participate meaningfully in the monetization. What's a successful example of this, other than the US economy? Ethereum has created a sustainable economy. They pioneered programmable money, and builders create massive value: NFTs, DeFi, digitizing bonds, and more—not to mention the billions of dollars in fees the miners have received each year in base fees and priority fees (tbd how much of that will be delivered to proof-of-stakers now that The Merge is complete). Here's the Ethereum Q3 2022 income statement courtesy of Messari: Ethereum is a sustainable economy because: It always has new money coming in from the outside Ethereum contributors create real value through their work (yes, someone always thinks those monkey pictures are valuable even if you don't), and Contributors participate meaningfully in the monetization of their contributions Is it possible for a Web3 game to accomplish these three things? I think the answer is yes, and I'll be writing more about that soon. Are you launching your own NFT project? You need a budgeting tool to help you calculated expenses, staffing, tokenomics, and income from minting and secondary trading. Check out my NFT financial projections tool. ### Mike Lingle is the founder of Rocket Pro Forma (financial projections for startups), acting CFO at Security Token Group (digital asset securities on the blockchain), and an entrepreneur-in-residence at Founder Institute. He co-founded SlideRocket, an online slide presentation app that was acquired by VMWare in 2011.

I did a webinar walking through the basics of startup financial projections, the three financial statements, cash vs. accrual (they work well together), we love COGS, and fun with business models. Here are the links I sent out after: Video recording of the webinar Pitch deck slide templates for pro forma financials Milestones slide template (I like using this as the last slide of a pitch deck in order to frame the conversation with investors) I've also released my Rocket Pro Forma financial model spreadsheet. My goal is for you to be able to draft your financial model in an hour. Yes, really! Hit me up on LinkedIn or check out Rocket Pro Forma (and I've included a bunch of other resources for startups on the site as well). Here's the video, and I've included the Q&A below: What's the best way to present financial projections to investors? Please grab my full spreadsheet template here (or just my financial projections slide layouts if you already have a spreadsheet). Then I would either send your financials pitch deck slide to investors in advance, or give them a few minutes of silence to digest if you’re presenting live. People aren’t good at taking in a bunch of information while listening to you talk, so give them some space before continuing the conversation. I also love ending pitch decks with a milestones slide that shows how much you’re raising, how long it will last you, what you’ve already accomplished without this investor’s money, and a few key milestones you’ll reach once you have the funding. I like to leave the milestones slide up during discussions with investors because it frames the conversation you want to have (rather than ending on a Thank You slide, which I feel is a wasted opportunity). When is it the right time to raise capital? There's no right answer. In fact, some businesses succeed without ever raising money. The most common approaches I see are: Bootstrap to get the first customers with a minimum viable product, and then raise a bit of money ($250k to $1 million) Raise a smaller bit of money ($25k to $250k) and use that to get the first customers with a minimum viable product. Raise more money ($1+ million) to start the company. This is usually easiest for second-time entrepreneurs and rock star teams. Again, there’s no right answer. Please feel free to chart your own course. Depending on the business, is the cash method better than the accrual method when it comes to accounting? (For example, businesses in the food industry or hotel industry) You'll end up using both the cash and accrual methods together. These are simply two tools, and you'll use both of them (rather than choosing between them). Also, remember that accountants use three main financial statements for every business: Income Statement (usually on the accrual basis) Cash Flow Statement (on the cash basis) Balance Sheet (on the accrual basis) These three financial statements work together to give an accurate picture of each business. Here's a quick walkthrough of cash and accrual accounting. Does my pro forma need to show historical financials? If your business has historical financials, I would only share them with people who are actually interested in investing (i.e.- I would save them for a second, third, or fourth conversation—rather than emailing your historical financials to strangers and bringing them to a first meeting). I would put your historical financials on a separate slide, rather than trying to combine them with your forward-looking financial projections. How far in the future should my pro forma go? I recommend projecting three years of financials. Why three years? The world is moving so quickly that it’s hard to plan even three years ahead. I used to do five-year projections, but switched a decade ago and haven’t looked back. That being said, there are a few business models where 5-year projections make sense. These are typically cash-intensive areas like IoT, medical devices, and products requiring lengthy regulatory approval. In these cases it may take five years to make back the upfront investment. Which KPIs should I highlight? For your financial projections, I would highlight the one or two key metrics that drive your revenue. These typically include number of sales, number of subscribers, and monthly or annual recurring revenue. Once you're actually running the business you'll find more KPIs. How much detail should I show investors? Please see my financials pitch deck slide layout for a walkthrough of specific recommendations on how much detail to show to potential investors up front. I recommend one slide that contains: Between one and three main KPIs that drive revenue Income statement (accrual basis) Headcount—This is usually the biggest expense for any startup Cash flow statement—This is your live-or-die number Once you find investors who are interested, they’ll ask for more information over time. Professional investors will run your startup through a due diligence process after they give you a legally binding term sheet and before they invest. They’ll want to review your financials in detail along with contracts, they’ll ask to speak to your customers and employees, and they’ll request conversations with customers and personal references. I recommend interviewing them too: It’s a good idea for you to speak with other founders they’ve invested in to make sure there’s a good fit. I am interested in learning more regarding the investor's perspective on financial projections. Given the speculative nature of forecasts, what are investors looking for from entrepreneurs before deploying capital? Honestly, most professional investors want to see that you can grow big enough to make them rich. They understand that actual results may vary, but they want to understand your thought process. Their main criteria for investing is usually their confidence in you, so it’s important that you make them feel comfortable about both your vision and your management skills. I also recommend doing some work to reduce the speculation as much as possible. Can you quickly build a minimum viable product and sign up some customers? Can you run some tests on Facebook and Google Ads in order to better understand your customer acquisition costs? Please see the Pitch Deck Analyzer for a deeper dive on what investors are looking for. Where can I find benchmark data for SaaS Companies, including how much they spend on COGS, sales and marketing, etc. Also How they finance their working capital and what interest rates they have. Check out annual reports of publicly traded companies in your industry, which are available for free in the Investor Relations section of their websites. For SaaS you could compare yourself to Salesforce and Zoom. How do you use forward-looking financials, monitor performance of key indicators, then refine the predictions to make them more accurate. i.e. we have found ourselves (especially on the revenue side) predicting some sales ramp, not achieving it, then re-predicting a new growth projection. I figure this is normal, but how do we "teach" the model so that we can have more confidence in the new projections than the old? You’re not alone! The hard truth for many startups is that expenses are real—but revenue is imaginary. This is really a question about building a predictable sales pipeline. I suspect that you need to do some more work around customer validation, marketing, and pricing. I recommend spending a lot more time talking to potential customers and truly learning to understand their needs. I also suggest reading Predictable Revenue and checking out this free World Domination eBook from Sales Hacker. Finally, early financial projections are guesses—and that's okay! You're allowed to make numbers up at first. You'll get better at predicting as you a) turn on those parts of your business and 2) practice. It's okay to feel like you're pulling numbers out of thin air at first—have fun with it! From the investor side; what are some good questions to ask founders/CFOs to understand if they have good financial model practices (as above) and gain confidence in their model and process. First, I think you want to see that the founders have thought through the finances for themselves. They should be able to explain their assumptions to you. They should be able to adjust their model as the business evolves. I don’t think you necessarily get there in your first conversation, so keep diving deeper every time you speak with the entrepreneurs you’re interested in working with. How do you think startups should adjust their projections during the pandemic? I would reduce spending now in order to conserve cash, at least until there’s a clearer timeline of what comes next. I think this may go on for a while. Even once we’re out of our homes, it may be a long time before everyone’s comfortable taking their family to a restaurant, a movie, an airport, an amusement park, or even the grocery store. Do you have any templates you might suggest? Please grab my Rocket Pro Forma financial projections spreadsheet plus other resources at RocketProForma.com. ### 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 startup financial projections.

