Episode 31: Startup Pain: The Art of the Pitch Deck and Winning Over Investors

Ever felt the excitement of holding the golden ticket that could launch your startup into the stratosphere? That's the power of a killer pitch deck, and I'm here, Shawn, to guide you through creating one that'll have investors on the edge of their seats. On Full Circle, we unravel the art behind pitch decks and information memorandums, the twin pillars of startup fundraising. You'll learn how to weave the essence of your business mission into a narrative that resonates, discover the common pitfalls to avoid, and why customizing your approach can make all the difference. From the boardroom to the backroom, this episode is packed with insights, including a deep dive into how companies like Airbnb and Snapchat turned their presentations into industry lore.

As we navigate the intricacies of investor networks and problem-solving, remember that a 'no' isn't the end—it's an opportunity to grow your community of potential allies. Whether you're grappling with a complex robotics concept or crafting the next big social app, you're not alone. I'll share tales from the trenches and strategies that have seen startups rise from the ashes to the heights of success. So sit back, grab a notebook, and get ready to map out your journey from pitch to powerhouse with Full Circle at your side. And keep your ears perked for an upcoming episode where we'll flex our mental muscles with brain-teasing riddles, sharpening our wits for the entrepreneurial battles ahead.

Transcript

Speaker 0: 0:00

Hello and welcome back to Full Circle with Sean. I'm your host, sean, and today we're back on Startup Pain and we'll be talking about pitch decks and information memorandums. So what's a pitch deck? And a pitch deck is just a. It's basically a PowerPoint right, a PowerPoint presentation, and it's used to give a quick overview of your business, your marketing position and your potential. A lot of people use pitch decks to get that first meeting or, if they've got the first meeting with, say, an investor or a partner, they use it as the discussion point for the first meeting. An information memorandum, on the other side, is more of a detailed document and it's going to provide more of a comprehensive overview of your business and it's for potential investors or maybe you're selling right and it's going to include details about your company's operations and, and more deep into the financials or market analysis and even the strategic direction. So, again, while the pitch deck is designed to grab attention, spark interest with very high level insights, the information memorandum, or IM as you call it, is used to inform and persuade through detailed data analysis, which is really going to aid in your due diligence process. Now we can use both of those documents together to significantly increase the likelihood of securing funding or even selling the business. So we'll look at some key elements of a successful pitch deck and that would be your company overview and your mission. So you want a very brief introduction about the company, about its mission and even its core values.

Speaker 0: 1:42

We want to look at the problem and the solution mission and even its core values. We want to look at the problem and the solution. So what is the problem that your business is addressing and what is your unique solution that leads us into the market opportunity? So what's the market size, what's the potential growth and who's your target audience? Then we look at the product or the service that you have. So we're going to describe the product or the service. We're going to include development stages and our unique selling proposition, or USP. We look at the business model. So how is the company going to make money? What's our pricing strategy? What's our sales channels? We want to look at traction and validation, so we want to show evidence that it's actually a product market fit. We can do that through customer feedback and milestones that we've achieved.

Speaker 0: 2:28

We want to look at our marketing and sales strategy. So what are our marketing tactics, what's our sales funnel look like and what's customer acquisition costs. We want to look at competitive analysis, so we should have identified our main competitors and we need to showcase our competitive advantage. Very importantly, we want to talk about our team right. What's our team's expertise and their roles? And we want to really emphasize leadership and our advisors.

Speaker 0: 2:57

Then we want to look at our financials, so we'll present our financial projections, our current financial state and the funding needs that we're going after. And then we want to close it right. So we want to summarize the key points and we want to. We want to ask so what are we asking for? Are we asking for an investment? What's the amount? Are we asking for a partnership? What is, what is some of the high level? What does that look like?

Speaker 0: 3:19

And now, if we look at the information memorandum, we're looking more at a comprehensive business overview. Okay, so we're going to deep dive into the business. We're going to provide extensive information about the company history, the business model and the organizational structure. We're going to give operational insights, so we're going to have a detailed description of operational processes, our supply chain, logistics, the technology we use, and we're going to highlight efficiencies and potential areas for improvement. We're going to have a section on legal and regulatory information. So all legal considerations, including current and potential litigation, regulatory compliance, intellectual property rights and we're basically going to ensure investors have a clear understanding of the legal obligations and the risks, which leads us into risk factors. So we're going to outline the potential risks and ensure that the investors are informed of the risks that we're asking them to get involved with. And then, finally, we're going to include our strategic plans. So what's our strategic direction? What's our future plans? And that includes both growth.

