The Wonderful Guide to Pitch Decks
If you’re looking for an effective way to provide potential investors, customers, or partners with a quick, yet comprehensive overview of your company, you’ll need a pitch deck. Not only does it give you a chance to tell your company’s story, but it also allows you to make a first impression they’ll never forget. Studies show that investors only spend about four minutes reading a pitch deck, which means that the recipe to a successful pitch deck is clarity, conciseness, a compelling story, and actionable next steps.
Before we dive into what makes a successful pitch deck, let’s dive into a few key terms.
Quick Reference Glossary
Executive Summary: An executive summary is a one or two-page summary of a company’s business plan that is designed to help potential investors quickly understand a business.
Pitch Deck: A pitch deck is a presentation that is used to “pitch” an idea, product, or company. This presentation is intended for audiences that have no prior information about the idea, product, or company and is an introduction to the more in-depth investor deck. Pitch Decks can also be referred to as “Investor Decks”, but only when oriented towards acquiring capital from investors.
Go-To-Market Strategy: This is the action plan a company will use to get their products on the market and reach market penetration. This is not a one-time event, but instead is focused on the entire life cycle of a product or service from concept to grave. Essentially, it is a blueprint for how the company intends to deliver a product or service to the end user and will account for aspects such as pricing and distribution.
Path to Profitability: This term refers to a company’s clearly-defined plan that will take them from startup to turning a profit. The shorter this path is, the better it will be for investors since their goal is to determine whether a startup should receive funding based on return projections.
Key Performance Indicators (KPIs): These are measurable values that demonstrate how effectively a company is achieving its objectives. KPIs vary from company to company and even from department to department. High-level KPIs focus on the overall performance of the company while low-level KPIs assess the performance of various departments or divisions.
Elements of a Pitch Deck
In general, investors do not have a lot of time, as top venture capital firms see and hear dozens of pitches every week. In fact, major venture capital firms like Andreessen Horowitz hear from approximately 3,000 startups each year. This means you have to condense your business and story into a comprehensive presentation that only lasts minutes. Needless to say, this is truly an art form and those who can do it well can position their companies for success. A well organized pitch deck is crucial when trying to distill your company’s mission, goals, and vision down into a few minutes.
Humans are innately visual creatures with more than half the brain dedicated to processing visual information. In a study of pitch decks that performed well with investors, 82% used visuals to convey key points of their business. While most companies used more than one type of visual, screenshots of their product were the most popular, with 50% of companies using them. Trailing behind that, 14% used demos, 12% used process maps, and 6% used videos.
Depending on what story you’re trying to tell, any of the above sample visuals can help capture your audiences attention and tell your story more effectively.
There’s no general consensus or magic formula for what information (and how many slides) to put in a pitch deck. But, an analysis of 100 pitch decks over the past 20 years can help us glean what has been critical to success. Here’s a list of the type of slide and the percentage of those companies who included them in their own decks:
Team Information (87% included)
Solution (84%)
Market & Target Audience (81%)
Problem (74%)
Product Uniqueness (73%)
Business Model (59%)
Financial Figures (56%)
Metrics (45%)
Investment Required (41%)
Competitors (33%)
Roadmap (32%)
Despite the fact that a main goal of pitch decks is to secure funding, only 41% of decks actually stated the necessary investment requirements in their presentation.
In terms of the number of slides in a pitch deck, this tends to depend on the funding stage of your company. Decks from early funding rounds had significantly fewer slides than later rounds, as their company was less defined and had less history to share.
Pre-seed: 10 slides
Seed: 17 slides
Angel: 16 slides
Series A: 23 slides
Series B: 22 slides
Series C: 25 slides
Series D: 24 slides
Important Slides to Include in Your Deck
The Problem
This slide should illustrate the gap in the market that your product or company is trying to fill. There needs to be a painful problem that affects enough people that your audience can relate to it. But, make sure you stay focused on the one main problem that your company solves. Having more than one problem listed may make you come across as unfocused and unsure of your product’s place in the market. When an investor gets involved with a company, it’s often due to the fact that they’ve experienced this problem in the past or have personally witnessed the market gap in the course of their daily business.
Your Solution
Your solution to the problem needs to be extremely clear and concise. This is where visuals can really help your audience understand how your product or company can solve the problem. Although many investors do not like product demonstrations during the initial presentation, a short video can help clarify technical processes that may be difficult to visualize. Screenshots of software products and other technology products that illustrate specific components of the solution are critical here and may take up more than one slide.
Market & Target Audience
In order for investors to gauge the size of their potential return, they need to understand the size of the market your firm operates in.
A study of pitch decks of companies that had successfully raised more money than they asked for in their funding round found that 70% use a top down approach to determining market size. However, some experts recommend calculating market size using both a top down and bottom up approach.
Finally, when it comes to outlining your target audience, it’s important to be specific. Who are you targeting with your solution? Develop a persona of the person for whom your product is intended and provide basic demographics such as age, gender, income, education level, and geography. Understanding who your company or product is for will allow you to show your solution in action.
Not sure how to do a market sizing? Check out our Wonderful Guide here!