My goal is to help entrepreneurs launch and scale their companies rapidly. This often requires raising money to accelerate growth. But the fundraising process can be confusing, and it’s hard to get a straight answer—or even an actual “no”—from investors. Your pitch deck is key, as are your financial projections. There are lots of pitch deck templates online, but nothing that tells you how to improve your specific slides. What founders need is a pitch deck analyzer. So I created one and you can grab it here for free. You can use this Pitch Deck Analyzer to quickly identify where your strengths are, so you can: Highlight your startup’s best attributes in your pitch. Fill in any missing info that you already have. Identify opportunities to improve your business over the next few months. As entrepreneurs we want to find the path to success while avoiding as many of the pitfalls as possible. One of the founders I worked with said it best: “Starting my own business is like being lost in the ocean in the middle of the night. I have no idea which way to swim to get to shore.” Our startup Pitch Decks are reflections of where we are in our journey. This article lays out the roadmap we're looking for. What Investors Want Professional investors may look at over one thousand startups per year—and invest in only three. That's more difficult than getting into Harvard! How do you make sure you stand out? The secret is to spend less time talking about the problem and your solution, even though that's pretty much all we want to talk about as entrepreneurs! The secret is to show investors what they're looking for. Here's a quick pie chart of what investors care about. Please notice how small the "Business Plan" slice is. Here's what investors want you to talk about: Investors love momentum. How much are you hustling to move things forward *without* their money? This is the easiest way to stand out. There's always something cool you can do using the resources you have. In fact, running a business is a continuous cycle of doing what you can to Investors love great teams. Who are you and why will you succeed? Don't worry if you don't have a resume yet—simply do what the founders of Buffer did and show how much you've already accomplished for your startup. Investors love traction. Have you already built something? Do you already have people using it? Are you already making money? Yes you can sell the dream—but it often helps when you can prove you're turning the dream into reality. One founder I know built a beta version of a referral platform, went door-to-door to sign up users, and drove the first $20k of referrals himself. That's a founder that investors want to back! (plus this checks the "Team" box too). Investors love customer acquisition. Do you know how you will acquire customers? Do you know how much it will cost? Have you run tests? Have you done any customer validation. This last point deserves some explanation. As founders we think we need to build the thing first and then bring the customers in. Modern startup theory says different: businesses are actually "behavior change machines" so we need to start validating the behavior change before we build anything. Otherwise we are likely to build the wrong thing (ie- we *think* we know what customers want, but then they behave differently than we imagined). Think of how much easier it is to change the blueprints of a house vs. actually trying to modify the house once it's built. My favorite book on how to do this is The Right It by Alberto Savoia, who used to work at Google. It's a short read and provides a simple framework for early customer validation. My favorite quote from the book is, "People's opinions are worth zero points." It's only people's behavior that counts. The Fundraising Process You can expect to have several conversations with someone before they write you a check. People invest in patterns, and your first meeting is simply one dot. Your next few meetings create your pattern—so your job is to actively manage this process. Always show up talking about new things you’ve accomplished without the investor’s money. This creates FOMO while also highlighting your hustle. We recommend always running the “No money plan” while you’re out raising money. We’ve seen successful entrepreneurs sit down ahead of time and create a calendar of good news that they’ll talk about during the raise. Read my article: Investors Love Momentum for my 6 best tips. The Pillars of Startup Success The short story is that founders who pitch well are able to raise money—so how do you create a great pitch? First, let's look at data from CB Insights on why startups fail and map it to six main areas of focus to help startups not only succeed—but grow exponentially. The six pillars of startup success are: Vision — Solves for “Lack Business Model” and “Get Outcompeted” Product — Solves for “No Product / Market Fit” Execution — Solves for “Not the Right Team” Growth — Solves for “Poor Growth Strategy” Investment — Solves for “Run Out of Cash” and “Pricing/Cost Issues” Technology — Solves for “Poor Product” Now we have a roadmap that we can apply to our Pitch Deck. What Investors Say The thing about investors is that they often won’t say “no” if they’re not interested. Instead, they’ll say things like “Please keep us updated on your progress,” and “Let’s re-connect in six months.” Those are actually examples of investors saying no, but it doesn’t feel that way. That’s because investors don’t want to shut a door on something that may eventually turn out to be awesome. So from the investor perspective it’s better to be vague. This makes it hard for us to get detailed feedback about their pitches from investors. My Pitch Deck Analyzer will help. It highlights areas where a company is strong, uncovers things that founders may have accidentally forgotten to include, and tells entrepreneurs where they need to focus on making changes to the actual business. The Pitch Deck Analyzer So now that we know what investors look for—along with what makes startups successful—we can use the Pitch Deck Analyzer to see both strengths and areas for improvement. Once we know our strengths, we can re-organize our pitch decks to focus on them while minimizing the opportunities for improvement. Here are the results when we ran a test on Front’s pitch deck for their Series A raise: The goal is to give the entrepreneur a map of what their pitch deck is telling investors, not to be confused with the actual strengths and weaknesses of the company. In fact, our summary often reminds entrepreneurs that they simply forgot to include great information that they already have. The goal isn’t to get 100% in each category, but rather to understand where the strengths and opportunities for improvement are. So the results are typically: See which strengths to focus on Uncover existing information that should be included Determine where to focus on