The different requirements towards a pitch deck for Seed and Series A financings
Over the last couple of months I’ve been spending some time helping various entrepreneurs around their businesses as well as their fundraisings. One common pattern I’ve been observing during those talks is a common lack of differentiation of what investors are looking for during Seed and Series A financings. I’ve seen quite a few Series A decks which were basically a combination of a (client-oriented) sales deck and some rough financials, with the product part making of 80% of the story, often even without any detailed revenue numbers or costs structures and no advanced metrics at all. Most investors will not even bother looking at such a business unless the company was introduced via a trusted source. The first thing they will have to do is ask for some proper data, so why not provide it right away.
Let’s start with a very short summary of your basic message when going out raising the respective rounds:
- Seed: You have an early product concept and (ideally) some first users, customers and revenues. Something might work and you are now looking to verify these first successes and work on first steps of scaling.
- Series A: You claim / think to have found a scalable product and model and now need money to do so. Your business is already growing above benchmarks.
Every financing round (unless you are really scrambling and start doing internal rounds to keep the company alive) leads to a higher bar of expectations towards the state of your business as well as development potential. Most companies will not meet these demand, the funnel gets smaller and smaller. And the dominating factor in making such a decision becomes data, not your product. What matters is your traction (how fast are you growing, be it revenue or other factors such as users / user activity), how sustainable is or will your business be (detailed metrics such as LTV, CAC, Activity, Retention / Churn, Sales Velocity etc etc) and how large can it become (your market) within a certain time frame.
A pattern me and some other folks work by is first looking at some core metrics to get a basic understanding of size and growth of the business (check if it is in stage and corridor we are working in at an almost generic view with regards to what the company actually does in detail), then get a detailed understanding of company, product and market and finally looking really deep into the metrics. Each step is like a gate of a funnel and sometimes one question is enough for a decision.
Besides the standard best practices on presentations, here some hopefully helpful recommendations when preparing a deck for a Series A and beyond stage financing
- Have your metrics prepared and understood before you even start concepting your storyline or slides.
- Make sure your metrics are calculated properly, especially when operating in a metrics-dominated area like SaaS or eCommerce.
- Understand industry benchmarks and see how you compare, as most investors will use such comparisons for a first check. Your story and factors such as financing volume should be somewhat in line with the state and outlook of your business (another factor signaling an investor that you know what your are doing).
- Have a rough plan on how your business will develop and what factor the money plays (besides not running out of cash).
- Ask yourself if your business can really match the financing expectations (exit potential) an investor needs for an investment. Are you really fundable?!?
- Do not try to reuse slides from your sales or earlier financing decks. Take the time to work on your storyline and do not take shortcuts.
Also, but this is somewhat generic for all stages, it is important to have a clear understanding of where you as founders want to take the company with the next financing. What are the critical milestones to achieve and what is their relevance in the bigger picture of the development of the company. These milestones do not have to financials only, they can be anything from goals for key metrics, achieving a certain strategic positioning to building a specific expertise within your team. Be as transparent and clear about these factors as possible … since they are a key part of you pitch and you should align about these with your investors before they invest!