The startup path from rags-to-riches isn’t easy.
According to statistics in the UK, one in four small businesses won’t survive the first five years.
The story of startups has plenty of twists and turns and this guide focuses on one aspect of this journey: pitching to the investor in order to raise money for your disruptive startup.
Pitching to an investor is almost like going on a first date.
If you make a good impression, you might find the love of your life. If you blow it, you might be alone for the rest of your life, watching cat videos on YouTube.
And as if dating wasn’t difficult enough, investors don’t really give you a lot of time to warm them up.
This definitive startup pitch deck guide will show you that investors are looking for the short and sweet explanation – the trailer to your startup movie.
Is your startup worthy of investment?
If yes, why?
The answer has to convince the investor in around 4-minutes.
Now, this might sound rather scary.
In four minutes, you need to convince someone to part with their millions.
However, the guide is here to help you through the process – to tell your startup story in a few minutes and ensure the investors fall in love with it.
So, let’s start by examining the story behind creating an irresistable pitch deck.
This pitch deck guide has several chapters, so you can select where you feel you need the most help:
- Chapter 1: Why having a world-class pitch deck can make or break your startup’s future growth prospects [Hint: You are reading chapter 1 at this very moment]
- Chapter 2: How to give an elevator pitch that hooks investors
- Chapter 3: How to structure your irresistible startup pitch deck
- Chapter 4: How to deliver your pitch to investors effectively
- Chapter 5: Exercises that help with pitching to investors from investors and founders
- Chapter 6: The best and worst things you can say during investment pitch
- Chapter 7: Examples and key learnings from startup pitch decks that’ve raised $7.4 billions in venture capital
- Bonus: Get our free startup pitch deck course directly to your inbox
But first, let’s start by looking at the point when you should start pitching.HECK YES!
From business ideas to startup to business to exit
I will let you in on a secret.
The best pitch decks tell a compelling story.
Yes, it is about the information – the facts and figures of your startup – but it’s much more than just presenting a few facts for the investor to see.
It’s about telling the information in an interesting and compelling way. After all, your pitch deck should be perceived as an attractive investment case.
Now, you might be thinking you’re no J.K. Rowling.
You’re running a startup, not writing the latest novels.
But are you really?
Think about it.
Your startup is essentially a story from a business idea to a startup to a potential exit.
In the beginning, you have an idea.
Your startup has a start – an idea that you’ve had; a solution to a problem you want to solve – and then you turn this idea into reality. You get other people involved in your story – you introduce characters like team members and investors – and your business develops.
In the end, your startup has an ending (well…at least in terms of the investor involvement).
Your startup pitch deck is essentially just about taking the investor on this journey.
Therefore, in order to present a compelling pitch deck and ensure your story gets those extra characters, you need to learn to tell your startup story in a compelling manner.
Think about it this way: an idea alone won’t make a compelling story.
Jack Dorsey and Biz Stone thought about creating a platform where people can share short status updates with the world, while Howard Schultz fell so deeply in love with European-style coffee houses during his visit to Italy that he wanted to create similar places across the US.
But you can’t convince someone of your story just by telling them that you don’t like the coffee culture.
Remember, pitching is not just about introducing your business but also getting the investor to part with his money.
Therefore, you can’t just have an idea and rely on it to be compelling enough to attract your investors; you also need to validate the idea and proof this to investors.
It’s not just thanks to Schultz’ idea of European-style coffee houses that you might be sipping your Starbucks right now or Dorsey and Stone’s idea that leads you to tweet this post on Twitter – they also had the ability to turn the idea into a business.
They were able to create a story around their idea.
See, ideas don’t build multi-billion businesses on their own. It’s execution and fast-adaptive learning that will make you win.
Your idea needs to prove that it’s worth those billions.
By solving real problems (so called customer pain points).
It might sound simplistic but think about what your ultimate goal for the startup is. You want to solve big problems you see in the world, isn’t it?
Schultz’ problem was that not enough people are enjoying a proper coffee experience in the US. He saw Italians just able to pop in and out of the coffee shop, enjoying proper coffee in the process. He wanted the same for everyone.
You see, the world is full of problems waiting for you to be solved.
Heck, we don’t sometimes even know something is a problem until someone points it out to us and a light bulb goes on in our heads.