improving the business over time Uncover exactly the feedback that investors aren't giving us A More Detailed Pitch Deck Roadmap Here are the attributes included in the Pitch Deck Analyzer, along with a brief description of each: Vision Story — Does this company have a compelling massive transformative purpose that will attract the best talent, customers, and investors? Problem — Is this company tackling a proven problem, meaning competitors with real revenue already exist and/or the founders have done extensive customer validation? Counterintuitively, companies that tackle proven problems tend to be the most successful. Competition — Does the investor get a clear understanding of this company’s position vs. its competitors? The answer is often no, which is a red flag. The most promising startups have competitors and can clearly articulate how they differ. Product Solution — Is this solution at least 10x better than existing solutions? Ben Horowitz famously states that your solution has to be so much better that people are willing to go through the pain of changing their behavior (remember that we're building "behavior change machines" here). It’s tough to win with only a marginal improvement unless you’re already an established player. The point of an MVP (minimum viable product) is to deliver one thing that customers value so much that they’re willing to put up with a crappy experience, which you can improve over time. Business Model — Does this company have a proven method to make money at scale? We see a lot of pitch decks where the idea is to build a big audience and figure the revenue out later, but this usually doesn’t work. Even Facebook knew how they were going to make money, and it’s still incredibly expensive to build a free audience large enough to generate meaningful advertising revenue. Execution Team —Is this a rock star team with founder / market fit, diverse skills, and preferably at least one person with a previous exit. This is often the #1 thing investors look at, especially in early-stage companies. Vinod Khosla recommends using equity to attract and retain “magnets.” Advisors — Does this company have world-class advisors with relevant experience? Reach out to leaders in your field until you find some who will help you. This has the benefit of forcing you to practice your pitch and keep improving your value proposition along the way. Advantage — Is this company creating strong barriers to entry in terms of unique selling proposition, unfair advantage, IP, etc? Or can it be easily copied and outcompeted? Nir Eyal points out, “There are only five ways to defend your market from competitors: economies of scale, network effects, regulatory protection, brand, and habit." (did I mention behavior change machines?) Growth Market Size — Is the potential market large and growing? Is it clear who the early adopters will be? Smart investors look for rising tides that will lift all boats—which reduces the execution risk of any specific investment. The message is that anyone will be able to make money....but we're not just anyone...which brings us to: Customer Acquisition — Does this company know how to acquire customers at scale? Smart entrepreneurs have already done marketing tests and figured out channels that do and don’t work, along with CAC (cost to acquire each customer), churn (what percentage of customers leave each month), and LTV (average lifetime value of each customer). Think about Uber going after the entire taxi / black car market by first targeting young techies in San Francisco and New York City. I would avoid saying vague things like, "We'll run ads once you give us the money." It's best to run an inexpensive experiment or two to find some evidence to put into your pitch deck. Traction —Has this company found product / market fit, with evidence in the form of strong KPI growth (engagement, revenue, etc.)? Marc Andreessen famously states that a startup’s only job is to find product / market fit, and that you’ll know it once it happens because it feels completely different. Successful businesses create a working business model—not simply a great product—and traction is the proof that you’re succeeding. Exponentiality — Does this company have a solid MTP (massive transformative purpose), the potential for engaged community, access to shared resources, and/or is it creating and utilizing big data? I'm a big fan of exponentiality because it allows smaller teams to have an out-sized effect on the world. I recommend reading the Exponential Organizations book by Salim Ismail. Buzz —Are there lots of happy customers and/or articles in the press? Customer testimonials are your friend here. The most effective form of marketing is word-of-mouth, and investors often want to talk to actual customers as part of the due diligence process. Technology This section is optional if your startup isn't a tech company. Development Team — Is there a strong development team, preferably with at least the head of product in-house? A tech startup’s access to great product managers and developers, along with its process for running sprints, determines its success over time. Existing Tech — Has the company already released awesome technology that peopler are using? Assessing this area usually requires due diligence rather than simply looking at a slide in a pitch deck. Performance at Scale — This product is designed to handle large amounts of data and customers. Remember Twitter's "Whale Fail" message when the platform used to crash all the time? In a perfect world, the tech team has already deployed this product and tested with a big number of users. Investment Current Investors — Are world-class investors with relevant experience already involved? In their pitch deck, a startup called Front lists Stewart Butterfield, the CEO of Slack, as an investor in the current round. Investors love social proof! Think of how getting into Y Combinator or Techstars can set a startup up for future success. Financial Projections — Is there a clear, achievable path for the planned use of funds to generate at least 3x the valuation for the next round? It’s harder to find investors when you’re saying, “Give us the money and we’ll figure it out.” It’s easier to raise money when you’ve already built the rocket ship and you’re just asking for fuel. Investors don't expect you to be able to predict the future, but they do want to see that you've put some thought into your financials—and that you understand and can adjust the assumptions (which is why having someone else build a fancy spreadsheet for you usually doesn't work). This is, of course, my favorite subject. Read my deep dive on The Best Financial Projections Slide for Startup Pitch Decks. And purchase my startup financial projections template at RocketProForma.com if you're looking to quickly create startup financial projections that you can update yourself. Growth Potential — Does this company