Subtle Art of a Winning Pitch Deck

by Praveen Dayananda

Every entrepreneur will at some point need to put together a Pitch Deck, also called an Investor Presentation, or before the internet-startup-era, simply a Business Plan. A Pitch Deck is an indispensable document for any company that is raising capital. While there is good data to indicate the basic sections of a winning pitch deck, the process of creating one and considering what goes into each section is more art than science, blending story-telling, design-thinking, strategic-planning, financial-planning and an instinct for persuasion. It is not so much about just having a Pitch Deck that meets a checklist of required sections, as many entrepreneurs often seem to assume. No, that would be the surest way to scuttle your fundraising efforts. A winning Pitch Deck presents your company’s story in a way that is compelling enough for the listener, your investor, to back you over the countless other opportunities they have. Having spent the better part of the last decade helping dozens of startups develop their pitch decks to raise millions in capital around the world, there are certain components and subtleties that seem to regularly resonate with investors and make for a winning pitch deck. This ranges from the creative such as the entrepreneur and their journey, to the rational  such as your Profit & Loss statement. To make this exploration practically useful for you, think of each section below as a slide in a pitch deck.

Entrepreneur‘s Personal Story

You are excited and working many long hours to launch your concept. Something is driving you, almost like a hidden force. The first process of describing your business is describing this inner motivation, which is intimately connected to your personal story. 

Here are some questions that will help you better understand your inner motivation and story:

• What was the specific moment that led you to start the current venture: 
  • What was the time, date and location?
  • What were you doing?
  • Who were you with? 
  • What is the problem you were facing at the moment?
  • Where were any epiphanies and if so what were they?
  • Where there any insights and if so what were they?
• What have been critical situations in your life and how did you respond to them?
• What are your top five core values?
• What are problems that you are inspired to solve?
• What is most important to you currently and why?
• Why are you really pursuing this venture? 
• What are you wanting from the venture? 

The answers to these very personal questions can go a long way in describing 1) the venture, the type of company you are building, the scale of revenue and profitability to be expected, the kind of partners that you will need to support you in the journey, 2) the likelihood of you staying the course and executing a plan, 3) the likelihood of you building an inspired and motivated team that will realize the vision, and 4) the likelihood of securing funding. 

First, your personal reason for doing what you are doing provides a strong indication of the type of company, expected revenue and type of investment needed. For example, you may be starting a business to primarily help yourself or immediate family, or to simply be your own boss. In this case, your business might just be a lifestyle business generating enough revenue to manage your personal expenses. It could be a sole-proprietorship, or a partnership, with small-to-medium scale business revenue and funded by potentially personal/family funds and loans to help you build and expand. If you are looking to tackle a personal problem that is also of value to a lot of people, then we are looking at a limited liability corporation structure, with high potential revenue and venture investors that are happy to take a risk on you with the expectation of a high potential return (greater than 30% IRR) in the medium-to-long-term future. In this case, your personal mission will also very likely over time be closely connected with the brand and mission of the company and thereby be the critical factor in a customer choosing your product over someone else’s.  Thus, your personal story tells a listener or reader right away the kind of business they will be getting involved with. Of course the rest of the business plan will provide more information on how you plan to go about your vision and allow a reader to judge whether your choices are the correct ones.

Second, the entrepreneur’s reasons for doing something is also indicative of the odds of them staying through the ups and downs in managing and scaling a company. New ventures can be difficult. Developing a product can be challenging. Managing a team can be tough. Managing your own time effectively to meet company and personal needs might seem impossible at times. For example, challenges such as Covid can come out of the blue and your entire market gets shut down. Things happen, unpredictable things happen. The question for an investor is, will the entrepreneur stick through it all when the unexpected difficulty arises. If there is a compelling reason for why the entrepreneur is doing what they are doing and if there is evidence of resilience in the entrepreneur’s journey, then yes, chances are good that they will stick to the company through the hardest of times. The entrepreneur’s motivations can be a strong indicator of this success factor.  