One of the signs of an entrepreneur is the ability to identify these and then be willing to do something about them.
So, everything starts with a problem.
However, you aren’t just in the business of coming up with problems – you also want to find the ways to solve them.
And when you are building a pitch deck to tell your startup story to the investor, you need to focus on the solution as much as you need to focus on the problem.
It’s important that your pitch focuses its storytelling on turning the idea into a viable business.
You figure the solution – and not just any solution but one that creates real value.
It’s crucial to consider the problem and the solution and figure out why your solution is better.
There are lots of entrepreneurs out there coming up with solutions to very similar problems – why is yours better?
You need to answer the question:
What is the unique selling point of your startup idea?
Of course, just having a problem and a solution isn’t enough. A story needs more than the premise and the plot.
And so, as you develop the idea, you will need to start working more closely on turning the idea into a business.
All of this will require labour and capital.
You need people to make the products, provide the service, market it and so on. All of this will also cost – resources, equipment and so on.
Now, as your idea begins to form into a business – you set up a website and you design a prototype – you have two separate roads in terms of financing these actions.
Financing option 1: First, you can bootstrap your startup.
Bootstrapping means launching and validating the business without external funding. You’ll probably need to use your own savings to finance the early costs and you probably will work on the project while being paid for another job. That’s totally fine.
Instead of taking a loan or seeking investment, you launch lean and continue growing the business only as much as your revenue streams allow.
While bootstrapping is certainly a viable road to business success, the focus in our pitch deck guide is on the other path.
Financing option 2: Your second option is to seek capital from external sources.
Startup fundraising is the opposite of bootstrapping. Although you certainly want to be lean with spending and you’ll probably invest some of your own money and resources – especially in terms of your time – to the project, you’ll also actively seek outside funding, for example from venture capital or angel investors.
So, who will potentially invest in your startup?
The most common sources include angel investors, venture capitalists and other institutional investors. Essentially, any investors, who are ready to invest a lot of money and take a big risk in receiving a return on the investment.
This is down to the nature of startups.
Startups are seeking rapid growth from an idea to a business and to an eventual exit.
Therefore, startup fundraising is often the go-to path because of the ability to inject a lot of capital into the idea and speed up the process of scaling the business to becoming the market leader.
And so, your startup journey begins with an idea. But your idea is like a plant – it needs care and it needs nourishments to grow.
You need to talk to investors that can provide you the nourishment, i.e. capital.
This is naturally where the pitch deck enters your process.
But you also need to think about one final twist in the tale.
Your startup also needs to consider the end of its journey – especially when venture capitalists have invested in helping the business grow.
Investors are not pumping money into your idea without needing something in return.
Your idea doesn’t just have to sound valuable but the investor will want to receive an actual return for helping your business to flourish.
For pitch deck stories to work, it’s a good idea to consider this aspect as well. How does the story end?
In terms of VC exits, the cashing out of your startup generally takes either of these two routes:
However, there is a third option called recapitalisation.
This essentially means that the startup debt and equity mixture is reorganised. The VC will exchange its equity for cash and the management receives equity incentives.
Recapitalisation is the least favoured option, with M&A still holding on as the most common exit strategy for VCs.
So, your startup lifecycle looks like this:
It is this story that you essentially want to convey with your pitch deck.
Because it can convince the investor to realise that you have thought about the issues – you’ve looked at every angle and you have compelling reasons to thinking your idea will be more than just an idea.
The startup fundraising process for securing those sweet $$$
So, that’s the journey from idea into a potential exit for investors and perhaps even you.
But the investor doesn’t just magically pop by and hand you the money.
So, how does the investor-startup relationship come about?
How do you make sure your startup secures those sweet $$$ that help it eventually reach the exit?
When do you tell your story to the investor?
Step 1: Assess your startup’s investment readiness
Before you even start pitching to investors, you need to take a good look at your business. Does it have a chance?
In 2016, worldwide venture capital activity stood at $127 billion. The investments went to 13,665 deals. Statistics like these are easy to find but it’s the investments that weren’t made that actually matter.
The truth is that VCs weren’t just approached by those little over 13k financing opportunities and they said yes.
