The startup and venture capital market keeps growing year after year. A survey by EY (Ernst & Young) found that almost US$ 210 bn of venture capital was invested in startups worldwide in 2022. In Brazil, KPMG reported US$ 3.4 bn in the same year. It is a huge market, with plenty of room for high returns in companies that want to grow and bring their solution to more and more customers.
But finding investors is not easy. The funnel to get funding from large funds and angel investor groups is brutal, and the least prepared are cut quickly. To stand out and get investors' attention, you need a good presentation. Being an excellent company with an exceptional solution is not enough. You also have to communicate it to the investor.
The traditional way to do this is a pitch deck: the startup's company presentation, with its offer to raise money for investment in the business. Every investor has a unique investment thesis and prefers certain kinds of companies, industries or growth stages. But investors tend to compare startups the same way, with the same yardstick. That lets them weigh different investment opportunities and pick the one that makes the most sense.
To put your company on that yardstick, you need to answer a few questions every investor asks, and the pitch deck plays a key role in that process. It is the investor's first contact with the startup. It may also be the last, if it fails to hook the investor into wanting to learn more and, eventually, start talks about investing.
To help founders who are raising money from investors, I have listed below seven essential pieces of information your pitch deck needs. Here they are:
1. Pain
Start your presentation by explaining why you decided to found your startup. Every solution or product comes from a need, a pain point. If customers have no need, they will not buy your product or solution. Here you can go into detail on your customer persona.
2. Solution
Once you have defined the pain, it is time to present the solution. Show how your company will solve the customer's pain. If it is a new solution (such as a technological development), make that clear. If something similar already exists, explain the differences that make yours unique.
3. Opportunity
No investor wants to back a founder who does not know what they are getting into. This is where you show that you did your homework, that you know the size of your market and that the investment opportunity is for something really big. Here it is important to state three very common metrics: TAM, SAM and SOM.
- TAM: Total Addressable Market. This is the whole market you operate in, usually global or at least national: the total traded or billed in the startup's market.
- SAM: Serviceable Available Market. This is the part of the market available to your company. Only very mature companies can fully reach the global market. So even after showing the TAM, it is important to show the SAM: the market that is available and that you can somehow reach.
- SOM: Serviceable Obtainable Market. This is the market you will actually reach, or intend to reach. Based on your metrics, what market share do you expect to achieve under your business plan?
4. Specifics
Now that your potential investor knows what your company does and how big its growth opportunity is, it is time to show more of your solution. Go deeper into your startup's business model. Some questions to answer here: How does your startup make money? How do you charge for your product or service: is it SaaS, do you charge for performance, or do you take a share of each transaction (take rate)? Who are your customers: B2B, B2C, B2B2C, B2G? Add any other details you think are important to share.
5. Credibility
This is the moment to sell yourself. Show your startup's credibility: who the founding team or senior management are, how many customers you have reached, your revenue, your strategic partnerships. In short, show the investor how far you have come without their help. They will infer that, with their help, you can go even further.
6. Sustainability
I do not mean ESG, important as that topic is. This is the moment to show that your company can stand on its own. Go into the financials and show that your business model is profitable in the long run, even if the startup's bottom line is not in the black yet. Some important points to show here:
- CAC: Customer Acquisition Cost. How much it costs the company to bring in a new customer: marketing spend, proofs of concept (POCs) and so on.
- LTV: Lifetime Value, the expected return from a customer. Once you have won a customer, how much that customer will generate for the company over the years.
- LTV/CAC: how many times your LTV exceeds your CAC. For example, if you spend BRL 50 on marketing to win a customer and that customer brings you BRL 500 in "profit" over their lifetime, your LTV/CAC is 10x.
- Breakeven/cash burn/runway: Is your startup already operating in the black, or is it still burning cash? If it is still burning cash, how much per month, and what is your runway? In other words, with the company's current cash, how many months of cash burn does it have left before it runs out of money?
- Financial projections: A pitch deck is a quick 10- to 15-minute presentation. Nobody expects you to go into the details of the company's financial projections, but a few specific points matter, such as projected growth, revenue and breakeven.
7. Offer
Finally, it is time to talk about the investment. If the investor has made it this far, they are interested. Cover the total amount the startup is raising in this round, how you plan to use the money, the stake in the company you are willing to sell and the other key terms of the deal.