Most startups need funding from external investors. External investors need to be introduced to a startup’s growth potential to make them ready to invest money. The pitch deck is a brief presentation that allows investors and other stakeholders to get an idea about the business of the startup.
The pitch deck should generally be as concise as possible while also giving relevant details. According to my experience, the following information should be included in a pitch deck :
- Introductory Slide (elevator pitch)
- Why Now?
- Why Us?
- Business Model
The entrepreneur should create an ‘elevator pitch’. Elevator pitch is a 2-3 line introduction to the startup. Within 30 seconds to 1 minute, the entrepreneur should be able to tell the startup to the potential investor. This first slide acts as an interesting hook for the rest of the presentation. If you cannot hook the investor with the elevator pitch then the investor may not listen to the whole presentation attentively.
For example, the elevator pitch of startup Fun2Do Labs is very simple: ‘We are making a Doraemon like story world through which we can teach primary school kids.’
Startups exist to solve problems and provide a solution. The problem should be big enough and urgent enough to interest the investor.
A startup should be able to devise a good solution to the problem described above. The solution should be desirable, viable and feasible. A startup should tell about the solution and its major points in the pitch deck.
Investors generally ask about the right timing. They generally ask why someone has not created a solution to the big problem to date. The startup should have a good answer to this question.
The startup needs to define the potential market, it’s size and the structure. The startup needs to share the following 3 things related to market size:
- Total Addressable Market (TAM)
The total market size if the company can reach everyone who can use the solution.
For example, a company building Netflix kind of video streaming solution can say that there are 4 billion people having access to the internet. If everyone pays USD 5 a month then the total addressable market is USD 5 x 12 x 4 billion = USD 240 billion.
- Serviceable Available Market (SAM)
Serviceable available market (SAM) is the portion of TAM targeted and served by a company’s products or services.
In our above example, this will be people who have access to high-speed internet as Netflix type of solution cannot be used without high-speed internet. Also, it may need people to have either a TV or a mobile phone. It will also be useful only to those people who can be covered with the available content. So say if we have content in a few languages that will further restrict the number of potential users. Thus say only 1 billion people can be covered with the above restrictions. So the serviceable available market (SAM) will be USD 5 x 12 x 1 billion = USD 60 billion
- Serviceable Obtainable Market (SOM)
Serviceable obtainable market (SOM) refers to the share of the market which the company can get through its products. In the above example say we have 5 big competitors including Netflix and Disney. Thus say the company estimates getting a 20% market share. Then the Serviceable obtainable market (SOM) will be 25% of SAM i.e. USD 12 billion.
The startup needs to show the product. If a demo can be shown it should be shown. If showing a demo is not practical then preferably a video of it can be included. At least a slide showing the product visually along with the main features should be there.
This is a very important slide. The startup founders need to tell why they or their team will be able to beat the competition.
The startup needs to define the business model. In case its an internet based business the business model may be one of the few prominent ones :
- Paid App
- Freemium App
- Ad support content
- Software as a service (SaaS)
- Content Subscription
- Uber for X (Uber kind of physical service delivery using the Internet and apps)
The potential revenue and fixed and variable cost curves can also be shown to give a better idea of the power of the business model.
The startup needs to share details of the founders and the major members of the team. The educational qualifications and experience of the founders and major team members are generally shared.
The financial if any to date can be shared. The future projections can also be shared.
This will contain the amount required and the equity dilution which the founders are looking for in lieu of the investment.
Thus you can see that pitch decks are an important part of communicating facts about a startup to the investors. A good pitch deck is an important necessity in getting funding from professional investors. Both angel investors and venture capitalists (VCs) require a pitch deck. The only difference between pitch decks for angel investors and VCs is that during the early stage the product may not be ready and financials may not be there. Some of the other details like the market size may also be not as clear as in later stages. Thus pitch deck for early-stage investors may be less detailed and more concise.
I would also recommend the startup entrepreneurs to read some books and see some videos on presentation design. I have been a judge in many startup pitching competitions and my experience is that majority of people try to cram to mutch details in a slide. Once I was a judge in IIM Lucknow pitching competition and to my surprise, most teams created slides that looked like word documents. They were very information heavy. Ideally, visual thinking should be used and slides should have a lot of relevant visuals along with relevant points.
I would recommend books like ‘Presentation Zen’, ‘The Back of the Napkin’ and books and videos by Nancy Duarte to learn more about creating good presentations. The heart of human beings can only be reached using stories. Thus many of the famous authors who teach about presentations tell about presenting using storytelling. I have personally worked with Vijay Shekhar Sharma of Paytm. He is a great storyteller and has great convincing power. That ability is really a big reason for Paytm’s growth.
Thus if you want funding a great pitch deck is a must. You will not be able to create a great pitch deck in one shot. It’s an iterative process. Over time you will be able to iterate to a great pitch deck. When combined with visual thinking and great storytelling your probability of getting investment will be greatly increased.
Author: Saurabh Jain (Follow him on Twitter : @skjsaurabh)
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