We are coming off of a successful CO_INVEST CLEANTECH, in which we unveiled our new 2018 investments and highlighted portfolio company successes. As we collaborated with our portfolio companies on their pitches, we realized that there are a lot of resources and beliefs out there on what the best Series A pitch looks like. Beyond CO_INVEST CLEANTECH, we work with many of our seed-stage portfolio companies to prepare for this next step. We have sorted through these resources and collected our thoughts to develop a guide and highlight the most interesting points for startups preparing for their Series A pitch.
- Recommendations For Any Early-Stage Startup
- Heated Topics & CET’s Perspective
- Specific Advice for Deep Tech Startups
- Things to Keep in Mind for the Meeting
- Slide Content & Flow
Recommendations For Any Early-Stage Startup
The following recommendations are exceptionally critical for Series A fundraising
- Be business-focused, not product-focused: Many founders find themselves talking about their product, when investors really want to know “is this company likely to become far more valuable in the future?” Look no further than the the cliche: “VCs don’t invest in products, they invest in businesses”.
- Have the right deck for the right occasion: You will need multiple Series A decks to tailor your content for specific audiences and situations. Not exhaustive, but you will need an introductory deck sent over email, the preliminary over-the-phone deck, investor pitch in-person, and the post-pitch deck. All of these require different content depending on the stage in the investment process and if it’s a standalone deck vs. in-person presentation.
- Have a monthly financial plan for 18-24 months: It’s important to know strategy 2+ years out, but investors want to know what you are going to use their money for in the immediate future; include historical numbers prior to projections.
- Don’t forget about customer acquisition: While this is a big point of focus for B2C software startups, it’s often overlooked by startups developing B2B solutions for industry. For your Series A, it may be too difficult to calculate customer acquisition costs on a per-unit basis. However, you do need to show you have a plan in place to cover the cost of long sales cycles, trade shows, and other marketing expenses.
The following recommendations are relevant for any stage of fundraising
- Avoid too much content: Don’t drown them with information – you don’t need to share everything and sometimes less is more. We suggest 10-15 slides (no more than 20) for the big investor pitch and much less for introductory decks.
- Design is now table stakes: Content and story is most critical, but this document represents you and your company so make sure it looks nice. If design is not your strong suit, you can consider outsourcing once content and story are complete (design / formatting only!).
- Bottom-up TAM approach is preferred: Explain the total addressable market and your opportunity through number of customers and revenue/customer; this makes it more real and shows you know your stuff.
- Highlight key milestones: show the investors what you’re going to accomplish with their money and identify the proper metrics so you can appropriately track your goals; however, be careful what you mention as the future board will evaluate you based on these goals.
Heated Topics & CET’s Perspective
- Where does the team slide go? We’ve seen decks, blog posts, etc. place the team slide in the beginning, middle, and end. We believe that placing near the end avoids distractions and eating up precious time up-front. Spend 30 seconds at the beginning of the pitch to introduce the founders present at the meeting.
- Are talking headers better than simple ones? There are many different theories on what’s easiest for investors to digest your information. Although experts struggle to reach agreement on the format, everyone will agree that if your headers are crisp and to-the-point, it won’t be a problem. Also, using talking headers is a great way to tell a story if you are unable to provide a voice-over.
- Are x-y competitive landscapes acceptable? We’ve seen blogs saying they are over-used, to just use a list, or sprinkle competitors throughout the deck, etc.. What’s more important is that the content is right. Make sure you are differentiated based on strategy, not each attribute of your technology. If you are creating a new market or competing across multiple existing technologies, use a more creative method to showcase your knowledge (e.g. the petal1).
- What is the best method to share your deck (attachment vs. link)?: Today, there are many resources out there to share your deck via a cloud-based resource2 (e.g. docsend, pitchXO, or attach.io) that provides security, controlled viewing, tracking, and allows real-time changes. However, you lose some benefits of an attachment. Investors receive too many pitch decks as it is, and they may be reading them on their phone on the train, so you don’t want to give them any excuses to not read it. They also may be forwarding the deck to their junior analyst or circulating it with others. Your deck shouldn’t have anything you are worried about sharing with others anyways. We believe the cons outweigh the benefits of a link. Send an attachment…and make sure it’s a PDF.
- What if I’m not ready to talk about customer traction? If you have great traction, margins, customer growth…that’s perfect, but few companies do during a Series A. Most companies are focused on product improvement not customer acquisition. Investors will gravitate to your company’s traction and current sales – so if you don’t have much traction, make sure you’re thinking far enough ahead to tell stories about the future. What does early traction look like and how will you scale the business from there?
Specific Advice for “Deep Tech” Startups
”Deep tech” startups deliver breakthroughs in science and engineering that transform industries and solve real-world problems.
- It’s OK to not be revenue-generating: Deep tech is typically capital-intensive with long product development times. You should focus on IP, pilot successes, timeline to market, and customer acquisition channels. If it’s truly disruptive, investors will be a bit more patient for market traction.
- Invite your investors to your lab: Ideally you can provide a demo during your pitch, but this is really tough for deep tech. If you can’t bring the prototype in, make a video or share customer testimonials and anecdotes. Or better yet – invite the investors to your lab to see the special sauce!
- Prove you have thought through development3: This is a critical miscalculation by many deep tech startups. Show that you have established testing protocols, gone through customer discovery, set a development budget that aligns with your business plan, and factor in time for validation testing.
- Acknowledge regulations & certifications: If you are in a highly regulated industry or know you will encounter regulations or need certifications, show that you understand the requirements and are thinking about the future. For example, if you are in the UAV industry – speak to FAA regulations.
Things to Keep in Mind for the Meeting
As you wrap up the deck and prepare for the meeting, there are a few points to keep in mind.
Create a list of anticipated questions and concerns that investors will have for you. Draw from unanswered questions from your last round of funding. Surface these throughout your pitch to curb investors’ speculation.
Simplify your language and always use your own. It may go without saying, but don’t hide your best stuff. If you have something important to say (e.g. significant traction, great results of a pilot), make sure to share earlier so the investors don’t miss it.
Lastly, your pitch can only address so many points. So make sure there is ample time – we recommend 30 minutes for an hour in-person meeting – to answer questions from investors.
Slide Content & Flow
As we mentioned earlier, you should be prepared to have the right deck for the right occasion. However, generally speaking – we believe every deck should have the content and follow the flow highlighted below:
- Title/Intro: Include a “tagline” and use opportunity to set context for your audience
- Problem: Lay out the issue at hand and current solutions, before talking about yours
- Solution: Focus on the value prop of your solution, not your technology attributes
- Results: Show customer traction (include quotes), successful pilots, current revenue
- Market opportunity: Identify bottoms-up TAM, showing the problem is worth solving for
- Competitive landscape: Differentiate on strategy, not each attribute of your technology
- Business model: Highlight sales channels customer acquisition approach
- Milestones & next steps: Explain what you will accomplish with the investor’s money
- Team: Take the opportunity to highlight mix of skills on the team and where are the gaps
- Round details: Set stage for timing, size of raise, status of round, etc.
2 – cloud-based resources: https://medium.com/techstars/a-step-by-step-guide-to-prepare-your-series-a-fundraising-f9d51ba27f6
3 – Don’t underestimate development: http://prgnpi.com/preparing-your-hardware-startup-to-get-funded/
4 – Slide recommendations: https://medium.com/the-stack/what-should-be-in-my-fundraising-slides-eca162d14d2a
by James DePaul, Northwestern University – Kellogg MBA, CET investment intern ’18