Quite often, I get PowerPoint presentations targeted at investors (known as "investor decks") from founders who send them to me for overall critiques. (I invest in early-stage deals from time to time. I'm also on several boards.) Unfortunately, many of them fall short of the ultimate goal—that is, getting investors interested in pulling out their checkbooks.
Why do they often miss the mark? Too much focus on product and technology. Investors want to make money—so they are mostly interested in the business case. The information is too general. For example, the go-to strategy may neglect the sales cycle, the budgets and so on. Or they make over-the-top blanket statements, such as "there is no competition."
For the most part, I want to see an investor deck that tells a story, clearly showing the company's path to success. In fact, it doesn't need pizzazz or many slides (15 to 20 are fine).
So, what are the key elements of your story? Let's take a look at a framework every investor deck should include:
Why is this a compelling opportunity? Do research to put the competitive space in perspective. What is the pricing? Distribution? Investors? Recent initial public offerings? I'm not talking about hiring a research firm; using Google (GOOG) should suffice.
Armed with your research, you need to do two things: Identify an unmet need and then determine the size of the market opportunity (which, for venture capitalists, is usually at least $1 billion.)
A good example of a company that managed to articulate this element is Athenahealth (ATHN). Back in 1999 the upstart firm pitched Bryan Roberts, a VC at Venrock Associates. The company saw a multibillion-dollar market opportunity in helping physicians improve collections from insurance companies.
No doubt, there were many competitors; however, they were mostly mom-and-pop operators. By offering a Web-based approach, Athenahealth showed it could be a game-changer in the industry. Its offering was both more effective and cheaper.
Today, Athenahealth is growing its top-line or gross sales at 30%-plus and is on track to exceed $100 million in revenues for the year. The company's market value is about $943 million.
What are you doing that's unique? In simple terms, try to explain the key value proposition. Traditionally, investors want to see something that provides an improvement on existing approaches by a factor of 10.
An example is Berkeley Design. In 2002 the company pitched its deal to Daniel Ahn, who is a VC at Voyager Capital.
Berkeley was targeting the so-called electronic design automation market, which involves software to create microchips. At the time, the market was reaching the limits of its existing technology. But this company was able to demonstrate a unique approach, which allowed for simulated designs for analog and radio frequency chips. The upshot: Time to market was much quicker, and the simulations were highly accurate, which helped to reduce costs.
As a result, Berkeley has gotten traction, with customers that include the world's top-10 semiconductor companies.
What's the business model? First of all, make sure you understand the business models of your competitors. Is their approach sub-par? Keep in mind that it's not easy to move from one business model to another.
What's more, investors like to see a variety of revenue streams. A good example of a business that has achieved this is LinkedIn. The company sells premium subscriptions, ad sales, job postings, and enterprise solutions. It recently raised $53 million in venture capital, with a valuation of about $1 billion.
What are the cash needs and the milestones? Investors will likely ignore the revenue forecasts (they are often widely off the mark anyway). Instead, they want to see a month-by-month time line for the cash needs and milestones—say for a term of two years.
This was the approach of Ben Wolin, the CEO and co-founder of Waterfront Media, for his Series A round in 2003. In his investor deck, he specified a variety of key milestones, such as user counts, contracts, and new features.
The most important milestones you'll need to include? Go-to-market dates. Determining them requires talking to potential customers and trying to get answers to the following questions:
• Who makes the purchasing decisions?
• Where are the budgets?
• What are the realistic sales cycles?
• Are partners the preferred distribution approach? Or is a direct sales force?
Furthermore, make sure you have a slide on the milestones you have already achieved. If you are making progress on a month-by-month basis, you will certainly get the attention of investors.
Who is on your team? Provide bios on the main team players and emphasize how the backgrounds will be critical for the success of the venture. For example, in the case of Berkeley, the firm emphasized that it had some of the brightest academics in the automation design field. Interestingly enough, they were not even employees; rather, they were part of Berkeley's advisory board (BusinessWeek.com, 2/1/07).
Back up everything: Don't guess. Your potential investors will probably have a strong understanding of your industry. So if they uncover an inaccuracy, you're credibility will evaporate—and so, unfortunately, may your chances of snagging funding.
As you can see, investor decks are not easy to piece together and can easily take months of work. But it's a critical step in the capital-raising process. Moreover, the document can be an extremely helpful guide for your business.