According to industry insiders, VCs reject around 98% of the startups that connect with them. And I am very certain that all entrepreneurs believed 100% in their business idea… so do YOU, right?
In order to belong to the 2% that manages to attract startup funding, your startup has to be investment ready.
Now, I’ve written about Investment Readiness Level before and if your startup is still at the stage of developing its idea, you should read the post before venturing further into pitching.
What is important about investment readiness in terms of the pitch deck is the storytelling.
Investment readiness essentially gives you the building blocks to the story.
It answers the questions:
- What is the purpose of the startup? Why did you start it? You examine and outline the problem – the premise of your story.
- What is the solution? What is the role of your business? You outline how your business can help solve the problem – the main ‘meat’ of your story.
- Who is going to do it? What is the startup team? You introduce the people working on the solution – the characters of your story.
- What is going to happen when you solve the problem? What is the outlook of your startup? You explain the methods and the predictions of how the startup will perform given the investment – the ending to your story.
Essentially, your investment readiness level is looking at the journey of your story from start to finish.
The more you’ve already written the story – i.e. the more evidence you have of things such as traction or market research – the better your chances are with investors.
You can’t pitch a business idea if you haven’t fully validated it yet – what problems are you trying to solve? How are you solving them? For whom? Why should they care and buy?
Questions like this help you identify your investment readiness level.
It reveals how far you are in turning your idea into a business. This matters because the closer you are to being a ‘real’ business, the better your investment readiness will be… and the more likely investors will say “YES”.
So, investment readiness is really just about identifying if you have the required pieces ready for the investment pitch.
If you are struggling with your investment readiness – the who, the why, the what, and the how – you won’t be able to start developing your investment pitch… or worse: you spent a year trying to raise money and only then realize that no investor will invest in your startup (that would be depressing; I tell you).
Step 2: Showing your ability to provide significant returns
Now, investors are looking for high returns – around 10 times what they invested.
Since investors are savvy people, they won’t just hand you a check and hope you can start making money.
A part of the story is to be able to let the investor know what the outcome will be – how the journey will end.
You need to be able to prove how you are going to achieve the growth rates that allow the investor to make those sweet returns.
So, as you tested your idea in the first step and figured out your investment readiness, you’ll now take it further by proving you can make money with your idea.
This means understanding who your shareholders are:
- Primary – the person(s) holding the biggest ownership in the business, meaning it’s most likely you and the other founder(s).
- Secondary – the person(s) holding the smaller shares of ownership. It can include angels or VCs.
Why do these matter in terms of the pitching?
The stakeholders will have an impact on your startup’s finances. For example, the state in which you operate might have different regulations in terms of tertiary stakeholders and taxation of dividends.
All these must be taken into account when you are devising your strategies for fundraising.
If you have a lot of primary shareholders, investors might be wary of dividing the pie even further – it’s crucial to find a balance.
When you are telling the story and pitching the returns for the investor, you must be able to showcase who is investing in the business and what are they getting out of it.
But more importantly, you also need to include information regarding the way your startup is going to make money from the problem.
Having a problem and a solution to it is not enough to attract investment.
Once again, VCs are not there to save the world – they are there to make money and perhaps save the world in the meantime.
There are different ways your startup could start generating income with the idea. These are the strategies for monetising your idea.
Below is an example of the revenue models your startup could adopt:
Source: SlideShare presentation
For the investors, it’s not really about having a specific strategy more than it is about having the right strategy.
You want your revenue model to fit your problem and solution.
In terms of pitching, the ability to show how your startup will make money is often the icing on the cake.
Step 3: Begin the search for the perfect investor
After all that, it’s time to start matchmaking – you need to find your perfect investor. That perfect person to go on the first date and tell that story to.
Yes, finding a VC is not just about picking up the phonebook or googling ‘VC in my neighbourhood”. Not all VCs are alike.
Going on a blind date without any idea of whether you two have something in common could end up in a disaster – you might have nothing to talk about (and both of you waste precious time where you could be growing your business).
Similarly, without vetting the right investors, you might lose the interest before you even open your mouth.
VCs have different preferences in terms of the industries they invest in and the investment stage in which they invest – not all VCs are looking to invest in Series A, for example.
