Raising capital requires a specific set of supporting documents and media, commonly called fundraising collateral. While the pitch deck and financial model are both essential, they are only part of the picture. Investors often use the fundraising pitch to gauge a person’s ability to sell more generally. Just as with selling any other product, there is a sales process to go through: prep, introduction, qualification, presentation, objection handling, closing, and follow-up. To do this right, you need sales collateral for your equity.
As jargon goes, “pitch deck” is pretty bad, but the PowerPoint deck of slides is the backbone of all investor pitches and it is something you will need. The best ones can be sent alone and will have the same impact as when you present them. It won’t be longer than 20 or so slides and it ideally will pique the interest of the investor while at the same time answering all the key questions they might ask about the business.
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This sounds impossible, but it is doable, although it’s challenging and will take time to get right. A good collection of decks can be found here. You should watermark it and PDF it, mark it for a specific investor, or take out the most sensitive info. Expect to send it in advance, most likely without signing an NDA. Typical topics to cover include an elevator pitch, team, market, problem, solution, business model, competition, projections, and the ask.
The Must-Have Financial Model
Even if your business is focused on “engagement first” and building a user base before monetizing, you will still be spending money. How much money? We want to know and we will ask for this document at some point. In form, it is an Excel workbook with monthly forecasts of profit and loss until the business either runs out of cash or breaks even. It doesn’t always have to be complicated, but it needs to be based on sensible (ideally data backed) assumptions. The most important question is to what extent the business can miss its targets and yet still achieve meaningful goals that mean it will be worth more at the next funding round/exit.
While you might feel tempted to send a massive document right away, you should probably hold off. The investment memorandum (IM) or business plan is the in-depth, behemoth of an investment document that starts with the executive summary and goes through business proposal, market, route to market, barriers to entry, and business model. Please do not send it as the first document you send to an investor. We speak to hundreds of businesses a week and will not read a 40-page document to find out about what your business does in the first instance – there simply isn’t time. The reason that this is still “nice to have” rather than a waste of time is that it does have two uses:
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- Writing it can be a useful exercise. It means re-evaluating the business model, market size and route to market and properly articulating it, which is helpful as investors will ask you about all of this at some point.
- It saves us time. Should a VC decide to invest, there will almost certainly be some kind of internal process involving the writing of a paper and presenting it to an investment committee. If there is an existing IM, then it makes writing that paper a lot easier.
The data room is the folder where you keep all the in-depth company detail. It is a time saving device because if you are raising money, then at some point in the diligence process someone will ask to see the employee service contracts, signed copies of the memorandum and articles of association, signed copies of all your customer contracts and so on. If you have to pull them together, scan them, and send them over at the point when they’re requested, it is going to take a lot of time during a period when you’re probably spending too much time fundraising and not enough time running the company anyway.
Sales in one form or another goes on in a lot of businesses – whether you’re selling the vision of the company to a prospective grade A employee, a product or service to customers or as a prospective investment to us. As investors, we often use the fundraising pitch as a proxy for ability to sell more generally. So get out there, write a great pitch deck and start selling that equity.