WHAT TO LOOK FOR IN A PITCH DECK
An investor will come across hundreds of pitch decks a year, and you will only have the opportunities to invest in a few of them, so you need to develop your own filter process.
The ideal pitch deck should reflect your investment criteria. Once you convey your criteria to the entrepreneurs, they ought to put together a pitch deck that includes all the information that you would need to assess whether they meet your criteria. Just like an elevator pitch, a deck should be engaging and grab your attention in the first few slides.
In the first contact with an entrepreneur, you should expect to see a 10-15 slides deck, along with a few appendix slides that include data such as market size or cost of customer acquisition.
Pitches are also living documents, so they should be dated and have a version number. Only look at pitches that show that the founders understand the information you need and are organized and efficient enough to put it together adequately.
When you receive hundreds of pitch decks, you need to learn how to quickly assess which ones are worth taking a deep look at. Below are three pitch deck essentials that you should consider before assessing the rest of an entrepreneur’s deck:
1. KEY PLAYERS: WHO ARE THE FOUNDERS, KEY TEAM MEMBERS AND KEY ADVISORS?
It is critical to have the right team and founder almost as much as the right idea. Beyond the obvious credentials and experience in their field, founders should be driven and passionate - while also being clear-eyed about their idea and ready to adapt to change. When investing in a company, it is important to identify if the entrepreneur can listen to advise during due diligence and take it on board. They should have the right attitude towards learning if things go off track and if investors need to intervene.
Lastly, they should have the passion and ability to motivate their team and inspire confidence in other stakeholders. The founder should also not be the one leading every aspect of the venture. The company should have an executive team of leaders that can operate effectively without the founder driving every decision.
2. MARKET OPPORTUNITY: WHAT IS THE MARKET SIZE, GROWTH, CHARACTERISTICS, AND SEGMENTATION?
Look for a founder’s understanding of the potential market, customer, and how they came up with the projected figures. If the product only has a small, niche market it might not generate great returns for investors. Look for an understanding of where their product fits in the value chain because that will affect their sales channels, pricing, and profitability.
The higher up the value chain, the greater the profits will be. The pitch deck should also include who their buyer is and how they plan to get to them. Lastly, the founder should identify what are the channels in place, which ones do they have access to using, and who and where the competition is.
3. THE NOVELTY OF THE PROPOSED SOLUTION AND DEFENSIBILITY: WHAT IS THE PROBLEM AND THE PROPOSED SOLUTION? CAN THE PRODUCT/SERVICE BE PATENTED OR PROTECTED? WHAT IS IT’S SPEED TO MARKET?
There is no point in founding a company to market a product or service that anyone else can copy. The service/product should be patented or protected in some other way. The founder should also have considered if the product will have to be protected in different territories, and the administrative costs that it will entail.
Lastly, having a defensible product is not just about the brand -it is also about speed to market. The proposed solution should be novel; the first to gain traction with customers can secure a leading position in the market.
You should develop your own set of investment criteria that works for you, and create your own ideal pitch deck template like the one below:
Slide #1 - Images of product, with the company name, logo, and mission
Slide #2 - Team - photos, education, background, any non-executive directors or advisors
Slide #3 - The unmet need. Founders should illustrate the business model or consumer journey containing the problem that needs to be solved.
Slide #4 - The company’s proposed solution
Slide #5 - Market size, the route to market, and competition
Slide #6- Pricing and Cost of customer acquisition
Slide #7 - Finances: How will they use the investment capital over the 12-18 months to the next round
Slide #8- What is their 3- or 5-year plan with sales, gross margin, overheads and losses/profits
Slide #9 - Defensibility
Slide #10 - Progress to date
Slide #11 - Exit planning: This will rarely be accurate, but it shows that they have thought about their exit strategy.
Slide #12 - An overview of the team, market, tech, and financial ask.
You also have to learn how to identify when it is okay to relax on your assessment criteria, and when you should stick to the criteria you’ve established. What’s most important is that you invest in entrepreneurs that you trust and with co-investors that you know.