Andrea Zurek, a founding partner of XG Ventures, told Entrepreneur:
“It’s more than just speed dating for the right investors, it’s finding someone that if you were literally stranded in an airport for hours, you would truly get along with them. Building businesses is personal, and raising capital is also an investment in human capital.”
The same article outlined the six questions that determine an investment match. Hence, you need to figure out:
- How well the investor is connected in terms of other investors within your sector.
- Whether the investor has previous experience or current projects related to your startup.
- If the investor is knowledgeable of your industry.
- What are the investor’s expectations in regards to your startup and how it creates value?
- If the investor is still active in actually investing in businesses.
- What criteria is the investor focusing on in terms of startup funding. What is their typical funding schedule, routine or the lifecycle of investments?
And since investors are not alike, your startup pitch decks can’t follow a single template either. BTW: Most startup pitch deck templates are really bad and won’t help you raise money.
The story you ultimately tell will depend on the person you are telling it to.
Think about J.K. Rowling – she set out to write for people who love stories, who are imaginative, who love an adventure. She didn’t just write for children but people who are questioning and adventurous.
Therefore, you can’t approach pitching with the mindset that a single story is sufficient.
It’s important to understand who is the investor you want to pitch to. When you’ve used the above questions to identify the investor, you can start identifying the kind of stories you want to create.
In addition, as I’ve mentioned earlier, investors also differ in terms of the investment rounds. You can’t use the same story in seed round and during the later funding rounds.
Because the story of your startup will change as the business grows and evolves.
When you start, your story is very much based on the problem and your idea for the solution – you also talk about the team and why you are best to solve the issue. However, the story won’t have a lot of details. You won’t have traction to prove people love your products, for example.
So, the story evolves just as your business evolves which is why you need to know your audience better.
Let’s take a closer look at this point and how you should build your pitch deck story.
First, your initial investment round – seed round – is essentially just about the problem, the solution, the team behind the solution and the opportunities available in the specific industry.
Your story must focus on identifying why the problem is such a big issue and how you could potentially benefit from solving the problem. It’s not that much about actual figures – you don’t really have any – but about showing the potential of your business.
Now, as your business attracts investment and you move on from pitching to seed round VCs to Series B and C VCs, the story will change. You will still need to outline the essence of the problem and the solution, but you shall also focus more on the present traction.
Your story needs to show what has already happened.
Your pitch will start including actual figures – your current and past growth rate, the sales figures and traction numbers (such as CLV, CAC, churn rates, viral coefficient).
It’s also ever more focused on the end part of your story. Later stage investors want to find out information regarding the exit strategy.
Step 4: Making the first connection – time to pitch your startup
And now you are ready to tell your startup’s story.
The perfect pitch is about telling a story and the whole process is all about creating connections.
Just like Rowling connects with her readers, your pitch is aimed at connecting with the investors.
All you are aiming at with your pitch deck story is to explain your startup to the investor.
Think of it this way: if you read the back page synapsis of Harry Potter, you would probably know whether you like the books or not.
If the story seems interesting, you’ll pick it up. If it doesn’t, you pick something else.
This is the whole premise of giving an investment pitch – you give a short introduction to the investor by saying “Here I am, this is what I’m all about – now take it or leave it.”
This, of course, is not easy. As I’ll show you later in the guide, pitching requires a lot of practice, careful consideration and a proper analysis of the investor and your own startup. Else you are wasting 6-12 months and still never hear a single “YES” from investors.
Now, just as books have a short synapsis at the back, pitch decks also start with an introduction to the introduction.
In order to get to your investor and present the actual pitch deck, you need to present an elevator pitch.
An elevator pitch is all about putting your core idea into words. It’s about summing up the business idea in less than a minute and answering the key questions:
Now, as you make your elevator pitch you hopefully catch the attention of the investor.
They want more.
It’s time to pitch with a pitch deck and take your elevator pitch a step further – stretch it out and put a bit more meat around it.
While the pitch deck will still focus on the problem, your solution and the unique value proposition, you’ll also focus more on what the market opportunity is and how well your startup idea is creating traction.
You, essentially, show the investor that your idea isn’t just good; it also has the potential to grow big and to provide real returns for the investor.
During the pitch, the focus is also on the investor fit – investors are interested in learning more about the team behind the idea.
