Here are our top 5 tips for creating an investment deck for your startup. This is not your run-of-the-mill advice on the deck content – you can find it everywhere online. What you’ll see below are amendments we had to make again and again for our novice clients. So let’s begin.
What is an Investment Deck, and why do you need it?
An investment deck is the most important document a startup’s founder will create, potentially spelling the difference between the success and failure of their startup.
Also known as a pitch deck, startup deck, or slide deck, an investment desk is an informative overview of your vision and how to execute it. It attempts to convince the person sitting at the other side of the table that you have what it takes to do it. In other words, that you will provide a return on their investment.
Tip #1: There is Always Competition
If we could get a dollar for every time an entrepreneur told us they are “creating something new that no one has done before, for which there are no solutions, while there is an enormous need” – we would be pretty well off. When you declare something like this to an investor (or to anyone for that matter), it sounds as if you don’t understand your market, you are very arrogant, or both.
Outline the problem your company solves; show how other companies are trying to address it and then prove you can do it better/cheaper/more efficiently.
Tip #2: Your Numbers Should Reflect Your Assertions
When preparing an investment deck, you also prepare the financial documents that go along with it (mainly Profit and Loss and cash flow). This much most entrepreneurs know. What they don’t know is that the deck often shows a fast and very ambitious growth trajectory that the numbers do not support.
For example, stating you will achieve a revenue of $3 million in the U.S within two years, when your P&L doesn’t provide for business development managers, sales managers, SDRs, support technicians, and all the rest that is required to get those $3 million dollars. When you do go back and put the numbers in, you will probably realize that your growth trajectory was way too fast to be realistic.
We suggest you pay close attention to how your P&L reflects your business goals. Additionally, you should be 25% more conservative in your estimates than your goal. You’ll probably discover that even after the reduction, you’re way too optimistic.
Tip #3: Conduct Thorough Market Analysis
The most experienced entrepreneurs can fall into the pitfall of not searching the market well enough, and not coming up with correct numbers from reputable sources. Companies fall short in finding out the size of their addressable market. Too often, they confuse between their customer’s market (eg: the European insurance market) and their market (eg: risk management software for insurance companies).
Sometimes the most seasoned of players make this mistake. Here’s an example: Cognis was once called in as “deck doctors” to help write an investment deck that a VC prepared for its next financing round. The VC invests in Israeli enterprises that tackle a global problem. Yet the deck failed to show a fail-proof case, meaning a worldwide – and unmet – demand for solutions to this problem.
After researching the market we sourced hard data showing that large international companies in the field were working towards finding solutions, mainly through M&A.
Tip #4: Try to Show a Young and Fast-Growing Market
This tip actually connects all of the above: an investor would typically want to see a market and competitive landscape consisting of a recently created or intensified problem, with companies scrambling to provide solutions.
The best market is young (with a place for new competition), not yet standardized (no constricting regulations and standards, no prominent vendors competing over price), with high demand (as witnessed by the flurry of companies rushing to provide solutions).
This is the sweet spot, and that’s what we want to show the investor.
Tip #5: Good Storytelling is Important Here like Everywhere Else
An investment desk cannot be only about writing and detailing the information. It is a visual tool, telling a story.
Show your vision so an investor can understand and visualize, and then proceed along a timeline to show how this vision comes into fruition. Think about how relevant you are to the current climate your customers have found themselves in (for example, COVID-19). We cannot stress enough the importance of defining a message that will get through to an investor that is tired from going through many decks, and probably suffers from startup fatigue.
How to do it? Invest in a graphic designer and a marketing consultant with experience in startups to help you hone your positioning and messaging. Use images and diagrams to help you in the demonstration (but don’t let them take center stage). Even if you have written successful decks before, hire someone on an hourly basis to go through the deck and provide a much-needed second pair of eyes and professional assessment.
Conclusion
The goal of an investment deck is not to get your first investor onboard – the goal is to score another meeting. What you want is a foot in the door. Remember, your investor will become your business partner from now on, so candidness is key. Demonstrating a deep understanding of the complexities and challenges ahead – not hiding them – will build the trust you need to forge a good business relationship with your investor.