have the potential for an IPO or other large exit by being acquired? Professional investors are looking for big wins, because they know that most of their portfolio will turn out to be losers. Friends and family, on the other hand, may be more willing to invest in you personally regardless of how big the opportunity is. Burn Rate & Runway — How much money does the company burn through each month (total revenue minus total expenses), and how many months before they run out of cash? Investors want to know that their money is being spent wisely on things that will maximize success. The Ask — Is the company making an appealing offer, with attractive terms and valuation? Startup investing is a market like any other, which means investors are usually looking for reasonably-priced deals. In the same way that you can’t completely make up a price when selling your home, you’ll want to be in the same neighborhood as other comparable startups in your area. Ask your lawyer to provide some insight, since she sees deals all the time. Check out my template for the best Ask Slide for Startup Pitch Decks. Is It Cool? And Is It Proven? We use a scoring scale of zero (least) to three (most) for each attribute. This intentionally doesn’t allow a neutral score — because zero and one skew toward “least” while two and three skew toward “most.” We then score each attribute on a combination of “Is it cool?” and “Is it proven?” Is it cool? How awesome is what we're talking about, especially compared to the 999 other pitch decks each investor will look at this year? Does it get your heart beating faster just hearing the plan? Is it proven? Do we have data proving our claims are real? This is where the rubber meets the road. Your business plan is actually a set of hypotheses—and your job is to validate them or pivot when needed. You can definitely raise money on a big vision—but fundraising often gets easier as you start turning the dream into a reality. The best pitch decks combine both. Here’s the drill-down for Front’s pitch deck: Again, the goal isn’t to get 100% in each category. In fact, Front used this pitch deck to successfully raise their $10 million Series A round without mentioning a single world-class advisor. But they were strong in most of the categories, and had data to back up their claims. Strengthening Your Pitch Deck The Pitch Deck Analyzer gives you a quick snapshot of areas where you’re strong, as well as areas that could use improvement. I build Pitch Decks all the time, and I arrange the strengths as "tent poles" to support the less awesome parts of the story. Sometimes “improving a pitch deck” means re-working a slide or two. You simply forgot to tell part of your story, or to mention some data you already have. That’s easily fixed in a few minutes. People connect with stories, so you definitely want to spend some time giving your Pitch Deck a story arc that gets your audience excited about what you’re doing. You win when you make them feel emotions, especially passion. Other times “improving a pitch deck” means actually working on parts of the business. You have homework to do. It may take weeks or months to design effective experiments and collect the data you need. You may need to find and work out an equity deal with a co-founder. You may need to acquire your first paying customer and build a pipeline of ten more qualified leads. You may need to run several two-week marketing sprints to figure out which are your most effective customer acquisition channels. You may need to figure out your own CAC (cost to acquire each customer). Show Don’t Tell The main thing is “show don’t tell” wherever possible. Lots of entrepreneurs say they’re going to change the world (just as soon as they get the money). Very few entrepreneurs show they’re already successfully changing the world. Investors love this second group precisely because they’re so rare. Remember that angels and VCs may look at a thousand pitches each year and invest in three. Losing Weight One thing we didn’t include in this model is weighting the different categories according to their importance. For example, most investors consider the team to be more important than the solution and the business model. A good team can pivot and still succeed even when things don't go as planned. Vinod Khosla says that he will almost certainly invest in a startup if he’s impressed enough by two of the founders that he can picture himself investing in their next companies, regardless of what the current business is. “People invest in teams, not ideas” Let's recap how most investors make their decisions: If you think of it from the investor’s perspective: Investors want to bet on people who are likely to win even if the business model changes. Investors want proof that this plan is going to work (vs. the 999 other pitch deck’s they’ll look at this year). Investors want proof that you know how to acquire customers—and that there's a large universe of potential users out there. Investors want to see that other investors they respect have already done the due diligence and put money in. That being said, you still have to get the Pitch Deck right in order to generate traction, retain a rock star team, and attract the right investors. Your three best friends when raising money are scarcity, social proof, and momentum—which can best be summarized as FOMO: Scarcity—This investment is a great opportunity and the window is closing quickly. Finding a lead investor and setting a time limit on your current round both accomplish this: “We’re raising $500k in the next 30 days and we already have $300k committed.” Social Proof—Your rock star team, your world-class advisors, and the investors already on board combine to make people feel comfortable giving you money. Front’s Series A pitch deck lists Stewart Butterfield from Slack in their current round. Doesn’t that make you want to invest? Momentum—What are you accomplishing right now, without raising the money? You’ll have multiple conversations with investors before they put money in, so make sure that you always have something new to report. Always be running the "no money plan,” meaning that you keep hustling no matter what. It’s much easier to raise money when you don’t actually need it. And all of that momentum creates FOMO and helps you land investors. Next Steps The founders I work with find the Pitch Deck Analyzer helpful because it provides guidance: “Really appreciate the feedback, this is very detailed and specific, it’s like a pitch deck ‘health check’.” You can grab the Pitch Deck Roadmap here. (You'll be prompted to make a copy that you can edit) Want a deeper dive on specific Pitch Deck slides? Read these two articles: The Startup Pitch Deck Playbook Pitch Deck Playbook, Part 2 And please let me know how it goes. I want to hear your feedback so that I can make this even better. ### 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.