Speaker 0: 4:29

Now, there are a lot of misconceptions between pitch decks and IMs, and one of them is one big one is one size fits all, so a lot of people think that it's a single pitch deck or an IM. You can use it universally for all investors, but in reality, the documents that you create your pitch deck and your IM should be tailored to the specific interests and concerns of different investor groups. We have pitch decks are a standalone tool and many people think that pitch decks alone are sufficient to secure funding and, while they might be crucial for initial engagement, successful fundraising often requires follow-up with an information memorandum, and we've went over that and the importance of it, and I'll tell you right now that investors are going to want to do due diligence and your IM will really help them in speeding up that process of due diligence. Another one is IMs are only for large transactions and a lot of people think that you don't need an IM unless you're really large or you're really complex. But, as I said, they can be very valuable in any situation where detailed information could influence the investor's decision, and it doesn't matter the size of the investment. And finally, a really, really good one is a lot of people think excessive information leads to overload, right so that they think there's a tendency to overload.

Speaker 0: 5:54

Both documents with too much information and a pitch deck should be concise and visually engaging, while an IM is very detailed. But both of them still need to be clear, they still need to be focused and they still need to help facilitate easy analysis by the investors. And if those take a little bit longer, they take a little bit longer. I mean, if you look at our robotics company, we have four different pieces of equipment and each equipment has been built from the ground up, so there's lots of complexities. We do hardware, we do software. I think our pitch deck right now is like 20 pages, but it is what it has to be to get the information across. And I have had people say can you shorten your pitch deck? And not, really not. If you want it to be clear, concise and informational, you need that minimum amount of information to look at and to consume.

Speaker 0: 6:47

Now let's look at strategic use of the documents right. So in initial investor meetings we use the pitch deck during our preliminary discussions to help to engage and capture the interests of our potential investors, and this is why they're visually appealing right. This is why they have an overview that we can talk to and we can bring it up. Because it is a PowerPoint. I mean they should call it pitch deck slides or pitch slides right, because that's exactly what it is. They're just slides. We then give our serious potential investors the IM right and that gives them all the detailed information so they can make further analysis. And then we use strategic selection right. So we always try to choose the right document based on the maturity of the discussion and the specific needs of the audience, to ensure that the information provided is both appropriate and effective for advancing our investment talks. And remember these documents can complement each other. So we start with the pitch deck, as I said, we then use the IM to detail everything. We can use the pitch deck to highlight key points and use the IM to expand on these points, and then we can offer both and with that, we're enhancing our credibility and our trust, because it signals transparency, it signals preparedness and, yeah, like I said, it'll build credibility and trust with potential investors.

Speaker 0: 8:15

Now, if we look at some real life stories of pitch decks, we have some pretty interesting stories. Right, we have Airbnb cereal boxes. So in Airbnb's early days, they created these limited edition cereal boxes and they were themed around the 2008 US presidential election and, if anybody remembers, they were Obama O's and Captain McCain's and they used it to fund their strategy. So they presented these boxes with their pitch deck to demonstrate creativity and unconventional marketing tactics. And then, who remembers Snapchat? So Snapchat, who remembers? I know they're still around, but I mean, who heard of their pitch deck? Because it was very interesting, right? So Snapchat had a disappearing pitch deck and they would send it out to potential investors or for their initial investor presentation. They send it to them and it would disappear After they've opened it and went through it. If they closed it, it would disappear and this really emphasized their product's main feature right, and it made it more memorable to their investors. You have YouTube's simplistic approach. So YouTube's original pitch deck contained only one slide and they said it helped to highlight their minimalistic approach, and then that they had a straightforward value proposition and it had a potential for rapid growth.

Speaker 0: 9:42

Okay, and then you look at Buffer right. So Buffer was a social media tool right, and it included actual metrics, real-time user data and transparency where it outlined their revenue model in their pitch deck. And this openness provided investors with a very clear and data-driven view of the company's operations and even their growth trajectory. And you can see and I hope you see that pitch decks are very personalized. They're based on your business, right. They're based on your market, and the creativity that you do with your pitch decks can really decide if an investor looks any further into you. So let's look at a couple of different markets right. So you're a tech startup, so what do you want to do? So maybe some interactive elements. You could incorporate different elements such as clickable demos or simulations within the pitch deck and it'll give more of a hands-on feel. And you can also make sure you have good data visualization so you can present market analysis, user growth financial forecast. You can animate your charts and even your graphs and make the data more digestible while interesting.

