How to Create an Investor Ready Pitch Deck for Your App Idea
As a software design and development agency, we work with businesses of all sizes to create their product visions. Some of these organizations are in the early stages of their product development and are actively seeking to expand their business as they make product refinements. At an early stage, companies can create Minimum Viable Products (MVPs), clickable prototypes, or basic product demos to garner potential customers and obtain revenue. Once organizations start gaining traction, oftentimes they need to raise funds to scale their product visions and to expand their team in preparation for growth. Are you interested in raising funds for your organization? If so, read on.
As an entrepreneur, you may find yourself actively seeking funding from various sources to reinvest in your operations. One common mechanism to raise these funds is by obtaining institutional or angel funding. In each geographic region or industry, there are individuals and groups that are willing to risk their capital for the potential of a high return. Crunchbase tracks yearly fundraising and provides insights into the risks of these particular investments. Here is an article outlining funds raised by companies in 2020 to give a broader perspective of the investment ecosystem.
Overall, investors believe that by investing in higher-risk businesses that have a high potential of growth they can create a “multiplier effect” on the capital they have invested. Many of these startup investments fail, but for the ones that succeed, an investor can make 10x or higher on their initial investment.
Raising Investment Simplified
For any fledgling startup, the process of raising money can be daunting. In short, as an entrepreneur, you are trying to convince an experienced investor that you have a unique idea, the team to execute on that idea, and the ability to make them a return at the end of the process. You have to convince investors that you have a clear plan on how you will acquire customers, provide value to those customers, and convince those customers to pay you a reasonable amount for the value you are providing. This is where a slide deck comes in.
A slide deck, or as it is colloquially known, “A Pitch Deck”, is a set of slides organized in a powerpoint presentation that aims to outline your high-level vision for how you hope to take on a unique idea and to grow that idea into a sustainable business. Companies like Airbnb, Uber, and Stripe all started with a basic idea that required investment to grow and each went on to raise hundreds of millions (sometimes billions) of dollars to turn their vision into a scalable business. While materials including financials, legal documents, business plans, and diligence items are key in gaining investment, a pitch deck is the most critical document needed in order to raise funding and convince investors that your idea has merit and can make money in the long run.
The Key Sections of a Pitch Deck
The format of pitch decks vary on the type of fundraising round (Pre-Seed, Seed, Series A, etc.) but most successful seed funding pitch decks contain the following slides. See a basic description of each slide below:
On this slide, it is important to outline the vision of the organization, what you hope to accomplish long term, and a brief description of how the company will fit into the broader marketplace.
Arguably the most important slide, the problem slide should clearly outline the market need for the proposed solution, the financial cost of this problem, and the potential upside of creating a solution to the problem.
In line with the problem slide, the solution slide should clearly articulate how the proposed product/vision of the organization will aim to solve the stated problem and obtain the vision for the product long term.
Why Now/Competitive Differentiation
Just as it is important to define the solution, it is important to clearly articulate how this solution is different from other solutions that currently exist and “why now” is the appropriate time for this solution. Timing can oftentimes make or break a startup organization so outlining the importance of creating this product now will give helpful context to investors.
The market size slide is critical in identifying the quantifiable monetary opportunity of solving the problem at hand. This slide establishes the total achievable market capitalization of the company if you are successful in executing your product vision long-term. By setting the scale, investors can begin to see the potential monetary return on their investment if the organization succeeds in attaining a specific percentage of the market.
In line with the solution, the product slide should provide granular information on what the product is and how it will solve the defined problem. This slide should also include any high-level information on whether or not the product is proprietary and what makes it unique in solving the problem that it’s users face.
This slide is arguably the second most important slide in the pitch deck. Ideas are a dime a dozen and investors need to feel confident that you and your team can execute on your vision. Outline the team, supporting advisors, board members and their combined experience to give investors confidence that the organization will be successful in executing on its long-term vision.
Alongside the market size, this slide aims to give investors insights into how the organization will make money. As the market size outlines the total financial opportunity, the revenue model slide gives more specific information on how much a company will charge for its product/services to individual customers and possible additional sources of revenue as the company grows.
Just as it is important to discuss competitive advantages, market size, and revenue model, it is also important to discuss the other players in the space that are competing directly and indirectly. Investors need to feel confident that the work that your team is accomplishing will differentiate itself from the competition.
Towards the end of the presentation, it is essential to outline the basic financials of the organization. This includes the amount of money the business is spending (its burn rate), where the company currently is from a yearly revenue standpoint (Annual Recurring Revenue/Monthly Recurring Revenue), and any other financial information that is pertinent to your company’s growth.
The last slide should include a high-level financing request from the investors. Oftentimes, companies will use this slide to identify what basic investment terms they are considering (valuation, equity vs. note fundraise, etc.) to give investors an idea of what they are purchasing for their investment. The specific terms of the investment will be highly negotiated after the meeting but this can often provide a starting point for discussions.
Creating a successful pitch deck is possible if you simply take the time to architect the slides and inject the pertinent information that investors want to see. You will find that you will end up creating various iterations of pitch decks for investors as no single investor is the same. Over time and with feedback from colleagues and advisors, your pitch deck will become one of the most important deliverables that you can use to raise funds and grow your business.
Kyle Linton is the VP of Operations at Lithios. He focuses on reducing blockers and creating repeatable processes for the internal teams. In his free time, he partakes in interpretive dance.