It’s an amazing feeling to see $2 million show up in your company’s bank account! Founders who are raising money always ask me how much their startup is worth. They want to know what to tell investors. The hard way to value your startup is to use spreadsheet formulas like "net present value" and "discounted cash flow." You can also look at comparable deals in your space—but those can be hard to find since they're private (unless you can borrow someone's PitchBook account). The easy way to figure out "How much is my startup worth?" is to take the two pieces of info you know: How much money you're raising About what % of the company that should represent (post money) From there you can spend 30 seconds to calculate the valuation of a startup. Here's the playbook we used to value our startup when we raised our series A round for SlideRocket: Find your valuation from cash raised and ownership % (It's quick and easy) Quickly negotiate your best deal Keep your eye on the exit Figure out how much money to raise And check out Rocket Pro Forma if you're raising money and want to quickly create investor-ready financial projections (plus I’ve posted a ton of free resources for startups there). 1. Find Your Valuation from Cash Raised and Ownership % (It's Quick and Easy) When people talk about “valuation” they usually mean pre-money valuation—so how do you know what that is? If you were an established company you could use discounted cash flow, but that’s hard with pre-revenue startups without predictable cash flow. The basic fundraising equation is: Cash Invested + Pre-Money Valuation = Post-Money Valuation So $2 million of cash invested into a company with a pre-money valuation of $4 million = $6 million post-money valuation. The investors would own $2 million of that $6 million company, which is 2/6 or 1/3 or 33.33%. When talking to potential investors, remember to always talk about what % they own in terms of the post money valuation. What do I mean by this? Let's try a quick math quiz (it'll be fun, I promise). If I'm raising $200k and my startup is worth $1 million pre-money, what % will my investors own? ...take a minute to think about it... ...it's a trick question... ...the answer is not 20%... When your investors put $200k into a company with a $1 million pre-money valuation, it creates a post-money valuation of $1.2 million (simply the $1 million pre-money + the $200k in cash). The investors own $200k of that $1.2 million post-money value, which is 2/12 = 1/6 = 16.67%. Reminder: When talking to potential investors, remember to always talk about what % they own in terms of the post money valuation. Quickly Calculate Startup Value We knew we wanted to raise $2 million for our Series A, but we hadn't though much about what our startup valuation should be. We pitched about 40 potential investors, and finally found 3 who were interested. One of our investors said they wanted to own about 1/3 of the company after the transaction. That allowed them to solve for the pre-money valuation by dividing cash invested by ownership %. Cash Invested ÷ Ownership % = Post-Money Valuation In our case, $2M Cash Invested ÷ 1/3 Ownership = $6M Post-Money Valuation. Now simply subtract the $2M Cash Invested from the $6M Post-Money Valuation to arrive at a $4M Pre-Money Valuation. Post-Money Valuation - Cash Invested = Pre-Money Valuation In our case: $6M post-money valuation - $2M cash invested = $4m pre-money valuation Our VCs sent us a term sheet with an offer of “2 on 4” — meaning a $2 million cash investment on a $4 million pre-money valuation. This would create a company worth $6 million after the transaction (post-money). 2. Quickly Negotiate Your Best Deal You’ll get the best deal when you have multiple offers on the table at the same time. Remember when I said we pitched 40 investors and then got 3 offers? That gave us two VC term sheets in hand plus a $1 million offer from the strategic investor. I should point out that we got those 3 offers at the same time not because we suddenly got luck, but because: We became investable—By making 40 pitches we improved our presentation, slides, financial projections, and our company over time. FOMO kicked in—Once we had one term sheet, we were able to use that to get other terms sheets because investors didn't want to miss out. Fear of missing out is what actually makes investors write checks. Having three options put us in a great position to negotiate. After some back and forth we ultimately decided to go with a single VC because we were concerned that the strategic investors might restrict our freedom in an early round by steering us away from working with their competitors. We decided to revisit the strategic investor question in a future round of funding. We were okay with the VCs taking about 1/3 of the company because it gave us cash in the bank plus the social proof of taking money from a firm everyone recognized. One of their partners with operating experience joined our board of directors and was hugely valuable as we grew. We wanted to move quickly so that we could get the cash and go back to working on our startup. Fundraising takes a lot of time and is very distracting! We did a bit of negotiating with of our VCs: we asked for a $5 million pre-money valuation (instead of the $4 million pre-money valuation they had offered us in their term sheet). They thought about this for a day, and then said, "Yes." Awesome! We had just negotiated “2 on 5”—meaning a $2 million cash investment on a $5 million pre-money valuation, which created a $7 million post-money valuation. This gave our VCs 28.57% ownership since they now owned 2/7 of the company (their $2 million cash investment divided by the $7 million post-money valuation). So we saved almost 5% of equity from their 33.33% original offer of "2 on 4." 3. Watch Your Exit Price Also remember to keep an eye on your potential exit price. Your seed and series A investors are looking to get at least 10x their money within 5 to 7 years. That means they’ll want you to sell your company that’s currently worth $7 million post-money for $70 million. And if your company has a $20 million post-money valuation then you’ll need to sell it for closer to $200 million. Crunchbase reported that the average acquisition price for startups since 2007 is $155.5 million, so it gets harder to find buyers the further up in price you go beyond that. There are many more companies who can acquire you for $50 million vs. $500 million, so you may actually be reducing your options by raising more money. Keep in mind that Michael Arrington reportedly made more money selling TechCrunch for $30 million than Arianna Huffington did selling Huffington Post for $315 million—because he had raised less money so he still owned 80% of his company. One other important piece of info is that when you see startups raising $50+ million, the founders and early investors are often putting some of that money in their pockets. This allows them to take some money off the table and rewards them early for their hard work. 4. Figure Out How Much Money to Raise Our simple valuation formula requires us to know how much money to raise. How do we figure that out? Option 1: We built out five years of financial projections and decided to raise $2 million based on projected revenue and headcount. My Rocket Pro Forma financials template helps you quickly enter your assumptions and figure out how much money you need to raise. It also helps you create the mental map to run—and scale—your business. Option 2, because I love quick solutions: Sari Azout—partner at Level Ventures—recommends budgeting $15k per person per month for 18 months to cover salary, office space, equipment, general costs like servers, and a margin of error. So that means our raise of $2 million would give us 7.5 people for 18 months, which is more or less what we did with the money. We had two founders at that point and we hired a VP of marketing, a lead developer, a head of QA, an inside sales rep, and a head of business development. We did, in fact, go through the money in about 18 months. Next Steps: What's My Startup Worth? Now you have enough info to quickly calculate the value of your startup using: How much money you're raising What % of the company either you or your investors want that to represent post-money Please join my free Q&A session if you have questions or want further guidance. Bonus content: Here's the video of the workshop I ran on Valuing Your Startup: ### 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.