Speaker 0: 10:54

Let's say you're a fashion brand, so you might want to make very visual storytelling within your pitch deck High quality images, maybe even videos, tell the story of your brand, tell the from concept to creation. You know, maybe even videos tell the story of your brand, tell the from concept to creation. You know, maybe a runway right. Include mood boards and sketches and behind the scenes footage and you really start to create a narrative. And then, for a fashion brand, you might even want to do designer profiles so you can highlight key designers and you can do short video introductions or animated bios. Now, let's say you're a food and beverage company, so something really created a virtual taste test right. So you can provide some kind of experience by pairing your pitch deck with small samples to create that virtual taste test. And then you can even look at the sustainability angle, so you can use part of your pitch deck to focus on your sustainability efforts like sourcing ingredients and packaging innovations.

Speaker 0: 11:49

Now let's say that you're healthcare and biotech right, so you want patient stories. You might have patient testimonials and case studies and you want to really highlight the impact of your healthcare or biotech innovation. You want to showcase technology in action, right, so you can use 3D models or augmented reality to show how the device or drug interacts within the human body. And then let's look at real estate, so you could have 360 video tours of property listing or development projects. You can even use augmented reality to show future developments or property enhancements. And then you can even use market analysis so you can present dynamic maps showing market trends, property values, demographic shifts right, and the more you incorporate them into interactive elements, the deeper people will feel in your story.

Speaker 0: 12:40

And that's not really an exhaustive list, obviously. That's more just an overview to show that everybody's going to do something different. You should do what's applicable to your market and make sure that you don't over-technify things, right. Don't want to go too far into the technical, because a lot of times even the gatekeepers to some of these people that might be technical or will invest are not so technical, right. They know the high level and it's too much. So you're always going to have the gatekeepers, and I know that we're not really doing the whole VC or home office talk right now, but I will tell you a little bit about that. So you basically have your analyst, so they're going to do your initial screening and due diligence. They're going to go through your pitch deck, they're going to have a lot of questions for you. You might have your associate, so they're going to work with the analyst. And then you're going to have your portfolio manager, so they're going to oversee the firm's investment portfolio and they'll make higher level decisions. And then you'll have your partner right, and they'll be the ones that most likely have the final say on any investment. And some home offices work, obviously, a little bit different. Some have one person that does multiple roles, but that's pretty common in how the VCs work is.

Speaker 0: 14:04

Going through these steps and having a good pitch deck and having a good IM ready before you go out is really the key, because if you start getting momentum in these things, then you don't want the momentum to slow down, because the minute it slows down, it can stall. It can stall very easily, and these things take a long time anyways, right, it can stall. It can stall very easily, and these things take a long time anyways, right. So a lot of investments take up to 12 months to get through. So you definitely don't want it to stall if you've done all that hard work.

Speaker 0: 14:32

Now I've hired quite a few people to do different pitch decks, ims. We paid KPMG to do an IM once and I'll tell you, everybody has a different idea, everybody thinks it should be done a different way, and you can go get 20 of them done and then go see a consultant where you show them all 20 and they'll say everybody's done it wrong, and you know, and, and you need to do it this way, and this is why I need to charge you another 20 grand and it's. It's really funny how it works, because you can't really say any of them are right and you can't really say any of them are wrong. So it's really what you feel at the end of the day and how you're gaining traction with some of your investors. If you find that it's not resonating with them, well then ask them the question.

Speaker 0: 15:21

I like to do a follow-up, especially if somebody said, yeah, but you're not really in our market, or yeah, but not now, you know, or that. So you really just say, okay, what did you like? What didn't you like? You know, can I get a? Can I get a review? And a lot of these guys will give you a review of why they made the decisions that they made, and I talked to one every once in a while, that's, you know. Maybe they'll invest someday as we continue to grow, but not now, and I still get advice from that person.

Speaker 0: 15:48

I say, what did you like about this?

Speaker 0: 15:50

And they have networks. And I say, can you hook me up with this person as well? Because at the end of the day, yes or no for investment or for VCs or home offices doesn't mean you didn't just make a friend, or even that they or a whole bunch of people in that company are really excited about your technology. You just might not fit their profile right now, or they might not have the funds that you're asking for, because they've dedicated it somewhere else and they're more interested in seeing where you're going and what you're doing. So don't always take it as a bad thing.

Speaker 0: 16:22

Try to get something off of all your hard work and good luck with your pitch decks and IMs out there. And our next one is going to be something a little bit special. So we're going to do a couple of riddles, and I haven't decided if it's going to be two or three riddles yet, but we're going to do a couple of riddles. And the riddle, the whole point of the riddles, is to exercise our brains and try to look at some of the things we went over in the past, right, so like critical thinking or emotional intelligence, and how does that play a part in making certain decisions? So we will have that chat next time and thank you for joining me on Full Circle with Sean.