Investor pitch deck and communication strategies: pre-seed and seed
For better or worse, the practice of selling anything of significant value in the world of business involves pitch decks. This includes, of course, “selling” your next funding round to investors. While there is no lack of educational content out there recommending an ideal slide order for your deck (e.g. problem, solution, market size, traction, competitors, team, etc…), this article will guide you - an early stage startup CEO - through the nuances and differences of pre-seed and seed pitches, including tips for how to communicate with investors before and after the close. The more efficiently you can get in front of the appropriate angel investors and venture capitalists, the faster you can finish your round and get back to running your business.
EARLY STAGE INVESTORS ARE BETTING MOSTLY ON YOU, THE FOUNDER & CEO
The first fundamental lesson to learn in the early days of fundraising is that investors are - for the most part - betting on the CEO. This is exponentially more true the earlier the round.
Savvy investors understand that the most likely outcome of their early stage bet is zero return (i.e. they will lose all their money), but when they do see a return, it will happen because you took the subsequent ~7-15 years of your life to successfully build a team, pivot your core business, find product-market fit, land key partnerships, secure a bunch of funding rounds, release new product lines, and, ultimately, sell your business or IPO it.
Therefore, what’s actually going on in the minds of savvy investors when you are pitching them your early startup’s product, solution, market dynamics, etc… is whether or not you have what it takes to go the distance through the gauntlet of startup life (which is brutal) and generate them a return. Extraordinary grit, intelligence, charisma, and empathy for your customers are all characteristics that experienced investors will be looking for as you pitch them.
THE PRE-SEED ROUND: TELLING A COMPELLING STORY AROUND YOU
While “pre-seed” and “seed” are ambiguous terms that can describe very different raise amounts depending on your geography, they tend to universally represent a startup’s first two significant funding rounds - if needed - before the Series A (sometimes even a third or fourth “bridge round” is needed as well).
As it relates to your pitch deck at the pre-seed level - which is typically before you have a live product or are extremely early in its lifecycle - it’s a good idea to focus more up front about who you are, why you are the right person to build this business, and how your passion for the space will help carry you forward through the next decade or two, even when it gets really, really hard.
Therefore, a solid deck order for pre-seed fundraising is the following (we’ll discuss each below in detail).
- Title & Tagline
- Founder Story
- Why Now?
- Market Size
- Business Model
- Unique Advantages
- Marketing Plan
- Co-founders / Advisors
- Fundraising Details
If you are presenting your pitch to a large audience, the fewer words on your slides the better.
It’s a good idea to use short, complete sentences for titles to communicate the main point of the slide, rather than using a title like “The Problem”.
Many founders prepare a “presentation deck” and an “email deck”, which is a smart strategy. In your email deck, especially, don’t get overly liberal passing it around. Remember that an important tactic is to get in front of an investor with as little information as possible (e.g. a customized email blurb tailored to the investor plus an attached 1-pager), and send more info (such as your email deck) after you meet. See Troy Henikoff’s short video Finding the Right Investor for details on this important sales technique. It’s easy for an investor to think they know enough for “no” from looking at your deck, but meeting in-person gives you a much better chance for a yes because you are establishing a more personal connection and communicating vastly more verbal and non-verbal information for them to make a decision. This tactic is especially important for early rounds, since there is less historical data to serve as a foundation for investment.
TITLE AND TAGLINE
For the first slide in your deck, simply write the name of your company, or display your logo if you have one, and include a descriptive/catchy tagline. For example:
Your tagline is essentially your company’s purpose; i.e. it should succinctly communicate what your startup is all about and generate curiosity from an investor.
Dive into the current inefficiencies, areas for significant improvement, and insights into the market. For example:
Uber recognized that the medallion system was not optimal for both drivers and clients, and that hailing a cab digitally was going to be disruptive.
This slide should have a few key talking points and show off your product. Even if you are pre-product, you can show mockups. For example:
When you email a deck with a slide like this, it’s ok to add a few key bullet points about your product (even in a quick followup slide). Otherwise, it’s perfectly appropriate to just say those points out loud while you pitch.
Tell the background and story of you, the CEO, and why you are uniquely suited to build this company. For example:
Here is where you need to talk specifically about market validation for your product, given your target geography and user behavioral nuances at this moment in history. For example:
In other words, AirBnB saw what was going on over at Couchsurfing circa 2008 (and especially all those temporary housing listings at Craigslist), and knew that they were getting started at an opportune time.
The key idea here is to convince investors that there are - or will be - enough people out there paying money for your type of product. For startups aiming to raise money from VCs, you want projected annual revenues - i.e. your share of the market - to be well into the billions (and for them to think it could dramatically bigger), since realistically you will only ever capture a fraction of that market and VCs want to see the sale price of your company well over a billion.