Third, your story is going to be critical to inspiring your co-founders and co-workers to create the solutions and products you are envisioning. Most successful products and services are the result of many people working together in an inspired manner over a long period of time . A deeply authentic and personal mission goes a long way in motivating people to be their inspired best selves and to together create the solutions that you envision and to keep innovating in the face of change and competition.

Last, a compelling personal story also goes a long way in helping your investors believe and back you, particularly early on in a venture. The reason for this is simple. At an early stage, there is really no fool-proof quantitative data for an investor to make decisions by. An early-stage investor is largely going to look at the passion and level of competence a team bring to the table and/or the product itself and whether it solves a problem of interest to them. Yes, the rest of the information in a business plan matters too, but this human element is a much stronger driver of investment decision making than most investors will let on. 

Customer Goals, Needs, Reality & Desired Solutions

While a compelling and relevant personal story are important, they alone aren’t enough to make for a compelling business . You will also need to understand and define who the customer is, their goals, the current reality in them meeting their goals and the solutions that can bridge the gap between goals and reality. 

Many entrepreneurs make the mistake of simply doing what they want. A lot of technical founders, in particular, overlook the fact that customers will not buy a product if there is no strong personal need for it. We see many examples of smart people building innovative new products for months or years but when the time comes to go to market, no one buys the products. Lack of market interest in a product is the number one reason a startup fails.  Any business plan must describe who their target customer is. And this needs to be backed with real-world interactions with these prospective customers because that is, in most cases, the best way to know what customers want. 

Here are some steps to help you better understand your customers and to come up with products that will meet their needs:

• Describe quantitatively and or qualitatively who your customers are (some aspects to consider include geography, age, income and interest areas)
• Ask this target audience about what their key goals and needs are around a particular topic 
• Identify where customers are in meeting these goals and needs 
• Identify and analyze the gap between desired goals and current reality. 
• If you develop any unique insights, then you have the beginnings of a solution that could help the customer
• Once you have a product, go back to the target customers and ask them to use your product and observe their behavior and feedback
• Use feedback to further refine and develop your product

How do you go about engaging your customers? Here are some of the most common ways to engage your customer:

• In-person Q&A conversations
• In-person written responses to a survey
• Observing customers using a product/service 
• Phone interview
• Written interview
• Online survey
• Researching and analyzing existing studies on the topic 

As with any survey your design is critical to getting relevant and actionable information for your venture.  How you structure your questions (particularly paying attention to any leading questions), the types of response options you provide (in particular ensuring that all views can be captured), the time period of observation, the number of observations, etc all play a role in getting the kind of the feedback that you can be used for successful product development. 

You will also want to ensure that the response you get can be practically analyzed for useful information. This will mean working backwards from the kinds of charts or visual information you will want to see to convince your or investors that you have indeed captured a real need wanting to be met. 

Once you have the feedback and data from real-world customers you can begin to validate that the problems you are trying to solve are indeed significant enough for a significant number of people. 

Solutions

Now that you have a defined your own journey and the needs and gaps in potential customer’s meeting their goals and needs you can describe the solutions that would meet both your goals and the customers, again backed by customer feedback. 

You will specifically address how you will address the gaps identified in bridging goals and reality for the customer. Define the foundational elements of the solution, the key needs met. Describe core product features that a customer can expect and how it benefits them.  If you are relatively early into the business you can simply present your prototype with some evidence from customers as to their interest in it. The farther along you are the more detail and evidence for success you will need to present in this section. 

Secret Sauce 

As part of your solution, you can also present any particular features that enable the product to come to life, the core technology behind your product, aka the secret sauce. You do not have to necessarily reveal the core ingredients of your secret sauce, but you can allude to it to give an investor a sense of why they should back you instead of others. 

Why Now?

We know that there is a personal story behind your company. We also know that there are others that also share a similar problem. This section addresses why this is the right now to bring out the solution that you are proposing. What about the world situation, local situation, customer base or product features makes this the right time to introduce them to the world. You can highlight any particular trends or societal turning points that show that your timing is correct.  