Thanks for all of the great response to the last article on cold emailing investors! One big question that keeps coming up is, “How do we connect with investors on LinkedIn?” We’ll focus on cold outreach to people we don’t know. First, it’s important to target the right investors for your startup’s size and industry. Next, here are three different approaches that work when connecting on LinkedIn (and remember that you’ll be limited to 300 characters if you don’t have InMail): Compliment them in your intro Hint at your pitch in your intro Fully pitch them in your intro I also include actual LinkedIn message templates in each section of this article. Here are a few things specific to LinkedIn: Remember that you’ll only have 300 characters if you’re not using InMail on LinkedIn. Investors love brevity, so it’s actually a good thing. Once you’re connected on LinkedIn, you can either send longer messages or grab the person’s email address and email them directly. First, you’ll need to figure out who to target. Check out the “Find the Investor’s Contact Info” section of my previous article Step-by-Step Guide: How to Reach Out to Investors. I recommend using my Reverse Investor List Strategy when you start reaching out, so you’re practicing your pitch on low-value targets. As always, I encourage you to experiment to find what works best for you. And if you can get an intro, that's the best way to connect with a potential investor. LinkedIn is valuable for this because you can see who you know who's connected to the person you're trying to reach. I ask for introductions all the time. Even people I don't really know are willing to help make connections. But sometimes you just have to reach out cold. on LinkedIn. Here’s the walkthrough: 1. Compliment them in your intro In this approach, we’re not going to mention ourselves at all. Instead, we’re going to do our research on them and compliment them on a recent investment or something else that they’re excited about. Scan the person’s Activity feed on LinkedIn to see what they’ve been posting about recently. Make that the focus of your message. Let’s say I want to pitch Lightspeed Ventures. I went to their company page in LI, clicked on People, and saw that I’m a 2nd connection with Mercedes Bent. I went on her Activity Feed and saw that she recently wrote an article on finding advisors for your startup. Now I’m going to Connect with her and add the following (short) message: Hi Mercedes- I loved your article on finding startup advisors! Thanks, Mike Lingle // Rocket Pro Forma I did actually send her this connection request, but she hasn't accepted yet. I'll update this when/if she does. I intentionally didn’t say anything about myself or my startup, but I did make sure to include both my name and my startup’s name. They say that people need to see something seven times before they pay attention... Please note that some LinkedIn users like Mercedes make it a bit harder to connect with them. You’ll have to click the More button to find the Connect button when it’s missing from someone’s profile. Remember that once we’re connected I can either send her a longer message on LinkedIn or grab her email address and email her directly. 2. Hint at your pitch in your intro The idea in this second option is to drop a bit of info about us and what we’re up to, without delivering a full pitch. Again, I’ll probably include a compliment about the person I’m reaching out to. Most of us only have 300 characters to work with in our initial LinkedIn messages, so this takes some thinking. I’m having fun with Lightspeed Ventures, so I’m going to reach out to another partner there: In this case I went on her Activity Feed to find something she’s interested in. Perfect because I’m into crypto too, and I want to talk to her about a specific opportunity in the security token space. Questions are fun because they can generate conversation—or at least get someone to let their guard down and accept a connection request. Here’s my message: Hi Amy- Great insights on Axie w/ Paul V. Are you looking at the security token space? (Infinite Fleet is the current gaming example) Thanks, Mike Lingle // Security Token Market And this worked in real life. She accepted my connection request. Now I can either continue the conversation in LinkedIn or switch us to email. 3. Fully pitch them in your intro In this case we’re going to come right out and say we’re raising money and ask them to take a look. I still start with something about them. People love that plus it creates the context for why I’m reaching out to them specifically. Then I want to hook them on why this opportunity is exciting. Investors mostly care about team, traction, and customer acquisition—so here I’ve covered all three. Notice that I’m not spending any of my limited words on what Rocket Pro Forma does. I know it seems weird, but investors care more about team, traction, and customer acquisition in the initial outreach. I’ll have all the time in the world to explain what we do once she accepts my connection request—plus that info is in the pitch deck. Here’s a template you can use (and remember that you’re limited to 300 characters unless you’re using InMail): Hi - Congrats on investing in ! It made me realize that I’d love to have you join our seed round for Rocket Pro Forma. We have happy customers, real revenue, and I have a previous exit. Can I send you our pitch deck? Thanks, Mike Lingle 4. Now what? Now that you’re connected on LinkedIn, you can use the email templates in my Step-by-Step Guide: How to Reach Out to Investors (Email Templates included). Remember that you can usually grab their email address from your LinkedIn contacts by going to their profile page and clicking the “Contact Info” button: I'm one for two connection requests in this article, which raises the issue that not everyone will accept your connection requests on LinkedIn. This is partially a numbers game. I can also use other methods to contact the people who don't accept. For example, I can connect to people's co-workers and then ask for an intro. And read the Startup Pitch Deck Playbook for examples of how to improve your pitch deck. Good luck—and please let me know how it goes! Please join my free Q&A session if you have questions or want further guidance. ### 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. Photo by Souvik Banerjee on Unsplash

Founders always ask me if they can reach out to investors they don’t know without an introduction. It’s better to have a warm introduction—but cold outreach can work too. Below are the five steps I’ve taken in the past to make my cold messages as successful as possible: Find the investor’s contact info Keep your message short Focus on them Give proof of traction Ask their permission to send them more info I also cover LinkedIn outreach at the end of this article. I encourage you to experiment to find what works best for you. Want to use my approach? Give it a try! Want to send your pitch deck in the initial email? Give it a try! For best results, send a few with each method in order to test which works best. Here’s the walkthrough: 1. Find the investor’s contact info Investors want to be found, for the most part. Especially if you have a valuable opportunity for them. I usually start on LinkedIn, which a) allows me to reach out directly and b) gives me a map of who we know in common—and I can then ask these people for an intro. This strategy does require having a robust network on LinkedIn. My favorite thing is that LinkedIn will usually give you the email address of someone you’re connected to—just click the "Contact Info" button near their headshot once you're linked—and emails tend to get more responses than DMs. You can also reach out on Twitter, Instagram, and any other social network where you see the investor hanging out. Look for places where they’re active, so you have a better chance of them noticing your message. I encourage brevity in all investor communications, and social media usually enforces this with character limits. Not sure who to reach out to? Start by figuring out which type of investor you’re looking for (read my article on Are You Actually Looking for VC Money). You can then search for that specific type of investor who focuses on your stage and industry. I also recommend scanning CrunchBase and AngelList for the early investors of non-competitive companies in your space. Once you know who these people are, you can target them on social media as described above. You can also reach out to other founders who have already raised money and ask for intros to their investors. This allows you to hear first-hand about their experience with those investors. Finally, save your favorite investors for later pitches. If you’re going on Shark Tank, for example, don’t make them your first pitch. Instead, do at least ten other pitches first. That way, you’re practiced, smooth, and convincing by the time you get your dream investors. You can read more in my Reverse Investor List Strategy. 