As I’ve mentioned, investors don’t just want to be convinced about the idea but that you and your team are the right people to implement the strategies that take the business from an idea into a business and the exit.
You wouldn’t be able to date a person that doesn’t like you.
Therefore, the investor-startup relationship also requires respect and trust from both parties.
Step 5: Turning up the heat with negotiations
So, pitch deck is done, the investors loved you and it’s time to hand over the check?
Well, not quite.
Investor interest doesn’t necessarily mean that you have secured the investment. There are still things to sort out before you can celebrate your startup investment.
A successful pitch will lead to further discussion and scrutiny over your plan.
Your pitch deck is the first act to your story – the theatre version of a six-hour epic drama.
Now, you build your investment pitch around the different elements that are the backbone of your startup – the why, the who, the how, and the when. But investors will want to scrutinise each step deeper as they become more familiar with your story.
Consider this point as the spin-off story of an original version. For example, J.K. Rowling has written plenty of novels about some of the other characters in Harry Potter – explaining their behaviour deeper.
Now, your pitch deck is just the start: once you have the investors hooked, you need to tell them more.
The investor might want to look at your detailed business plan, go over the projections and finances with you, and examine other related documents.
Above all, the focus will shift to negotiating the term sheet.
You are essentially creating the groundwork for your finalised investment contract: the term sheet.
What it does is help ensure you are both on the same page and have an understanding of how the investment will take place before you draft the legally binding agreement.
So, what are the main things discussed in a term sheet?
While each term sheet differs depending on the VC and the startup, they all share a few common elements.
For example, check out the below template for a term sheet:
At this stage, your hard work in terms of pitching is over – you don’t get to this stage if your pitch didn’t go well.
Therefore, getting the pitch right is essential. You won’t get to talk about terms or go into detail if you don’t nail that initial pitch.
You MUST take the tips on board and learn to pitch your startup.
Step 6: Almost there – investors perform a due diligence
Something else has also been going on since the investor heard your pitch deck and found it interesting: due diligence.
The investor has been checking out your team and startup to find out if you actually have the ability to achieve what you’ve said out to achieve.
Essentially, due diligence is about evaluating your pitch and startup, figuring out whether you told the truth or not during your pitch.
This is why you need to make sure your pitch is not a ‘magical sales pitch of lies’ – you have to ensure you paint the most accurate and appealing picture of your pitch as you possibly can.
During due diligence, the VC will want to see documents that support your pitch.
You could divide the documents and information into three categories:
As the due diligence process moves on and the term sheet is signed, the startup fundraising process takes a deeper legal turn.
Lawyers are brought in and the problem areas will be further examined and solved.
On average, an investment round takes 12 weeks to finish… for the 2% successful startups.
Yet, imagine this:
Your elevator pitch should only last a minute or so and your pitch deck should be a bit over 10 slides long.
As I said, the pitch guarantees you get on the final stages which are the stages that last long – if you fail to deliver with your pitch, you won’t get to dream talking to an investor for 12 months.
Interestingly, a DocSend study of over 200 pitch decks and VC decisions found that raising VC funding is quicker than talking to angel investors. On average, deals with VC firms finished four weeks earlier than angel investments.
Step 7: Pop up the champagne, the investment is yours
Now, after the investor has performed due diligence and the term sheet has been signed, things will quickly move into something more serious. While the process of due diligence can take weeks, the green light can come right in the end.
Just remember, a term sheet is not legally binding and you really need to have the legal documents signed, sealed and delivered before the investment is yours… and your startups gets the cash infusion to scale the business.
Therefore, never pop up the champagne until the deal is finalised and binding!
Why investor introductions really matter
Now, the DocSend study found also found something rather obvious when they studied VC pitching:
The more investors you contact, the more investors you’ll end up meeting.
But as the above also showed, the road to securing those $$$ is not easy.
Making a connection with an investor that is the right match and willing to invest in your startup is not as easy as it is to walk into a store and find shoes.
You can’t really judge the book by the synapsis at the back.
Think about it: the Harry Potter book might turn out to be the best thing you read even though the idea of wizards and spells might sound unappealing to you.
And this is where the startup pitch deck really comes to life.
It goes into more detail than your elevator pitch.