Traction

Any investor will want to know where you are at with your company. Some questions that you can answer in this section are as follows:

• What have you achieved so far? 
• What has the reception been from your customers? 
• What is the evidence for your success/What are your key metrics and how have you performed so far? 

The metrics you use will depend on the product and service at hand but some of the more common ones include:

• Users acquired over time
• Monthly active users o
• Daily active users
• Revenue per transaction
• Revenue per user
• Total SKUs
• Total Revenue per date
• Gross Margins 
• Gross Monthly Burn
• Net Monthly Burn
• Awards Won 
• Customer Ratings

Competitive Analysis

One of the prime questions an investor or potential acquirer would be most curious about is, is how likely your business is to execute the game plan for cash flow generation that you have put together. The quality of your team, the product-market-fit you have validated with your customers, the right timing and a viable market all play a role in evaluating this. The biggest threat to your cash flow plan, is arguably though, your competitors. 

Most of you will be tempted to say, “There is no competition.” Which might be true, particularly for a ground-breaking product. Even in that case, and especially if you are in fact tackling a real need, competitors will pop-up almost immediately. Avoiding competitors is not really an option. You will need to continuously prove yourself and keep coming out on top as long as you can. Having competitors is not the end-all either that many investors try to push you towards feeling. Most markets allow for more than one player to operate and as long as you have a sizeable chunk of the market you are going to be okay.

Here’s how you can go about evaluating the competitive landscape. Ask yourself the following questions:

• Who else is tackling the same problems that you are? 
• Where is your product in the “hype cycle” and what does the future hold?
• How are the competitors doing in terms of customers, revenue, fundraising? 
• How does my product compare to other products in the market?  
• What are you doing differently from others?
• What aspects are you the best at?
• What will allow you to stand out from the crowd?

The goal is not to show all the details of your market. It simply to show that you understand the marketplace, and that you have good reasons to believe that the competitors will not be a major threat to your plans; Just about any sector has multiple players competing for the same customers. All an investor or partner will really want to know is why a customer would choose you over other players.

Concretely speaking, you can highlight the core features provided by your product and how those compare to your main competitors (again showing where you stand out), or you could show where your competitive edge lies in general aspects such as pricing, innovation, reliability, customer service, speed, quality, adherence to certain values such as sustainability, etc.

Market Opportunity

One of the most important questions for an investor to understand before they choose to invest in a company is the size of the opportunity at play.  In this section you will want to highlight:

• How many people face the problem being addressed 
• Any trends in terms of customer preferences and interests
• How big the market is in terms of past, current and future expenditure 
• How much an average customer is willing to pay for the product

Typically, you will see many market sizes broken down according to the following Total Addressable Market, Total Serviceable Market and Total Target Market.

Using the example of a grocery e-commerce delivery startup we can define the three markets as follows:

• Total Addressable Market: This defines the total potential for a market which in this case would total amount spent by the population on groceries 
• Total Serviceable Market: This is the percentage of the Total Addressable Market that engages in online transactions
• Total Target Market: This is the percentage of the Total Serviceable Market that meets the startups Target Market. In this case, the startup is only targeting Urban households so we would consider the percentage of the Total Serviceable Market that is in Urban areas to be the Target Market. 

Expected Revenue Models

The big question on everyone’s minds is – okay, how is this venture going to make money, i.e. how is the product going to generate revenue. While it may be tempting to list out multiple streams of revenue for your company, it is practically useful to focus on one or two major sources of revenue keeping the 80/20 rule in mind that most of your revenue will likely come from one or two major sources. If you really must demonstrate the multiple revenue streams you can focus on what your core revenue drivers will be initially and then highlight prospective other streams of revenue to explore in the future. 

Your chosen revenue models will come from your financial modeling work backed up by real customer information. The revenue models will need to both be viable for your company in terms of profitability or generating sufficient investor returns AND also be realistic in terms of what your customers are willing to pay. 