As I’ve written about earlier in this series, the best way to show market size is by calculating it “bottom-up” and relating it to your business model, i.e. the total number of active customers/transactions in your market multiplied by how much they could, potentially, pay per year. To use AirBnB’s example again:
Importantly, as it relates to “bottom-up” versus “top-down”, the “trips booked” that AirBnB used is a number of transactions, not a dollar amount. The founders then broke this down to the number related to their serviceable market (i.e. people booking trips online), and then multiplied by 15% to show investors a more realistic number for what one company in the market could do...i.e. that they are aiming at obtaining 84 million trips per year.
Savvy investors will bet that your market size will grow if you are a new category of product/service. In other words, the number of trips booked online certainly has grown dramatically since 2008. AirBnB could have (and likely did) talk about how market dynamics/trajectories were pointing in that direction.
To finish off the calculation of the market size, you should then show how your business model can specifically produce significant revenue at some point in the believable future:
Between this slide and your market size slide, investors will be given enough information to consider the reasonableness of the numbers - and whether you are the right person to execute the plan - when making a decision about whether or not to invest.
After your investors are impressed with your ambition to make billions every year, they will understanbly be curious about how you are going to pull it off and why it will be relatively hard for other teams to come along and do the same thing. This is the time to talk about your secret sauce, i.e. any patents/IP, unique features, etc… For example:
Uber had “secret sauce” behind their product that they were using to convince investors that they had a unique advantage. If you don’t have any extremely novel intellectual property, then it’s OK to tout your unique brand, ease of use, design, special features, etc…
Here is where it’s appropriate to define two axes that will put your company in the upper-right of a classic four-quadrant competition matrix. For example:
AirBnB was clearly going after “online” and “affordable”, and used that to define their matrix to show how they were unique in the competitive landscape. Despite sharing a quadrant, they were also obviously different than Hotels.com, given their unique model (i.e. sharing a house rather than booking a hotel), but that’s OK as an additional talking point rather than creating a 3-axis matrix, which is difficult to show on a 2-dimensional slide.
Describe your rock-solid go-to-market strategy. For example (from Mint.com’s pitch):
CO-FOUNDERS / ADVISORS?
Now is the time to talk-up the rest of your team and any notable advisors in the mix, highlighting why this is an amazing group of people to build the company with you. For example:
For a pre-seed pitch, here you’ll want to show the best possible data that demonstrates to investors that you are getting your act together and are on to something, even if you haven’t launched a product yet (e.g. key survey/interview results, testimonials/tweets, letters of intent, a promising sales pipeline, etc... ). Uber’s deck is a good example:
For any round (and especially pre-seed), you want to come up with the best possible story of progress to show investors you are making strong progress with the resources you’ve had to date.
Finally, describe the amount you are raising, the length of runway it will buy you, and the specific milestones you will achieve with the runway.
AirBnB’s deck is, again, a good example here:
Note that the AirBnB founders referred to the KPI that they discussed earlier in the deck on market size and business model (i.e. number of trips). With their $500k seed round, they are aiming to obtain about 10% of the annual revenue that they are targeting 4 years later. This helps tell a simple and cohesive story to investors, which - importantly - will be used to keep founders accountable during subsequent months after the close.
THE SEED ROUND: MORE TRACTION = MORE ATTENTION ON KPIS AND TESTIMONIALS
Typically, the biggest difference between a pre-seed and seed round is traction with a live product. Many startups skip the pre-seed round and bootstrap their way into an accelerator and/or enough movement in their KPIs to warrant a seed raise, which is admirable but not always possible.
Either way, there is plenty of information out there around suggested slide content and order for seed rounds, but the key additions to what is typically seen in a pre-seed decks are slides about traction and testimonials.
Here is a comparison of notable seed deck contents compiled by Slidebean:
And Docsend teamed up with a Harvard Business School professor in 2015, analyzed 200 startup seed rounds, and discovered the following about slide contents:
They also revealed the following about the time that investors spent on each slide:
Therefore, for seed rounds where you have strong traction with your KPIs (especially revenue), the following slide order is appropriate:
- Title & Tagline
- Testimonials & Press
- Why Now?
- Market Size
- Business Model
- Unique Advantages
- Marketing Plan
- Fundraising Details
Compared to a pre-seed deck, the emphasis here is much more on the traction and testimonials.
You get the idea. For your seed round, tell the most powerful story possible with the traction you are seeing in your KPIs, ideally with hockey-stick looking graphs related to your actual revenue.
TESTIMONIALS & PRESS
These slides are relatively straightforward. Here are AirBnB’s versions:
These days I see a lot of tweets in testimonial slides, sometimes even with many hearts/retweets attached to them. This can be a nice way to communicate to investors that you are on point with your social media game.
