A Simple Tip to Improve Your Pitch Deck
Most pitch decks include a “Use of Funds” slide. Typically, the slide describes exactly how the company will spend the money. “We’ll hire two front-end developers, hire a sales and marketing lead, attend three trade shows….” If that sounds familiar, I have a simple suggestion to improve the quality of your pitch deck and elevate your conversations with investors:
Don’t describe how you’ll spend the money. Describe what you’ll accomplish with the money.
This is a simple framing shift, but an important one. It helps to shift from an input-centric perspective to an output-centric perspective resulting in more efficient discussions, improved goal alignment, and the potential to stand out in a crowded pool of potential investments.
Output-centric versus input-centric
Describing how you’ll spend the funds is an input-centric point of view that gets tactical before setting the proper context. In other words, this perspective focuses on the inputs (people, equipment, services, etc.), but ignores the outputs (commercial metrics — revenues, user growth, etc.) You tell investors how you’ll spend the money, but they don’t know what value it will create. Hint: they care about the value it creates. How will your company look at the end of the investment?
It’s much better to take the output-centric perspective. I like to think of output as:
Output = Inputs x Efficiency
If you only describe inputs, you’re only telling half of the story. And it’s the less important half of the story. Output is what really matters.
Hiring developers, attending trade shows, hiring sales and marketing leads, etc., aren’t meaningful if they’re used inefficiently and don’t generate output (i.e. commercial traction — revenue growth, user growth, etc.). Conversely, using inputs efficiently and generating substantial output makes a very compelling case for investment.
An output-centric (results-driven) point of view is nearly always better. You’re telling the investors what you can accomplish with their money and you provide context for the tactical, input-centric discussion.
The output-centric framing also helps to calibrate alignment with investors. Alignment is critical. Typical VCs see hundreds or even thousands of deals each year and only invest in a handful. Most investors start with a blunt filter and apply increasingly granular filters as they spend more time with companies.
Describing what you’ll accomplish with the funds is a tool to help calibrate goal alignment. Investors want to understand whether the milestones you’ll achieve from a given round are compelling. They also want to understand if they’re realistic. What you accomplish must position the company for one of three things: the next round of funding, profitability, or exit. If you’re raising a Seed round, what you accomplish with those funds must put you in a strong position to raise a Series A.
If what you plan to accomplish is misaligned with the investors, or unrealistic from their perspective, they’ll either encourage you to revisit your assumptions or pass on the investment. It’s okay if they pass as long as you figure it out quickly before wasting too much of either of your time.
You’re competing with hundreds (thousands?) of other companies for the attention and dollars of every VC you pitch. Most of those companies are using the traditional input-centric view of “Use of Funds.” Using the more output-centric framing I’m recommending adds a level of sophistication to your pitch and may help differentiate you. I’m not suggesting it will be the difference between receiving investment and not, but in an ultra-competitive market every little edge helps.
Your use of funds, financial model, and business model should tell a cohesive story. Make sure the achievements you describe tie into your financial model. If your Seed round gets you to 50 customers and $1M ARR, your financial projections must reflect the same.
You also don’t get to ignore the tactical aspects. While the value you’ll create will be front and center you still need a deep understanding of how you’ll spend the funds to create that value. You financial model must reflect the “how”. Be prepared to walk through your tactical plans in detail.
This was a short post, but the idea described above is pretty simple. One shift in framing will help to calibrate alignment with investors, steer the direction of the tactical discussion, and may even help you stand out from the crowd.