Typical revenue models to consider are:

• Gross margins per item sold
• Recurring subscription revenue
• Revenue share agreements
• Percentage-based-fees for transactions 
• Visibility based revenue (cost per click/impression)
• Sponsorships

Go-To-Market Strategy/ Customer-Acquisition Strategy

Okay, so you have a great product, great team, great opportunity at hand, the next big question to answer is: How are you going to get customers?

Some aspects to think about are:

• Where are your customers? 
  • Are they online, located in specific geographical locations, etc?
• What are your current main goals, strategies and tactics for customer acquisition?
  • Your goals could be to generate awareness for your product, to educate your customers on why they should choose your product, to convert any potential leads, or to nurture your existing customers and encourage them to stay loyal to you. The strategies and tactics you will use will vary based on the overall goal you have chosen. For example, a strategy for a goal to generate awareness would be digital. The tactics would be to do display ads on a specific website. 
• What are the optimal ways to reach your customer?
  • Some variables to consider are cost, time and effectiveness of influence (conversation rate)
  • Some ways to reach your customer are:
    • Digital – Social media, search ads, display ads, content marketing
    • Offline – Newspapers ads, display boards, events, merchandize, sponsorship, word of mouth, SMS 
• What are your Unit Economics for your core products?
  • Some metrics to define are Revenue Per User, Revenue Per Transaction, GP Margin per Transaction, Expected Transactions Per Customer year, Expected Lifetime of a Customer (Years), Lifetime Value Per User (LTV), Total Acquisition for Cost for New Users, Total Acquisition Cost for All Users, Customer Acquisition Cost (CAC), LTV/CAC ratio, your customer payback period (months, years or transactions) 

Funding Need & Timeline

You have laid out your story, your product, and what you plan to do. Now is your opportunity to make an ask. If you are fundraising some of questions you will need to be ready to answer are:

• How much funding you need
• How long you need the funds for 
• How the funds will be utilized
• What equity stake is being offered 
• What the pre-money and post-money valuations you are proposing 
• What type of investor you are looking for. These could be generally categorized as follows:
  • Strategic (related to your industry)
  • Purely financial
  • As mentor or advisor
  • Investors that bring synergies from related industries
  • Executive role

Sometimes what you require is non-financial assistance. It could come in the following ways:

• Marketing/Business Development/Opening Markets
• Technology development/sharing
• Advisory 

Make your asks clear in this section. 

You will also want to include a timeline of the main activities and targets for the company over the period for which you are fundraising. If you are raising for one year, for example, indicate your monthly or quarterly targets over that period with product launches, technological milestones, geographic expansion targets, etc

Financial Forecast

This is where we get to see the numbers behind your business and allow an investor to evaluate the financial prospects of your company. You will typically want to present a summary of your Profit & Loss Statement (P&L) and Cash Flow Statement on an annual basis for the next five years, which will be derived from your financial model. The core components of the P&L Statement to highlight are:

• Revenue
  • Breakdown of core revenue streams
• Cost of Goods Sold (COGS)
  • Breakdown of core COGS components
• Gross Profit Margin
• SG&A 
  • Staff Costs
  • Marketing Costs
  • Administrative Costs
• EBIT 
• Net Income 
• Net Profit Margin 

The Revenue, in a nutshell, shows your ambitions, the amount of investment you can expect and the kind of prospective return an investor can expect. For example, if you are targeting $1m revenue by year 5 in the US, a venture capital investor might assume that this is more of a lifestyle business, that the entrepreneur is not looking to build a large company, and that only a small sum of investment (in this case probably up to $100k) could be justified given the ambitions. If, on the other hand, your year 5 revenue is $20m, that suggests to an investor that a big investment amount (in this case probably up to $5m) might be justified. In both scenarios of courses, funding would depend on all other aspects discussed above being positive as well.  

