Christoph Janz, co-founder and managing partner at Point Nine Capital, on how to put together a bulletproof fundraising deck.
You’ve spent hours in PowerPoint, toiled over spreadsheets, drafted and redrafted copy, created beautiful charts. Your fundraising deck is ready to go.
Yet no matter how much time, energy and love you pour into it, it’s all too easy to put off the very investors you want to appeal to. Since VCs spend hours studying decks, they have finely tuned BS antennae and can spot an error or exaggeration a mile off.
The following tips and tricks are easy to implement and should help you to bulletproof your deck.
Lies, damned lies and statistics
There are so many ways to twist the truth when it comes to statistics. Heck, there’s even a book called ‘How to lie with statistics’. And when it comes to charts in your deck, with a little creativity it’s possible to convey different messages with the same dataset. For example, you might be tempted to disguise a lacklustre growth curve by compressing the X-axis and stretching the Y-axis. Still not steep enough? Cut off a part of the Y-axis. Or what if your chart for new signups per month doesn’t look great? Just show the number of cumulative signups instead. These are some of the sneaky tricks people get up to to flatter their numbers. I wouldn’t recommend it.
Of course it’s fine to show your numbers in a good light – just don’t overdo it. Digging into numbers is one of the things that VCs are good at and they will want to see the raw numbers later in the process. You don’t want to start a relationship based on a lie.
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‘Extraordinary claims require extraordinary evidence’
VCs see hundreds of decks a month and most contain pretty bold claims. When these claims aren’t sourced, it can leave VCs wondering if they’ve been plucked from thin air.
You’re not trying to get a Ph.D. for your fundraising deck, but it helps to think like a scientist and include references throughout. Always include a footnote with background information or a link to the sourced document.
For example, if you claim your software makes people 20% more efficient, explain how you define and measure “efficient”. Include other details, such as the sample size and which baseline you compared your software to.
It doesn’t mean that the VC you’re pitching will spend hours reading all the materials you provide immediately, but it can go a long way in terms of instilling trust and credibility.
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And remember, the bolder the claim, the stronger the evidence should be.
For public companies, accurate reporting of metrics isn’t a nice to have, it’s a question of survival. Unclear financial communication can get a company into trouble with the SEC or other regulators, and lead to claims from shareholders. That is why public companies go to great lengths to avoid ambiguity.
Thankfully, if you’re an early-stage founder, inaccurate financial reporting will not land you in jail. But talking about metrics with even a hint of ambiguity might make VCs wonder if you’re on top of your numbers.
Let’s say you run a consumer web service and you’re claiming that you have a repeat rate of 80%. 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? Without additional context, the statistic is not useful.
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Similarly, if you talk about your churn rate, VCs need to know if you’re referring to customer churn or revenue churn, and in case of the latter, if you mean gross or net churn.
Remember that junior high-school physics teacher who kept reminding students that a numerical result is worthless without the right unit? She was right.
Market size matters
Almost all fundraising decks include addressable market estimates. But sometimes these numbers are borderline BS because they just aren’t specific enough. For example, if you want to convey the size of the market for practice management software for doctors in the US to an investor, telling them that healthcare software is a $10bn industry isn’t terribly helpful. However, if you note that there are approximately 230,000 doctors’ practices in the US, which multiplied by your ARPA of $500 per month leads to a TAM of around $1.4bn, it’s a much more meaningful figure.
It isn’t necessary to make your initial market as large as possible. Investors are interested in a whole range of data points and the total addressable market is just one of these – not least because in some cases, the company is literally creating the market.
A nice deck helps you get the attention of investors initially. A bulletproof deck increases the chance that they are still interested by the time they’ve got to the last slide. It might seem like a lot more effort, but if you’d like to raise money from investors, it’s time well spent.