LESS IS MORE
It’s important to note that Ycombinator’s recommend seed deck template matches the order above, but doesn’t include a Why Now?, Competition, or Marketing Plan slide. In many cases, these can indeed be dropped or added as appendix slides, but the talking points will likely still be needed as you pitch investors.
Alex Iskold, a long-time Managing Director at Techstars in NYC, also recommends simplifying the standard seed round deck into the following order (note the emphasis on the team up front):
- Business Model
- Market Opportunity
- Financing + Milestones
And parsing it down even further, Fred Wilson has famously recommended attempting to keep it to only six slides.
The important point that these investors are all making is that taking a hard look at what you can drop from your pitch deck is a key exercise to make the message as clear and simple as possible. Don’t feel the need to put everything in there; it’s OK to mix things up and parse things down to tell your unique story. The best pitches often get “interrupted” along the way anyway with tons of questions, which is a good thing since you are effectively tailoring the pitch to the person.
Investors at the pre-seed and seed levels care much more about your ability to execute all the things a startup CEO needs to do over the subsequent decade (or more) to be successful. Seeing who you are, the team you’ve built, and the traction you’ve achieved are much more important than the nuances of your market, competitive landscape, marketing plan, and product details.
PRACTICAL TIPS FOR TARGETING PRE-SEED AND SEED INVESTORS
At the end of the day, the early stage VC firms in your startup community (or region) should be your first stop in your fundraising journey (outside friends and family) for early rounds. They are open for business, want to hear from you, can write relatively large checks, and are usually connected to many angel investors that can help fill out your rounds.
Focusing first on the appropriate seed firms will help hone your pitch and lower the number of meetings you need to take, which can save you a significant amount of time. According to data from DocSend in 2015, firm-led rounds raised twice as much money in 30% less time and required contacting 40% fewer investors. That being said, if you aren’t able to land a seed firm to lead your round you aren’t alone (or out of luck), since over 3x the number of rounds are led by angel investors vs. firms every year.
Importantly, as you identify angels and firms to contact, do your best to get an intro from either a founder they have previously funded or from a co-investor/friend. In these cases, they are much more likely to take a meeting. As I mentioned above, do your best to summarize the main points of your deck in a simple email blurb and 1-pager for your contacts to make introductions. Try to avoid sending the email version of your deck until after you’ve had a chance to present it in person (or, second best, over a video/screen-share call).
Following up every meeting with a clear next step or check-in meeting is important to keep the process rolling with each investor. Many will wait on the sidelines, see who else is investing, and only be forced to pull the trigger on signing the docs and wiring in money when you set a firm deadline and approach the coveted “over-subscribed” state of your round. The ball is in your court to keep in close communication with all your leads and work to get the round finished.
COMMUNICATING WITH INVESTORS AFTER THE CLOSE
Finally, it’s important to keep two email lists: one with investors that said yes (obviously), and one with investors that said no (less obvious). The second list will likely include investors with a fair amount of FOMO (Fear Of Missing Out), so keeping them posted occasionally (e.g. 1x/quarter) can be a good idea in order to loop them into your next round.
For investors that said yes, however, one solid update email per month is a great way to keep them posted on your KPIs, team growth, introduction needs for clients/partnerships/investors/employees, and - yes - problems that inevitably arise. Your investors are often experienced and connected people, who have a financial incentive for your success, so leaning on them as much as possible without being annoying is key.
In general I have found that most founders fail to communicate enough with their investors, and those that are on top of sending monthly updates tend to be the most successful. Regular emails from founders helps keep their startup and needs top-of-mind as investors travel around, connect with other investors, etc… This is a simple way to maximally leverage your advisors/investors, and most will be more than happy to help.
In addition to the monthly emails, an occasional phone call goes a long way (in both directions). One way to approach it is to call one of your investors every other week, i.e. so twice a month you are making progress staying in touch with everyone, and you’ll get back around to each investor every few months or so, depending on the size of your base. For better or worse, the fundraising and investor-communication process for you - the CEO - never really stops until you step out of your position, close down, and/or sell your business. For many investors that said “no” in your early rounds, your ability to regularly and honestly communicate with them about progress can be a key driving factor to move them to a “yes” for a subsequent round.
Author's note, this is the 34th and final article in my deep-dive series on idea-to-funding startup operations. Subscribe to my newsletter to stay posted on book release details and when I publish additional articles (I also write occasionally about health science and emerging technology). If you haven't tried Startup Rocket yet, sign up and poke around for free here. My partners and I put together the initial framework based on decades of experience at both sides of the funding table. Finally, I'd like to thank Troy, Vernon, and David for their extremely helpful comments on early drafts of this article.