The COGS & GP Margin show the inherent profitability of your business. If you are running more than 70% COGS as a percentage of Revenue (or less than 30% GP Margin) that suggests that you are likely going to struggle covering the costs of your business, unless you operate on a large scale. An e-Commerce company with a 10% margin is likely going to need a lot of investment to get to a point of profitability. A SaaS company with a 80% GP Margin, on the other hand, is likely to be profitable quickly since there is significant earnings to cover SG&A.

Your Staff Costs reflect how human capital intensive your business is. It typically includes all of your senior management, technology costs, and sales and marketing team cost. Marketing costs will vary by industry (marketing costs as % of revenue is a great benchmark) and again a lot of investors will ensure that you are being reasonable with your assumptions – that you’re spending not too much or not too little. Adminstrative costs cover your rent, utilities, business licensing and legal fees.

A quick look at your EBIT or Net Income line will indicate your timeline for profitability and expected profit margins over the long-run.  

With the Cash Flow Statement, you will simply want to highlight your Beginning Cash, Change in Cash and Ending Cash for each of the five years of your forecast as this can capture any additional capital you need for CAPEX investments that does not usually appear in a P&L. 

Valuation & Exit Strategies 

This is a not a slide you will typically include but if you are in discussions for a capital raise, investors will be curious to know about what potential return they can get from their investment and what types of exits you have in mind (because the investor will not be able to make a return without an exit). This will also help you in developing the right strategy, targets and relationships to execute a success exit. 

While calculating valuations can be complex you can use the Revenue Multiple Method to get a quick sense of an exit valuation for your company, i.e. the value of your company at the point of exit. So first you look at a reasonable time frame for an exit, say five years. Then you look at your revenue forecast for year 5 and multiply it with a revenue multiple on that to get your expected Exit Valuation. To determine the appropriate revenue multiple for your industry, simply look at Price/Sales ratios of recent exits for similar companies or look at the Price/Sales ratios of trading companies.

To determine the return for your investor you do the following:

• Look at the amount being invested in the company and associated shareholding percentage, say $1m at 20%
• Determine time period for exit, say five years
• Make an assumption on shareholding percentage of investor at exit, say it remains at 20%
• Now we use the Exit Valuation number from the calculations above (say $100m) and multiple it by the shareholding percentage, 20%, which gives $20m, a 20x return on cash. 
• So an investor investing $1m today can expect $20m in five years. 
• You can show this in terms of the Internal Rate of Return (IRR), a traditional measure of expected compound annual rate of return that will be earned on a project or investment. To calculate this you can use the following cells and formula in Excel:

The formula for IRR in Excel is:  =XIRR(C5:D5,C4:D4)

Your exit strategies are essentially 1) continue with a dividend payout 2) get acquired or merge with another entity or 3) list on the stock exchange. Most investors do not like to hear you say that you want to ‘exit’ the company at any point, so how you phrase this is critical. What they are looking for is a sense of how they can recoup their investment. So anything you can provide along those lines is a bonus. 

Team

While we have had a chance to your hear your story as a founder (or multiple stories if you have multiple founders), you will also want to highlight your key team members and why they are the best team to execute this venture concept. For early-stage ventures in particular, team composition is one them most important factors to an investor. You will want to highlight a team that meets the key functional needs of running the business (for example in leadership, strategy, technical, operational, marketing or finance), a team that has the relevant experience and impact and a team that has the right mix of temperaments (for example, visionary, prudent, and result-driven). 

***

A Pitch Deck is a very specific document with a specific task: to describe to a potential investor the journey of the founder and company to solve a real-world problem and to provide a compelling case as to why the investor should invest in the company to solve the said problem. Putting together a Pitch Deck however requires a wide and flexible approach covering multiple dimensions including story, design, strategy and numbers. It is a product in itself requiring creative engagement from both your left and right brains. It is just not a means to an end, it is part of the journey and it is an end in itself. Embrace the pitch deck to create a winning Pitch Deck.