How to bulletproof your fundraising deck

Or what you can learn from academics, lawyers, and your physics teacher in junior high school

This is not a good TAM slide.

There is no shortage of great advice on how to create a great fundraising deck. Our very own Michael Wolfe (not to be confused with the Fire and Fury Michael Wolff, by the way, nor with the fantastic comedian Michelle Wolf) wrote an excellent article about what should be in your fundraising slides some time ago. Mark Suster put together this great post with lots of tips and resources, an older post but still very relevant. There are several templates that you can find online, plus collections of dozens of fundraising decks from real startups. One of my favorite ones is Front’s Series B deck (🙏 @Mathilde). If you’re new to the topic, these are all good places to start.

In this post, I’d like to address a few details which I think haven’t been covered yet. Specifically, I’d like to share a couple of things that I think you should keep in mind when you present numbers, charts, and estimates in your deck. These simple tips and tricks are easy to implement, will help you bulletproof your deck and might smoothen your fundraising process.

All right, let’s dive in!


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1) Come up with a comprehensible bottom-up TAM estimate

Almost all fundraising decks include some estimates regarding the company’s addressable market. But sometimes these numbers border on the line of being BS because they aren’t specific enough:

  • To make up an example, if you want to convey the size of the market for practice management software for doctors in the US to an investor and you tell him or her that healthcare software is a $10B industry, that’s not quite as bad as the proverbial “1% of China”, but not very useful either. If you say that there are approximately 230,000 physician practices in the US, which multiplied with your ARPA of $500 per month leads to a TAM of around $1.4B, that’s much better. You can, of course, talk about how you’re going to expand your TAM over time by going into new segments and/or increasing your wallet share, and it may be helpful to point out that your initial market or segment is part of a much larger market, which you might be able to tap into later on. But you should always try to come up with a bottom-up estimate of your addressable market as opposed to relying exclusively on top-down numbers that you’ve found somewhere.
  • If you’re building a marketplace, make it clear if the market size numbers that you mention refer to GMV or your cut of the GMV. Your so-called “rake” can vary substantially for different industries and different types of marketplaces, so try to complement your GMV number with an estimate of your rake. Check out this great post on marketplace monetization strategies by our marketplaces expert Pawel for food for thought on this topic.
  • If you’re addressing a market that is currently served by a combination of software and services, make it clear which portion is spent on software and how much is spent on services. Depending on what your product does, it can be reasonable to assume that the software part of the market will grow over time (while the total market might shrink).

Why does this matter?

The size of your initial market is something many investors care about. It doesn’t mean that everyone is fixated on a large initial market. Some companies go after a smaller segment initially and expand their addressable market over time. In some cases, it’s hard to come up with any numbers because you’re creating the market. Your TAM is just one of many data points which investors will look at when they try to assess the opportunity. But it’s an important one, so try to make it easy for your audience to get a sense for that number.

2) Make it easy to verify your estimates and claims

If your deck mentions, for example, a TAM estimate by a market research firm, always add the source of that number. The same applies to any other external numbers that you include in your slides, and more broadly to all claims that you make in your deck. Always include a footnote with background information or a link to the source document. Think of how scientists cite their sources in academic papers. You don’t have to work as diligently as a researcher because you’re not trying to get a Ph.D. for your fundraising deck, but directionally, this is the way to go.

Why does this matter?

VCs look at hundreds of decks each month, and most of them contain pretty bold claims. By making it simple for the investor to quickly validate your claims you can easily make your pitch more convincing. For example, if you’re saying that your software makes people 20% more efficient, investors would probably like to understand the details behind that statement. How did you define and measure “efficient”? How large was the sample? Which baseline did you compare your software against? Call me a pedantic, but if you’re saying that your CAC/LTV ratio is 1:5, I want to know exactly how you’re calculating CACs, how you’re estimating LTV, and which customer cohort you are referring to.

Extraordinary claims require extraordinary evidence, AKA the Sagan standard

It doesn’t mean that the VC you’re pitching will spend hours reading all the materials you provide right away, but if you give her a chance to glance over the data that forms the basis of your claims, that can go a long way in terms of instilling trust and credibility. And to borrow another page from scientists, the bolder the claim that you’re making is, the stronger should be the evidence that you deliver.

3) Avoid ambiguity

If you’re using any metrics for which there is no universally accepted definition, include your definition in the deck. Let’s say you run a consumer web service and you’re saying that you have a “repeat rate of 80%”. If you don’t provide additional context, you’re not transporting any useful information. Are you saying that 80% of your visits are from repeat users? Or that 80% of your users return? If so, during which time interval? Similarly, if you talk about your churn rate, I need to know if you’re referring to logo churn or dollar churn, and in case of the latter, if you mean gross or net churn, and so on.

If you are reporting metrics that are clearly defined, such as MRR or EBIT, everybody knows what you mean. But whenever you’re not sure if your reader knows exactly what you’re talking about, you should provide a definition. Take a look at how diligently public companies define non-GAAP metrics in financial statements or SEC filings. I looked at the various ways how public SaaS companies report churn in this post, in case you’d like to dig deeper into this topic.

Why does this matter?

For public companies, accurate reporting of metrics can be a question of survival. Unclear financial communication can get a company into trouble with the SEC and lead to shareholder lawsuits, which is why their finance and legal teams go to such great lengths to avoid the slightest ambiguity.

Hubspot’s definition of its retention rate, taken from the company’s IPO prospectus

If you’re an early-stage founder, inaccurate financial reporting will fortunately not get you into jail. But talking about metrics without a mutual understanding of those metrics makes communication inefficient and might make people wonder if you’re on top of your numbers. Remember that junior high-school physics teacher who kept reminding students that a numerical result is worthless without the right unit? She was right.

4) Don’t try to lie with charts

Thank you for the beautiful illustrations, team Geckoboard.

There are so many ways to lie with statistics. Heck, there’s even a book titled how to lie with statistics. Charts are similar. And it’s not just about plain lies, with a little bit of creativity you can convey different messages with one and the same dataset, at least superficially. Your ARR growth curve isn’t as steep as it should be? Just compress the x-axis and stretch the y-axis. Still not steep enough? Cut off a part of the y-axis. Or what iyour chart for new signups per month doesn’t look great? Just show the number of cumulative signups instead.

Fictional ARR chart before any cosmetic surgeries
The same chart with a compressed x-axis
The same chart with a cut-off y-axis

There are many more ways how you can try to make your numbers make look better than they are. My advice: It’s fine to show your numbers in a good light, but don’t overdo it. If you’re showing six months of data, you don’t have to use a chart in “widescreen” format. If you think your pre-pivot revenue numbers aren’t relevant, show a chart that starts post-pivot. If your average churn rate masks a lower churn rate of your “pro” customers, show a separate chart with the churn rate of the “pro” customers segment. But be reasonable, and remember that people will want to see the raw numbers later in the process.

Why does this matter?

Think about VCs what you want, but digging into numbers is one of the things which almost all VCs are good at, and their BS antennas are sharpened by 10,000 hours of checking out decks and working with Excel. :) So your chances of getting away with a too creative interpretation of your numbers are meager, not to mention the fact that you don’t want to start a relationship with a lie.

Do you agree that it makes sense to bulletproof your deck this way? Looking forward to your comments and suggestions!

UPDATE (07/12/2018): A few days after I’ve published this post, my friends over at Geckoboard have, by pure coincidence, released a great guide and a beautiful poster that addresses, among other things, some of the issues I wrote about in this post. They’ve also published a series of “cards”, some of which I will add to this post now. :-)