2. Keep your message short Professional investors look at over one thousand pitches each year (think about how many that is!). They want to spend as little time as possible on their first scan of your startup. If they’re interested, you’ll have all the time in the world to give them more details. The #1 mistake I see founders make is writing too much. These long messages are a signal to the investor that you’re going to take up a bunch of their time. Instead, keep your messages short to investors—and you’ll signal that you’re respectful of their time. They always respond much better to short messages. Here’s my actual email exchange with Tim Draper. Hi Tim, You and I spoke a few years back re: SlideRocket. Now I'm starting the funding process for a new SaaS presentation company, . Briefly, is a simple solution for companies to manage sales and marketing presentations across the globe and across devices. Our current customers include NBC, HBO, Western Union, Hearst, DirectTV, and Dior. We are self-funded to date. Can I send you our pitch deck? Thanks, - mike And here’s the reply from Tim: Yes. Please send it. Tim Notice how concise we both are? And we ended up getting the meeting. 3. Focus on them Investors can bring a ton of value. When we raised our Series A for SlideRocket we got $2 million wired to us—it’s an amazing moment when you check your company’s bank account and see all that money. At least as important, and possibly even more valuable, was the VC who joined our board of directors. This was a guy who had taken his own startup public, after which he became an investor and had worked with startups for the past decade. He helped us with strategy; tough decisions (of which there were many); and introductions to clients, teammates, other investors, and potential acquirers. He even helped us find a new CEO when we needed to bring someone in. My #1 caution about crowdfunding is that startups may miss out on adding an experienced investor to help advise them (but we’ll cover that in a different article). Consider blending crowdfunding with a key investor or two. Anyway, investors want to know why you’re choosing them so that they understand how they can bring value. Also, people love to talk about themselves. I recommend including a bit of why you’re choosing this particular investor in your outreach, or at least a congratulations on a recent deal. This sounds like “I saw that you recently invested in and we’re huge fans!” 4. Give proof of traction Remember that investors are receiving hundreds of emails from other startups, but they’ll only invest in a few. How do you stand out? You win by making it easy for them to invest in you. Peter Thiel wrote a $500k check to Facebook because they had so much demand that their servers were crashing. That made it obvious to him that Facebook was going to succeed. How can you demonstrate something similar? It helps if you have customers, revenue, active users, and growth. Note that in my email above I mentioned all the high-profile customers we already had. But even before you have those things you can talk about customer validation, high-quality advisors, and world-class founders. Who you are is usually the most important thing to investors, yet startups spend most of their time talking about what they’re building. In fact, I often recommend that founders put the team slide at the front of their pitch decks. That establishes credibility right up front. Otherwise, the investor sits through your whole pitch wondering who the team is. Don’t have a killer resume or a previous exit? Talk about what you’ve been able to accomplish in this startup. Buffer’s Team Slide noted that the two founders “took the idea to revenue in 7 weeks” and “took Buffer from 200 to 55,0000 users.” Instant credibility! Read the Startup Pitch Deck Playbook for more examples of traction and team. 5. Ask to send them more info This ties in with keeping your message short in step 2. Don’t include your pitch deck in your first message—and definitely don’t send any attachments without permission. Instead, ask if you can send your deck and schedule a call. I find I get much more interaction this way, plus I get immediate feedback on who's interested and who's not. Think of it this way: Investors are unlikely to write a check in your first conversation. Instead, they’ll want to talk to you again, possibly with a larger group of people. You’ll have a few of these meetings before they invest, which gives you lots of time to explain everything about your business. This takes the pressure off: You don’t have to explain everything up front. Instead, drop a few sound bites. Let the info sink in. Provide more info as people ask for it. Hold back in order to make it easier for potential investors to absorb your opportunity. Those are my top tips. Now let's look at some templates: Here Are Email Templates for Potential Investors Here are some short email templates that I’ve used to reach out to investors, both cold and with an intro: ### FOR: Cold email to investor (always try to get an intro instead of cold emailing) TITLE: Hi - I saw that you invested in . First, congratulations! Second, it’s made me realize that we’d love to have you invest in , our for . If you're interested I'd love to send you our pitch deck and schedule a meeting. Thanks, ### FOR: A warm intro (Send this to your contact who will forward this email to the investor) TITLE: Hi - As discussed, we’re raising $1M for , our for . I appreciate you making the introduction you mentioned. Thanks, ### That's it! Now you know how to do both cold and warm outreach to investors. Please let me know how it goes. And Join my free Q&A session if you have questions or want further guidance. 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. Photo by LinkedIn Sales Solutions on Unsplash

I hear a lot of people say they want to raise VC money but…sometimes they’re actually looking for friends and family or angel investors. Or sometimes early-stage founders try to pitch private equity firms. These terms aren’t interchangeable—and these are very different types of investors. I often see this lead to confusion on both sides, so let's take a minute to clarify. First, “VC” stands for “venture capital” and refers to a firm that has raised one or more funds (pools of money) with the specific purpose of investing in a bunch of startups. But not all investor money comes from VCs. Here’s the general landscape: Friends, family, and fools Incubators, accelerators, etc. Rewards and equity crowdfunding Angel investors Venture capital firms Strategic investors Private equity Let’s walk through each, but first let’s talk about portfolio theory. Professional investors estimate that every ten companies they invest will have seven failures, two moderate outcomes, and a single home run. That tenth one—the home run—will make up for all the other losses in the portfolio. Since no one knows which startup will succeed, it’s important to invest in all ten in order to make a profit. It helps if you choose each investment carefully, and if you help each company as much as you can. That being said, VCs are expecting some of their investments to simply not work out. Amateur investors only invest in one or two companies, and are therefore way more likely to lose all of their money. They're also likely to be more upset if things don't go well. It's important to get the words right so that you know you're talking to the type of investors who's most likely to be interested at your stage. 1. Friends, Family, and Fools This is exactly what it sounds like. You may just have an idea, and you probably don’t have much revenue and/or user growth (“traction”). These are people who believe in you personally and are willing to risk a bit of capital. These investors may or may not be sophisticated. Keep in mind that they probably have money precisely because they don’t like throwing it away. I like to make sure that I can actually pay these people back if things don’t work out, because money stress can sour relationships. 