There are essentially two reasons your startup needs to have a pitch deck:A startup pitch deck, in a nutshell, is a short presentation to introduce the investor to your business.
Pitch decks are visual and they are short – often consisting a bit over 10 slides that tell the essential story of your business… proving your startup’s investment attractiveness.
In a way, it’s a summary of your business plan but without the length of detail.
It outlines the essence in more detail than an elevator pitch but less than a business plan.
So, you know start pitching is like story telling. You are telling the story of your business from the idea to the potential exit.
What is the information that goes into building the story?
If you had to summarise a startup pitch deck to five core elements, it would be to provide the answer to:
The above is an insight into your startup business.
If your pitch deck answers those questions – and I’ll show you how it can be done in the most efficient way – you immediately let the investor know what your business is about.
You reveal the two things investors care about when they want to invest in a business:
What is the purpose of the business? Which is the main plot of your story.
How your business idea will provide rapid growth and therefore, give them a good chance of big returns?
Remember, investors are in it for financial returns. If you can convince them about the returns, you move the conversation closer to the actual paycheck being written.
Now, that’s exactly the second point of the pitch deck: introduce your business to the investor and not just tell them how attractive opportunity it is.
Consider this: there were over 450k new businesses launched in the US in 2014.
While this actually shows a decline in the US startup numbers, it’s still quite a large amount of firms competing for investment.
A popular venture capital firm can’t organise an hour-long meeting with every single startup that knocks on its door. Actually, they need to be very picky to provide great returns to their investors… the so called limited partners (short LPs).
Nonetheless, you need to catch the investor’s attention.
When it comes to stories, the best ones are those with real characters and real drama. In the business world, you need to be able to highlight that the problem you’ve discovered is real and that it is causing problems in people’s lives.
You also need to present the characters – i.e. the business team – as compelling and capable. You need the heroes of the story to be convincing and brave.
Investors often invest in people.
You know why it is true?
Because a person once made a pitch to investors that was about absolutely nothing.
NO IDEA – NOTHING!
You might be thinking, “Sure, a gutsy move but it could be done. I’m sure he got nothing out of it.”
Well, the person walked away with $2 million.
Therefore, your pitch deck really needs to focus on telling the investor the real story:
What your problem is and who are you – the people – trying to solve it.
But there is another part of the story as well.
The other answer is to the question:
Why should I, as an investor, invest in you? Which is the finale of your story – the big reveal of what benefits your startup will provide the world and the investor.
The best way to do it?
Give an investor an elevator pitch or let them look at your pitch deck – give them a glimpse of your startup and the reasons it rocks.
If you’ve built an irresistible startup pitch deck, then the investor will want to know more. You can move forward in the startup fundraising process – talk in-depth about the business idea and plan, begin the due diligence process and finally seal the deal.
What is the best glimpse to give to an investor?
It’s some kind of traction with customers or actual growth figures.
If you can show real interest from customers and later, real long-term engagement, you can highlight that the future is bright.
With the pitch deck you are able to introduce your business to the investor in an engaging and informative way.
You are able to take the investor on a journey to your startup – from the idea to the business and to the exit.
It’s about making that first connection and ensuring the investor wants a second date.
Now, pitch the hell out of that investor and secure $$$ for your world-changing startup
If you want to turn your idea into a startup business, you need to sort out your pitch deck.
While the next chapters will go into detail on how to structure your pitch and to present it to venture capitalists, the key is you use pitch decks as the introduction to your idea.
Whenever you meet a potential investor, you give your elevator pitch and you tell them to have a look at your pitch deck.
Pitch decks are your golden ticket from moving from an idea into securing those millions in investment.
Did you want to solve problems with your startup?
Then solve investor’s number one problem – whether to invest in you or not – by using your pitch deck.
Remember, pitch decks are the glimpse into your startup’s future. Don’t use them as the overarching source of information – use it to generate interest.
Pitching to investors is a crucial part of the startup fundraising process – it is the first date.
In a way, with your pitch, you need to show the investor that you are marriage material.
And you need to do this in around 4 minutes. It’s a challenge but I’m sure you are ready to take it on.
But as I said above, you need to make your elevator pitch before you present the pitch deck.
So, how can you do this?
Let’s take a look at how you can make the first connection and gain the investor’s attention in Chapter 2.