For seed-round founders who have already proven a market need for their product or service, fundraising is still a necessary evil. Unfortunately, on average, it takes founders numerous meetings to close seed funding. But there’s a secret sauce: effective seed fundraising pitch decks. There are obvious elements to consider while pitching, like having a thick skin and striking a balance between confidence and humility — but here are five other aspects to watch out for.
1. Activate the Storyteller Within You
In every context, whether in an elevator or a 20-minute venture capital (VC) meeting, you need to be able to tell your story efficiently and adapt to any audience.
If you are meeting investors in person at an investor day, for example, remember that your goal is not to close — it is to get another meeting. Ever been at a party and trapped by someone who has launched into a story that seems never ending? You may smile politely and grab another drink to get away. That’s exactly the reaction you don’t want. You’ve got to be able to judge the room, speak their language and include only the key details relevant to a certain audience.
Savvy entrepreneurs also have different seed fundraising pitch decks for in-person presentations vs. online or via email. Including a video presentation virtually could make your pitch more personalized too. But through whatever medium, the number one rule doesn’t change: Investors are more likely to remember an interesting story than dull facts and figures.
So, how can you connect emotionally to captivate investors?
Firstly, introduce your characters: Who are you, where are you from and why do you have what it takes to succeed? Then, describe the change investors should expect to see in the world due to your company instead of diving straight into the obstacles your target audience faces. There’s supposedly a problem at the core of every business, so stand out from the crowd by moving away from the “conflict” approach and offering a visionary idea. This could be a safer bet since an investor could disagree that the problem you are trying to solve exists or underestimate the problem’s size.
Next, incorporate the startup’s purpose and vision so investors understand why a solution is needed while feeling empathy for the end-users. You could even show your product through the perspective of the user journey. This should ultimately answer why your team is precisely the right bunch to build the solution. But if not, spell it out: What makes your team unique? Why couldn’t it be done before?
For every compelling startup story, there’s often a succinct executive summary behind it. This can be one or two pages that include all the relevant information about the vision, product, team, market size, revenue, and prior or current fundraising.
Realistically, if you struggle to put this together or can’t explain your mission and strategy in a few simple sentences, you probably won’t get a penny from investors. It doesn’t matter how complex the technology or idea is, break it down for a five-year-old.
2. Demonstrate Market Potential
When pitching, use data and statistics from market research papers as sources. So many founders say: “We’re excited about this growth,” or “There’s a market need.” But where’s the real evidence to support the potential? Investors want to discover why you have an opportunity to seize a large percentage of the market you are operating in. So, if your company is really on top of market trends and data-driven, actively speak in data.
For example, the original Facebook pitch deck is legendary in the tech space for that reason. Their expansion plan was clear: “By September 1, 2004, thefacebook.com network will have more than 200 member schools.” The stats and numbers spoke volumes.
You should also display a competitive analysis to drive home how your product or business is different in the current market landscape. Investors will be expecting you to answer the following questions: How is your solution different from other products? Why will it change the market? How do you make money? A competitor matrix can help communicate the unique selling points effectively.
According to the Corporate Finance Institute, the Total Addressable Market (TAM) helps paint the picture of whether a business deserves to be venture-backed. Some companies offer free Google Sheet templates so founders can model their TAM easily.
3. Convey Financial Projections
Seed investors really don’t care if your projections are wrong over time; they just want to know your initial assumptions. So, the goal of a financial model is not to be right with every projection but just to show that you, as a founder, or your executive team, know what could impact the success or failure of your business.
The structure of a financial model at the seed stage will vary hugely depending on the industry, for example, SaaS vs e-commerce. But a solid model will always consist of two things:
- Well-thought-out projections about the future
- A properly structured and dynamic spreadsheet that shows
- Cash flow overviews
- Cost of goods sold
- Operating expenses
You could even think about laying out your potential outcomes in terms of the best-case scenario, realistic success scenario and worst-case scenario. This offers potential investors clear insights into the future and makes you explore realistic financial forecasts and plan for many eventualities: potential competitors, risks, and new future product lines.
Don’t just put financial slides in a seed fundraising pitch deck just because you have to; put them in to add value. A slide with an overwhelming number of stats isn’t going to convert investors. Instead, ensure financial forecasts and revenue model slides are easy to read, and investors shouldn’t have to whip out a magnifying glass.
Take this example of Airbnb: When the company raised a seed round, they made the numbers simple and digestible on one slide. It wasn’t necessary to see the rest of the deck to understand the potential.
4. Refine Seed Fundraising Presentation Skills
So, the day has come, and you are in your first VC investor meeting. Try to balance standing up for what you believe in and being open to counterpoints. During pitching, there’s a fine line between charisma and coming across as arrogant. There are a few other pointers to watch out for too:
- Know your audience: Understand what an investor likes to invest in and why. Then, tailor your pitch accordingly. For example, some investors prioritize hearing founder stories, whereas others prefer to know the hard numbers.
- Use a very large font: No investor would complain about that. Small font, on the other hand…
- Put effort into your presentation visuals. Graphics, charts, and screenshots are all appreciated. The less writing on the page, the better.
- Make visuals clear. Don’t be a buffer by using too many icons or different shapes to illustrate market share.
- Leave investors with a two-sentence pitch. The final message should be simple so they can quickly take it and use it to explain to their partners after the presentation.
- Use analogies. Making parallels between your company in one industry and another in a different sector is a known tactic. For example, “We’re Shopify for X.” But don’t be too cliché by using Uber, for example. Pop culture references also do the trick; check out this data analytics CEO explaining a complicated 6-step process using the NBA.
- Be animated and human. Storytelling is a full-body experience. When you are pitching online, move your arms and allow the energy to flow. When in person, stand up, lean on something and walk around. Investors don’t want to feel like they are back in a classroom and you are their lecturer.
Most importantly, take the time to listen to feedback from an experienced investor. The chance that a meeting will result in funding is less than 10%. Therefore, if you’re just there to get the money, you’re wasting time. VCs and angels meet with countless companies every week, so leverage the opportunity and ask investors some direct questions on the spot.
5. Know How To Negotiate a Deal and Make Growth a Reality
After undergoing a due diligence process with an investor and extending a standard term sheet, it’s time for the negotiation process. The number one rule of negotiations for seed fundraising is: Never screw anyone over. Hold yourself and your team to the highest standards, and follow best practices, as a bad reputation amongst investors is difficult to repair.
Investors hardly ever offer terms that are completely unreasonable. However, make sure to never jump at the first offer you get. Investors have way more experience than you do at negotiating venture deals. That’s why we recommend never negotiating in real time. Instead, consult with your lawyer and other founders, come back with a counter-deal, and get any terms offered in writing.
When it comes to valuations, some investors promise their limited partners (LPs) ownership numbers. If this is the case, look at the post-money valuations of similar seed-stage companies and dare to ask for the mean or 25% higher (especially if you have access to data to justify that you have more potential).
Looking to the Future
Successful seed fundraising pitch decks can’t be plucked out of thin air; refining pitching skills is a continuous process. You have to learn from unsuccessful pitches and iterate, but it’s an art worth investing time into to attract potential investors.
At Founder Shield, after working with countless startups after seed fundraising, we know that it can seem overwhelming. But applying the advice in these blogs will help you make the first step.
Lastly, when your company (finally) receives your seed funding and you take on new professional endeavors, you’ll face unique exposures. We specialize in knowing the risks you face at each stage of development, and we work to ensure you have adequate protection. Feel free to reach out to us, and we’ll walk you through the process of finding the right policy for you. You can contact us at firstname.lastname@example.org or create an account here to get started on a quote.