2. Incubators and Accelerators These are boot camps for startups that include training and strategy from people who’ve done it before. They may or may not provide funding. They often take an equity stake (although sometimes they don’t). These may be structured 12-week programs—or arrangements where you can work out of a space and receive support indefinitely. You’ll receive mentoring sessions, introductions to investors, and a ton of networking opportunities. You’ll also be invited—and sometimes required—to work out of a shared space. 3. Rewards and Equity Crowdfunding Rewards crowdfunding refers the Kickstarter and Indiegogo business model, where people pre-buy your product and maybe some perks or bonuses. There's no stock ownership in rewards crowdfunding (only rewards). Equity crowdfunding mean that you're selling shares of your company to investors. Popular projects are able to find a diverse pool of shareholders this way. One drawback is that startups miss out on having a single experienced investor who can help coach the founders. When we raised our $2M Series A, for example, a partner from the VC firm joined our board. This was a guy who had built his own company, taken it public, and helped many other startups during his 10-year VC career. He helped us navigate ups and down on our way to being acquired—and we probably couldn't have done it without him. If you want to do equity crowdfunding, consider also finding a lead investor for part of the raise. This can give you the best of both worlds. The most successful crowdfunding campaigns—both rewards and equity—bring their own eager mailing list and often have a few "whales" ready to place large orders in the first few minutes. This drives momentum and builds buzz, which draws in strangers from across the Internet. 4. Angel investors Professional angels invest small amounts of money in a bunch of different companies. They are using the same portfolio theory as the VC firms (at least 10 carefully selected startups), but with lower dollar amounts—because they're investing their own money vs. raising pools of other people's money like VCs do. An angel's initial investment gives her a seat at the table for future funding rounds at successful companies. She may or may not join the board or help coach the founders. Smart angels will also keep some “dry powder” that they can use to buy more of the winners in later rounds. For both angel investors and VCs, they may actually make most of their money this way. For example, Andreessen Horowitz invested $10M in Clubhouse's Series A and then invested another $100M in their Series B—because they saw they had a winner. 5. Venture Capital Firms VCs are firms made up of successful entrepreneurs who mostly invest other people's money plus a bit of their own. They also understand portfolio theory. They look at a ton of pitches but only make a few investments, partially because they want to be involved in the startups they work with. They’re holding out for the best, so your company needs to be one of them. One typical misunderstanding, and what prompted me to write this article, is entrepreneurs often think that VCs want to invest in their idea. Maybe. But it’s more likely that they want to invest in your working business that's already growing exponentially. VCs are often interested in startups that are more than just an idea. The more traction you have, the more appealing you'll be to investors. We can think of startups as having two main phases: a) building the rocket, and b) putting more fuel in the rocket to go farther faster. Building rockets is more risky because lots can go wrong. Think of how many rockets Elon Musk has accidentally destroyed over the past decade. If you're idea stage—still designing and building your rocket—you may want to talk to friends, family, and fools; accelerators; angel investors; and early-stage VCs. Many VCs are looking for slightly later stage companies—where they want to add rocket fuel to the engine you’ve already build. And VCs want to believe that you can hit it big. I asked one of my investors about this and he said: “I only invest in companies I think can IPO, because that’s the real win for me. If I can’t envision the IPO then I’ll pass. Granted some of my companies get bought, but I’m always thinking IPO from the beginning.” VCs also expect your company to take multiple rounds of money. For example, a VC fund may raise a $100 million fund but only put $1 million into your series A. If they put the same amount into 9 other companies that's "only" $10 million. What do they do with the rest of the $90 million? Let’s say your company goes on to raise a $10 million series B. In this case your VC fund may put in another $5 million and ask you to find other investors for the rest. Your series C may be $30 million, of which they contribute $15 million. So now they’ve put up $21 million of the $41 million you’ve raised. If they repeat this exercise with their winning companies, they’ll spend the $100 million. But they want to see you succeed with $1 million first—before they give you more money. They’ll assume you’re one of the seven failures until you prove them wrong. 6. Strategic Investors This is money from larger businesses who are interested in your technology or customer base. Strategic investors are a double-edged sword. On the plus side they can give your business a turbo boost. On the negative side they have an agenda, often want a seat on the board, and can therefore try to steer your company in a way that's beneficial for their corporate strategy. This is especially difficult early in your startup's lifecycle. Later, once you have momentum, it's easier to stick to your guns. When we were pitching for one of my companies we almost took money from a video conferencing provider (this was long before Zoom) rather than VCs. They wanted a way to share presentations over the Web and we were doing exciting stuff. It was our first round, so we decided to wait before bringing on strategic investors. We took the VC money instead. 7. Private Equity These are later-stage investors who want to take over successful businesses. They are looking for cash flow, and you'll hear them say things like, "We want to see at least $2 million in EBITDA." They usually provide an exit where entrepreneurs take money off of the table. In return, the private equity firm takes a controlling interest and does fun things with the balance sheet like piling on debt in order to pay themselves. Founders are okay with this because they get to put a big chunk of money in their bank accounts while still retaining a minority interest. I sometimes see early-stage founders pitching private equity (PE) firms—which is usually confusing for everyone. It doesn't help that PE firms don't always clearly label themselves. Instead they'll say things like "We invest in mid-market companies" and "Growth equity solutions" that mean nothing to first-time founders. One main takeaway is that VC firms are very different than PE firms. They aren't interchangeable. Next Steps So that’s the investor landscape. Now you know who to reach out to when you're raising money for your startup. It may take a while to learn who your target investors are and where to find them. Different investors focus on specific industries, company sizes, geographic areas, etc. You'll probably pitch the wrong investors at first—and that's fine. It's always great practice, plus you can learn something from everyone. Just to set your expectations, we pitched 40 investors and they all said no. This went on for months...and then all of a sudden three investors said yes at the same time. It wasn't because we got lucky. Instead, it was because we kept practicing our pitch and improving our business. We also figured out the right type of investors to target. Good luck out there! Join my free Q&A session if you have questions or want further guidance. ### 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. Typewriter Photo by Markus Winkler on Unsplash

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: Competitive Landscape Financials Market Size Marketing Plan Unit Economics 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: I want to see a standard spreadsheet view with revenue, cost of sales, expenses, and EBITDA. I also want to see expected unit sales, # of units required to breakeven, and headcount (so I can sanity-check revenue per employee). I want to see annual summaries and a monthly or quarterly breakdown for the first year or two. 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. ### 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.