Team Information
This allows investors to understand who they would be working with and what they can expect from their business partnership. You don’t need to give a full bio for each employee, but providing a brief statement of each person’s educational and professional backgrounds and include two or three relevant accomplishments is helpful. Details can be saved for a second meeting or if investors explicitly state they need more information. Most pitch decks provide information on the founders and co-founders, but some include other team members as well.
Competitors
One of the biggest mistakes companies can make during a pitch is to assert they have no competition. Every founder wants to believe they are unique and that their product or service operates in complete white space but, unfortunately, this is almost never the case and assuming that can be a red flag to investors. Instead, provide your top 5-10 competitors and explain how your company differs. You can also provide a chart that shows how much funding each competitor has raised to give investors an idea of the market value for your company.
Need a hand with your competitive analysis? Check out this Wonderful Guide!
Financial Figures
In addition to market size and three years’ of growth projections, investors want to see your company’s value. Depending on the type of company or product, this could be in the form of revenue, number of users, transaction volume, burn rate, or customer lifetime value. The metrics you use will be determined by your business’ niche. Remember that you do not need to go into the details of your financials in your pitch deck. Instead, you should present a summary and have your numbers ready in an Excel sheet, should they request them in the due diligence stages.
Traction or your path to profitability is also important to demonstrate to investors. Present this in a chart that shows the month-over-month growth of your business using whichever metric is appropriate for your business (revenue, number of users, etc.). Early-stage companies may not have much growth to show yet, so it’s fine to leave out in early-stage decks.
Metrics
Key performance indicators (KPIs) such as customer acquisition cost, lifetime value, burn rate, churn rate, gross margin, annual recurring revenue, cost of goods sold, and share of voice should appear in this section. Some more popular KPIs and their calculations follow.
Customer Acquisition Cost (CAC): This is the costs associated with convincing a customer to purchase a product or service. CAC = (total cost of sales and marketing) / (# of customers acquired)
Lifetime Value (LTV): This is the return on investment for a customer before they churn. LTV = Average Revenue Per Customer x Gross Margin / Churn
Churn Rate: This is the rate at which customers leave after becoming a customer. This is expressed as a ratio of how many customers you have in one month compared to how many you have several months later.
Annual Recurring Revenue: This is the revenue you receive from customers that will carry over to the next year (as with subscriptions).
Earnings Before Interest, Taxes, Depreciation, and Amortization or, EBITDA. This can be used to demonstrate profitability. There are two basic formulas that can be used. The first is net income + interest + taxes + depreciation + amortization. The second formula is operating profit + depreciation + amortization.
Burn Rate: This is the amount of negative cash flow over a specific amount of time, usually a month. Burn = current cash balance - net loss
Cost of Goods Sold (COGS): This refers to the direct costs that are incurred to manufacture your product or service. COGS = beginning inventory + purchases in a period - ending inventory
Gross Margin: This is your total revenue after subtracting the cost of goods sold (COGS). Gross Margin = sales - cost of goods sold.
Share of Voice: This is the percentage of mentions you have across a platform or in media compared to the mentions of competitors. Share of voice = brand mentions / total mentions of all brands / 100
Business Model
Investors want to know how you’re going to generate revenue. Are you going to use a subscription model? If so, what are the tiers of membership? Are you going to provide an app for free, but charge for upgrades or enhancements? Are you relying on one-time purchases? These types of questions should be answerable in your presentation.
It’s important to note that the business model will look different at various funding stages. Some companies have long product development times, so there may not be a way to generate revenue yet. If you are still in the product development stage, make sure to describe how long you intend to be there and whether you will be revenue positive during those stages. However, once the company shifts to business development, investors will need to know how it intends to make money.
Investment Required
Some experts recommend never providing an absolute investment amount because firms typically have limitations on how much they can invest, which means if you ask for $5 million and their limit is $3 million, they may pass on your company. However, of the successful pitch decks analyzed above, 70% requested an absolute investment target and 30% requested a range. Either method is appropriate, but typically investors want to see how much they are expected to bring to the table.
Roadmap
A roadmap that outlines key milestones is less important in a pitch deck, but again, most successful pitch decks over the past 20 years have used them. In this section, you will want to include a summary of how the investments are going to be allocated, additional investor participation, expected milestones for deliverables and updates, and any other steps your company will be taking to reach its goals.
Pitch Deck Best Practices
To ensure you create a pitch deck that has the best chances for success, follow these best practices:
Tell an exciting story about your company or product that engages your audience emotionally.
Limit each slide to one idea to avoid overwhelming your audience and to keep them all on the same page at the same time.
Your text should be large enough to be seen by all audience members. This means using 32- to 44-point fonts for titles and at least 28-point fonts for text and bulleted information.
Know your data forward and backward and try to anticipate the questions your audience will have. This will allow you to practice your answers before you deliver them.
Don’t include too much text. People are visual processors and images tend to inspire and engage audiences much better than plain text.
How Can Wonder Help?
You know your business better than anybody, but Wonder can deliver elements of your pitch deck that may be too time consuming for you to do yourself. Market size, market growth, competitors, and market position are all aspects of a pitch deck that can be completed by our expert analysts.
Whatever your goals for your pitch deck are, Wonder can assist you in creating the perfect one for your audience.