Anthony Rose, CEO and founder of SeedLegals
Raising funding for your startup can be a challenging task at the best of times. And then along came a pandemic, making it even harder.
The UK government’s Future Fund scheme is a useful boost for those startups who qualify (which means having raised more than £250K in equity funding before 20 April 2020, and can raise £125K in new funding which the government will then match-fund). Of course, you need to find that new funding in the first place, in order for the government to match-fund it. And, with companies clambering for investment to offset declined revenues and competing for a smaller pool of active investors, you’ll need to work harder than ever to stand out from the crowd.
Having a compelling investor pitch deck
SeedLegals is the largest closer of funding rounds in the UK, and thousands of companies send us their pitch decks to review as part of their SEIS/EIS Advance Assurance applications. This gives me a unique vantage point, by being given access to large numbers of pitch decks and seeing which of those companies then go on to secure investment.
Some pitch decks are really compelling, but many would leave an investor scratching their heads trying to figure out exactly what the company does, or how much they’re looking to raise, or what they plan to use the money for.
So, here are the six biggest things to get right in your pitch deck:
- Explain the problem you solve, not what you’ve built
When we started SeedLegals the first version of our website explained that we did document automation, machine-generation of legal documents. All very clever stuff. Then I came across Mike Butcher’s excellent The Press Release is Dead article and I realised… nobody cares. There are zero people in the world who wake up one day and go, oh, I need document automation. After that epiphany, we completely changed our website messaging to “the fastest way to do your next funding round”, because that’s what people are after.
So the very first thing I look for in a pitch deck is a clear description of the user benefit, the problem you’re solving. It’s amazing how many pitch decks spend all their pages describing their blockchain-based immutability without actually describing why anyone would want it. Show how you’re solving a problem (even better if it’s a problem the investor has experienced themselves) and you’ll have an investor who gets it instantly. If you’re thinking “But the investor isn’t my customer”, maybe so, but for sure they’re looking at your messaging as if they were a customer thinking “If I don’t get it, nobody else will either”.
- Do one thing, and do it well
Founders often try to impress investors by listing a grand vision of all the things they’re going to build. “We’re building a B2C product, and B2B as well, with partner APIs, and we’ll sell data, with an admin portal”. The founder is thinking “More is better, we’re impressing them with our vision!”. The investor is thinking “There goes all my money, frittered away before the business earns a dime in revenue”.
Think about it… if you’re spreading your resources over a B2C app, B2B portal, data warehouse… and your competitors are focussing all their firepower on just creating a great consumer app, who’s going to win? Plus, you’ll need to hire more people, so you’ll run out of money faster.
So, unless you have 50 developers, focus on one thing, and do it well. Stay focussed and aim to get revenue before you go wide.
- Don’t over-value the company
One of the most difficult problems every founder will need to figure out is how to value the company. Get it too low and you’ll give away too much equity and dilute yourself excessively. Get it too high and investors won’t bite. But, what many founders don’t realise is that get it too high, and your next round may have to be a down round, which makes everyone unhappy. That’s a particular problem for companies doing crowdfunding, where a bubbly pitch deck may entice small investors to invest at a high valuation, but when it comes to the next round, VCs may not buy into that stellar valuation. This SeedLegals article shows benchmark valuations for UK companies.
- Avoid buzzwords and distractions
It’s all too easy to sprinkle your deck with buzzwords. CAC. LTV. ARPU. GMV. You might know what it means, but don’t assume your investor does. Your investor may not engage in conversation about your business for fear of being embarrassed that they don’t know those terms. Or, if they’re industry-specific terms (e.g. medical buzzwords) you’re sending a message to investors who don’t specialise in just that segment that this isn’t for them.
Also, investors are going to be looking at every single word, every image, trying to extract meaning. That graphic of a man climbing a rock face, you thought it was a cool way to show you’re up for a challenge, but racing through your investor’s mind is “Why a man, not a woman? / OMG, no ropes, they could fall / Hey, is that Chamonix? I need to book for next year”. So treat every word and image as either adding value, or being a distraction that could lose the attention of the investor.
- Remember the ask!
If your slide deck doesn’t end by saying what you’re looking for, your investor will be left thinking, “nice, but why are they showing me this?”. So make sure your deck ends with an ask, “Raising £300K, offering SEIS and EIS” and of course your contact details and web URL. You’d be surprised at how many decks miss that.
- Know when it’s time to stop.
I’ve seen pitches which had me at slide 12, then lost me at slide 30. A pitch deck should tell a story, and like a story it has a beginning (the problem you’re solving, what it is), a middle (market size, competition, unique advantages) and an end (revenue projections, traction so far, team, the ask). And, then, job done, stop there. Get the slides in the wrong order and you’ll miss building the desire and holding the attention of the investor.