Pitching plays a pivotal role in fundraising, and only the ones who do the spadework will win the vote of investors
It’s raining unicorns! 12 unicorns were born in 2020, the highest ever in a year in India. And 2021 has already seen the birth of 20+ start-up unicorns in India. It is mind boggling! But before you turn to shows like Billion Dollar Buyer and Shark Tank with an offhand pitch, pause and take a moment. Fundraising is a serious task and only the ones who do the spadework will win the vote of investors.
Pitching plays a pivotal role in fundraising and the pitch varies according to the stage of transaction; for example, seed funding, Series A/B and so on.
So, if a company is at the seed round of fund raising, the pitch should mainly focus on:
- Problem Statement
- Solution proposed
- Superiority of the solution v/s the other available solutions in the market
- If the market is large enough
- Background of the team
- What does the MVP (minimum viable product) or the initial customer validation or the initial customer traction do?
If a company is at the Series-A round, the pitch would focus on above points along with the following:
- Traction as well as velocity of the venture which is gauged by MoM growth
- Stickiness of the customers which can be gauged by renewal, retention data or cohorts
- Unit Economics (Gross revenue, net revenue, Contribution Margin etc.)
Investors don’t just evaluate founders; they also evaluate their presentation skills — reflected in a pitch deck. Getting the outline, content, and delivery right is not easy, but extremely vital.
Here are few dos and don’ts for every founder looking to raise a round:
1. Tell Them a Story
Remember to bring your emotions and enthusiasm into the pitching room. Investors are not just analytical; they also have hearts. Founders make their pitch decks a data puzzle too often and do not build a narrative. VCs come across 70-80 decks every month so do add the passion angle to your deck & pitch if you want to stand out
2. Create Traction
If you are at a pre-revenue stage, that’s okay. What you need to exhibit in this case is, your traction which can be in the form of active installs, MAU and DAU, retention rates, time spent on app/website and so on
3. Talk about Unit Economics
In an early-stage start-up, losses are considered obvious. The investor is more interested in knowing about the unit economics like burn, profitability metrics (GM, CM1, CM2, CM3), net/gross revenue per unit and so on. Unit economics is also heavily relied on to understand your company’s future potential. Investors would always turn to the unit economics in the early days to gauge the ultimate profitability and sustainability of your venture
4. Highlight the Team Profile
Many pitch decks only provide the founder(s) profile, but if your team is excellent, investors would be more likely to take a chance on you. For example, a senior hire in an early-stage start-up speaks volumes about the quality of your idea
5. Project a utilisation budget
A calculated allocation of funds presented even in percentage terms (if not absolute figures) gives a high degree of trust and clarity to the investors
1. Avoid Gully/Paid Awards
Many pitch decks highlight awards. But the fact of the matter is that these awards can easily be sponsored or bought. You must understand that the people sitting on the other side are investors and they have their own portfolios and get 100s of pitch decks every month, so mentioning an award which is a paid award actually can bring your credibility down. That being said, the awards which are coveted and are a result of natural competition should definitely be mentioned
2. Don’t Blindly Replicate Decks
Founders sometimes borrow decks from their friends and start cloning them without taking into consideration the fact that their friends` company could be at a different stage. Every deck is unique and your deck should be customised to the problem you are trying to solve, your market and your stage. For example, a traditional growth stage company may start the deck with an executive summary and an investment highlight but for a start-up these are best avoided.
3. Avoid Lofty Projections
Keep it real and digestive. Founders should avoid aggressive projections in the initial stage as it can backfire at a later phase of fundraising cycle.
4. Don’t Oversell your Advisors
Founders tend to give a lot of importance to their advisors, sometimes more than themselves. Advisors merely spend a few hours in a month and they are never a make or break for any start-up. If one has got stellar advisors then one can briefly mention about them in the pitch deck
5. Avoid Jargons & Unnecessary Details
Verbiage and unnecessary details can confuse or worse, irk the investor. Keep the deck simple, crisp and easy to skim through
Remember, a pitch deck is like your first date with an investor. Put forth just the right amount of information, not too much and not too less.
The author is Founder & CEO, Dexter Capital
DISCLAIMER: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.