Getting Notice. What To Put in Your Pitch Deck To Make VC’s Swoon!

So you’ve done it. You are officially an entrepreneur. The entrepreneurship bug has bit you and you are itching to start your business. You have come up with an amazing business idea or product that undoubtedly will revolutionize the way consumers see the world. It’s awesome! All hail you! Let the billion dollar checks start rolling in. There’s only one problem. You need money. You need money to market this product or service to the masses. You need money to evolve your product from an MVP (Minimum Viable Product) to something ready for the masses. You also need money to eat.

But how does a new entrepreneur get money? Even the savviest saver may find it difficult to fund a business and banks may see your small business as too risky for a loan. This is why many entrepreneurs look for venture capital firms for investments. But if you are like the average entrepreneur you may not know what it takes to get a VC to invest in your company. That’s why we here at Zell Lurie Commercialization Fund are here to guide entrepreneurs on their journeys while providing our thought leadership on the inner workings of VCs. The Zell Lurie Commercialization Fund is a pre-seed investment fund established the University of Michigan to identify and accelerate the commercialization of ideas generated within the University of Michigan community and the surrounding area.

There is a lot of mystery regarding what it takes for a VC to invest in an early stage business. The goal of this blog post is to demystify this process a bit more to better prepare entrepreneurs. During your initial contact with a fund, they may ask you to send over a pitch deck. A pitch deck is a concise version of your business plan that tells what your business is, what you’ve accomplished so far, and what you need funding for? Below is a list of topics that many early stage start-ups leave out of their pitch decks and should always be included.

Know What Problem You Are Solving

Why does the world need your product? Who is it for? The worst response to “Who is your customer?” is “Everybody.” VCs want to see a clear value proposition for a specific customer group.

What’s Your Market?

What’s your market and how big is it? What is driving market growth? Can you profitability go to this target market? VC’s want to know that you’ve thought thoroughly about your market and have data to support your logic. (you might add something about debating whether team, product or market is most important in the early stage and how you a great market can overcome some other challenges)

Demonstrate How Unique Your Product Is

Why is your product special? What is your sustainable competitive advantage? Tell VCs what is proprietary. If it’s patented or in the process of getting patented, VCs want to know. Can you scale this business? If so, how do you plan on scaling it? Don’t make VC’s visualize anything if you can show it! Put a product in their hand or have a demo ready. The more they understand your product the more likely they are to invest in it.

Show Off Your Knowledgeable Team

Venture Capital firms seek entrepreneurs with special knowledge and experience in the industry that their company is in. You may think, if it’s a great idea why should it matter. But it matters. Having a great understanding of your space is pivotable to optimizing the product and developing relationships that could help facilitate the dissemination of a product or service. If the entrepreneur does not have this experience in a field, he or she should recruit teammates and advisors who do. Often accelerators and incubators can facilitate start-up introductions to potential partners and co-founders.

Show That You Know Your Competitors

If you say you don’t have any competition, most VCs will call BS. Every company that has ever been invented has competitors. Even if there are no current products or services like yours, there are substitutes. To start Uber without considering the reaction of taxi companies would not only have been absurd but irresponsible for an entrepreneur. Make sure you know who your Taxi company is, metaphorically speaking of course.

Let Them Know How You Plan On Making Money

There are a lot of factors that inhibit business from making money according to plan such as unclear unit economics, agile competition, suppliers higher in the value chain, longer sales cycles, price sensitive customers etc. Let VCs know that you have thought through these factors and have devised a clear strategy to make money. No plan is going to be perfect but the goal is to show how knowledgeable you are about factors that can impact your profitability.

Communicate Your Exit Strategy

VCs care about the exit — a company acquisition or IPO at which their investment is returned, hopefully at a big multiple. Remember that they are investing in your business, not donating to it. Outline your exit strategy — i.e. why should the VC care? Make sure to list out some reasonable options assuming your business grows the way you describe it. Include multiple potential scenarios.

Who is Giving You Money

VCs often want to know that others have bet on you and you’ve bet on yourself. Have you proven your business convincing enough to garner investment and created value with that money? A proven track record of raising money and hitting milestones goes a long way to getting more funding.

Ask For Advice and Criticism

Lastly, be open to advice and constructive criticism. Better yet, ask for criticism. Often times entrepreneurs wonder why their products have not been invested in, but they fail to ask VCs for advice. Sometimes investors who understand how personal a start-up can be to an entrepreneur are reticent to provide feedback on why a particular business was not invested in, for fear of backlash. Ask the VC what your company can do better the next go round. Be receptive and take heed of their advice so that you can improve your overall pitch.

Starting a business and raising money is challenging for most entrepreneurs, but those who follow these step may find it to be a piece of cake.