2 and a half minutes. That’s the time venture capital investors spend on a pre-seed pitch deck, on average, according to the latest Dropbox/Docsend funding research report.
With the investor slowdown we’ve seen so far in 2022, approximately 30% globally in Q2 2022 (compared to the equivalent period last year, according to Crunchbase), it’s more difficult for startups to get funded, which increases the importance of finding the right lead investor, as quickly as possible. I touched on the steps founders can take on this in my post “Founder Investor Fit“.
Passing the initial filtering process
It may seem trivial, but the deck is critical document for VCs to assess fit with their fund’s investment criteria. You’d be surprised how many pitch decks I get that have absolutely nothing to do with what we focus on at Remagine Ventures.
Last year I published an article on Forbes on this topic – The 5 S’s of VC deal filtering. This may vary from fund to fund, but in general here is the top level criteria VCs would use to check initial fit:
- Stage – is the startup raising a round which is within the range of the fund (pre seed, seed, series A, early stage, growth, etc.).
- Stake – can the fund secure it’s minimum stake in the business?
- Sector – for thematic funds (like Remagine Ventures), is the startup in a sector that’s relevant to my focus areas
- Spatial (or geo) – some funds are geo-specific and would filter right away startups outside of their focus
- Similarity (to existing portfolio companies) – most funds won’t take the same bet twice, or invest in a startup that is directly competing with one of their portfolio companies
Most of these sound like common sense, but too many founders skip this important initial research.
What would make an investor more interested in your pitch deck?
Once you passed the initial filtering criteria, investors are quickly looking for signals that will make your startup standout. Knowing that, founders would be wise to call out these ‘stand out’ criteria clearly in the pitch deck to help the VC assess fit quickly.
In this old post by Mindrock capital, they call these elements either ‘Objective Signals’ or ‘Compelling Factors’. These can include:
- Strong traction – it’s hard to show strong traction at the pre-seed stage, but it’s essential to understand how the intended users/clients respond to the product/service.
- Strong endorsement from co-investors/portfolio founders/advisors.
- Investor interest – I must say that it’s less of a factor for me, but the FOMO is real and ‘hot’ rounds tend to catch the attention.
- Timing – why is now the right time for this startup – you can get some things wrong, but timing can’t be one of them.
- Exceptional team – at pre-seed level, the founding team is crucially important, especially as the idea might change. Deep sector expertise, past track record of success, experience working together, all help convey this.
What slides should be in your pre-seed pitch deck?
Going back to the Docsend research, which includes a survey of 300 founders and VCs in addition to their anonymous data collection on thousands of decks shared and reviewed, they found the top components/slides on successful pre-seed decks.
These 10 slides should be part of every pre-seed deck:
- Company purpose – why do you exist?
- Solution/ Product – show don’t tell if possible
- Why now?
- Market size
- Competition – be honest and knowledgeable about your competitive landscape
- Business model/ financials
- The Ask – how much are you raising? how much runway will it give you and what milestones will you achieve?
Common mistakes to avoid in your pitch deck
Entree Capital published an interesting post on red-flags in pre-seed decks and I thought it’s worth sharing the common pitfalls here as well. I picked my top 4 below:
Poorly analyzed market size:
- The TAM of a product/solution is an important indication of investment worthiness. Avoid the cliche diagram of two/three circles (your markets) intersecting to show a big market. And don’t just throw in statistics you have not researched in depth (and by in-depth, we don’t mean an in-depth dive into Google to copy/paste from a market report).
- Properly analyzing and presenting your market is an opportunity to show your depth of understanding of your buyer, their budget, etc. Spend the time to do a proper bottoms-up analysis of what you can sell annually to different customer segments.
Why us”/ “Team Slide” unclear or non-existent
- Many investors, like Entrée, are looking at the team just as much (if not more) than the solution itself. In our 4Ts model, (Team, TAM, Timing, Tech) the Team comes first. Make sure that your deck includes a VERY clear “Why us” team slide that clearly shows short bios (plus LinkedIn links) and how the core team members are the exact right people to solve this exact problem. Show why you specifically (based on skills, personal experience, and knowledge) are the ones to do this.
No product visual:
- Even if you’re at the very early stages, you must have at least some product visuals, mockups, and wireframes in your deck. Include a simple-to-understand overview of what your product does, what has already been built, and your roadmap/feature pipeline. We suggest that you put your product front and center and use it to frame the rest of your pitch and the market that you’re in.
Embellishment (aka, lies):
- Investors aren’t stupid. If you don’t actually do AI or ML, don’t say that you do it. It’ll come out in any deeper diligence an investor will do, and that will kill the fundraise. Don’t over-embellish your capabilities. Don’t lie about your product or its readiness.
How to keep investors engaged following the initial pitch
While a lot of the focus is on getting the initial ‘IN’, if the startup progressed to next level it’s important to keep everyone engaged on the conversation/ round.
I just came across a weekly sprint update from Ycombinator which I found compelling (H/T Uri Gafni):
- Have you launched?
- Weeks to launch?
- Users/prospective users talked to in the last week? what have you learned from them?
- On a scale of 1-10, what’s your morale?
- What most improved your primary metric?
- Biggest obstacle?
- What are your top 1-3 objectives for next week
No warm intro needed to speak with Remagine Ventures
I believe that VCs are in the ‘service’ business and capital is commoditised. Therefore, while I appreciate a warm intro, I don’t think it’s necessary to have one to reach me. Any entrepreneur, especially if it’s my criteria, should be able to reach me. So don’t be shy, and either reach out on social media or drop me a line (eze at remagineventures). At the worst case, we have a contact form on our website and try to reply to every email.
Good luck out fundraising!