A pitch is the first thing any investor would ask for when you are looking to raise money.
In fact, some large and marquee venture capital firms like Sequoia have recommended flows for creating pitch decks to help founders make the best first impression.
But building a pitch deck is not one-time. If you are a startup that continues to require external funding over its lifecycle, you would have to make pitch decks every single time you raise.
The good part?
Basics remain the same. Your pitch, whether it be your main deck with 10 slides or an elevator pitch where you only have 5 minutes to impress the other party, will continue to be a story you tell about your business that gives investors the outsized returns they are looking for.
In this guide, you will learn how to pitch effectively so that you can amp up your fundraising game.
But first, what is an investor looking for?
Well, that changes depending on where your startup is in its journey and the industry you are operating in. If you are a very early-stage startup, investors are looking only for the absolute basics and whether or not it matches their broad investment thesis.
There is, however, no singularly correct approach to this.
In some cases, the investors would first want a brief about what you are solving, a bit about the team and how you plan to approach the problem. If they like it, there will be subsequent meetings to discuss a more detailed version of the deck, which will include financial projections and a roadmap to the future.
In some others, the investors may want a detailed pitch deck to even set up the first meeting.
But most of all, what they want is a burning problem and your story on how (and why) you are the best person to solve it. That’s what tells them if you would be able to earn them their returns.
Creating a pitch deck
You already know the basics. Your pitch deck must include a title deck with your company name and purpose, the problem you are solving and a bit about the founding team you have put together to solve it.
What else should your pitch deck include?
Market Size
The primary objective of the investor is to make money, which is why they are constantly on the lookout for the next big opportunity. A key indicator of that? The size of the market that you would likely be serving.
There are three things to look for here:
- Total Addressable Market (TAM),
- Serviceable Addressable Market (SAM) and
- Serviceable Obtainable Market (SOM)
While TAM covers the total demand for your product in the market at present, SAM is the part of the TAM that you can service currently due to your own constraints. SOM is the market that you will be initially focusing on.
For example, Ola first started providing rides in India in the city of Bengaluru in Karnataka and once there was sufficient traction, took the service to other geographies and regions, significantly increasing its market size.
Several founders greatly overestimate their market size, and end up at the wrong end of the stick. All your numbers must be carefully derived and arrived at. Even if it’s a completely new market and could require spending time and effort on surveys.
Scalability
What do investors love in an idea? Scalability.
It tells them if your product which is earning a couple of hundred thousand dollars by spending a certain amount of money, it should be efficiently able to scale the revenue to millions of dollars as well.
For instance, a single physical store is not a scalable business. But Amazon brings together products from different stores and sellers on to a single online platform, and delivers the products across multiple geographies.
If your solution to the problem doesn’t scale to service a large enough market, you likely won’t get institutional funding.
Revenue Model
You know what investors love more than ideas? Revenue.
While it is hard to arrive at an exact model at an early stage for many companies, a directional idea of how you plan to monetise your product and/or services will help.
For instance, Software as a Service (SaaS) products work on a subscription model, and a pricing model is a simple enough way to tell your investors how you plan to monetise.
Do note that sometimes you may not exactly know how things will turn out.
When Facebook started, they did not know how they will earn revenues. They were banking upon the fact that they were acquiring hundreds of millions of users organically who would likely be willing to pay for the service later. They are one of the largest tech companies in the world today, and their primary source of revenue is ads.
Competitive Advantage
Knowing who your competitors are can tell you how different your business is, potentially giving you a moat to include in your story.
This can take various forms depending on the business you are venturing into.
Suppose you come from a family of legacy Ayurvedic medicine. You have the advantage of using that brand as an anchor to establish immediate trust and zoom past your competition in the homegrown organic foods market.
For technology companies and especially the ones that are into creating proprietary tech like AI, patents or intellectual property plays a big role in how far they can be from the competition.
Financial Projections
Any financial projections made at the early stage is a shot in the dark. Investors understand that.
What they really want from such a slide in your deck is whether your goals are broadly aligning with what they know about the industry already.
Get into the basics with average transaction value, how much you would spend in acquiring each customer and subsequently how much you can expect to gain from a customer over the course of a lifetime.
These should help you create 3-5 year projections.
What’s your ask and why
One of the most important slides in any pitch deck: define exactly how much you are raising in the round, whether or not you already have commitments from others and where you plan to deploy the capital once you raise.
Pitching your story
You may have the most beautiful and comprehensive pitch deck in the whole wide world and still not be able to raise if you don’t know how to pitch your story.
Answer these questions when you pitch:
- Who’s the enemy? A narrative of “them” vs “us” where you talk about what’s truly affecting the customers in your market right now
- Why now? Timing is everything when it comes to success and you need to convince the investors why there’s never been a better time to solve this problem. If not solved now, one could potentially be missing out is the feeling you want to leave them with.
- How do you plan to overcome the hoops? Tell them the roadblocks that make this a difficult problem to solve and how your solution is efficiently going to jump past them.
- Show, not tell. Before you get verbose on how to get to the future you dream of, show them the future. The key to a good story is an outcome the viewer will buy into.
If you answer these well, and have an idea that is solid, your next fundraising round may only be a few weeks away!