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Execution is everything
The good news and the bad news is that “Execution is everything.” As a founder, it is on you to prove that you have more than a great idea. You have the team and the skills to make it real like no one else can.
Investors are not cheerleaders
They are there to make money first and they want to talk to people that can help them do that. They do not want to support brilliant ideas unless they are also profitable ones. In the past, investors tended to put their money on people like themselves – with the same background, education, and experience. Those days are over.
There is a growing pool of data that proves that companies founded by women, people of color, GLBTQ, and those who are differently-abled are both profitable and meaningful.
- A study by Boston Consulting Group found that “For every dollar raised, women-run startups generated 78 cents in revenue, compared to 31 cents for men.”
- Gender and ethnic diversity at the executive level are correlated to above-average financial performance.
- Global enterprises like Microsoft and Mailchimp are investing in underrepresented founders.
Even though facts like these are changing minds and mindsets, the percentage of investment that goes to underrepresented founders are still in the single digits in 2018. Diverse founders lack access to VC funding due to pattern-matching by investors. They made their backing decisions based on an institutional bias that excluded race, gender, and educational level.
Meritocracy more of a «mirror-tocracy»
Richard Kerby, a partner at Equal Ventures, summed the identity problem by saying, “With 82% of the industry being male, nearly 60% of the industry being white male, and 40% of the industry coming from just two academic institutions [Harvard and Stanford], it is no wonder that this industry feels so insular and less of meritocracy but more of a mirror-tocracy.”
Pattern-matching vs. lived experience
Because VCs matched patterns of old investments to fund new ones, those who weren’t already successful could rarely break in to form new patterns. Instead of standard industry experience, many women and POC are more likely to have «lived experience,» which is often more valuable even if it is less measurable.
The most intelligent Investors know this and they are taking a hard look at investment practices, but they are not about to invest in “winning” ideas that aren’t supported by hard evidence. Anyone with money to invest quickly hits idea saturation levels, as practically everyone they know presents them with “winning” ideas from their own circles of friends and family. From first-hand involvement in successes and failures, they learn to recognize some of the essential characteristics and critical pre-work of a functional, profitable business.
The Pitch Deck
The pitch deck is the fastest way to get the data that matters to the people who can help. In 12 slides or so — often less but rarely more — any founder or team of founders should be able to break down the economics of :
- Explain the problem you’re looking to solve
- Your solution and why it’s better than other solutions currently available
- Is your solution compelling enough?
- Who is willing to pay (and how much)?
- What the revenue and gross margins?
- Where profits will come from?
- Why you settled on a specific growth rate projection?
- How you will distribute your items/services?
- Who are the founders, do they exhibit grit, passion, and is their story compelling?
These are just a few of elementary building blocks of a functional business. Even disruptive tech – with no precedent at all — has to prove it can bring in more than it costs at some point. If you have to scale before you can generate revenue, that revenue better pay for the scaling.
How Do I Make One?
At the bottom of this blog, I’ve put links to useful templates. Don’t rely too heavily on them. Anything you find is already out of date and every pitch deck is as individual as the person who makes it. Don’t settle for 12 as the perfect number of slides. Find the truth of your business.
Remember that the pitch deck is only a ticket to the dance. It will get you in the door, but it can’t dance for you and it can’t wear glass slippers. You will have to be able to answer questions on the fly about your business without referring the slides.
For a rough guide to what the pitch deck should cover, consider answering the following questions in under two sentences or in infographics:
The slides you need
Who are you, what you have done to prepare you for this battle and why does it matter to you? Are you relentless, focused and passionate about your idea? Do you have grit? What is your compelling story and why will customers relate to it? Most investors will spend at most 3 minutes on your pitch deck. They won’t even spend that if your first slide isn’t professional and motivational. This is your most important slide.
What is the problem? What evidence do you have that people want to pay to solve it? Include your research
How is your answer different and more compelling from every other attempt at solving this problem? Is it enough to sway users away from current solutions? Include your research.
What is your addressable market? Do you have a clear understanding of the customer? What is the current market size and what do you expect it to become in the near future?
How will it work? Present the most important details about the mechanics of your concept. Prepare for lots of questions that you can’t answer on the slid
How will you gain traction (users, customers)? How will you raise awareness, distribute the solution, assure conversion? What is your long term vision and how is your solution scalable?
Which skills and talents do you need to bring on board to make it happen? What’s your secret weapon? Are you able to attract said talent?
How you will push back against the five fundamental market forces: Buyer power, Supplier power, Copycats, Alternatives, and Competitor
Get into the fine details of industry cost structure, margins now vs. future, operating costs, revenue distribution, cash flow interruptions, preparations for the unexpected, and roadmap. Investors on average spent 23.2 seconds looking at this slide alone. That’s more than double the time they spend looking at any other slide. This is how they decide about the financial aspect of the decision to back you or back out.
How much money will you honestly need by which dates? Don’t ask for more than you absolutely need. If you want a cushion, justify it. Be honest about other potential funding sources.
What are your key performance indicators (KPIs)? How will you know if you are on track? What will you use to measure that? What will you do if you go off track?
How can people contact you for follow up? List your contact info but also keep it updated with current accomplishments, recent developments, successes, upcoming events.
Note: Early stage decks should be substantially different from late stage decks, especially for customer adoption data on Slide 2, changes to the market on Slide 4, real vs projection financials on Slide 9 and accomplishments on Slide 12.
In my experience, one of the biggest problems I’ve seen is how founders use pitch decks. They tend to fall back on them – as though all the answers were on the slides. That’s just not possible. The pitch deck should serve as little more than your note cards. Everyone on your presentation team should be able to expound on any slide smoothly and concisely. The real magic will come from your in-depth knowledge of the business, your compelling story and the energy you project in talking about it.
On the inside, some of the key elements that are missing from decks by underestimated founders are often within the first 3 slides. Sometimes they don’t clearly tell their compelling story, identify the problem backed by research, define the solution, and then show how this specific solution offers benefits that differentiate the business, also backed by research. There’s also a gap in being able to identify the true market size and potential. This is not always due to founder inexperience, as many times I’ve observed underestimated founders experience lack of support and education in the startup world as compared to their peers, In their enthusiasm to get started, they often come into meetings with idea-stage business models without enough data to substantiate the claim that people will really pay money for this option over all the alternatives. I’ve found that they could truly benefit from spending more time on Slide 8. Mentors and helpful resources are key for underestimated founders as they develop their deck, as I’ve seen a lack of early stage support and education as compared to their peers.
One Last Thought on What Comes First
Perhaps the most important thing a pitch deck can do is guide your structural knowledge of how to run the business from the ground up.
Use it to help you think beyond venture capital. Investors aren’t the be-all and end-all. Aniyia Williams, founder of Black and Brown Founders, told People of Color in Tech (POCIT) that seeking out investment is a very narrow way of thinking about funding a business. Her advice to founders: “OK, I’m going to say – 1) at the end of the day we’re all here to make money. Right. I think that my first thing would be to say, ‘Don’t make fundraising your business model.’ You need to learn how to grow a customer base and make money from them. That’s number one.”
The pitch deck doesn’t have to be built for investors only. Try to build slides that can motivate a wider audience. Build a pitch deck for customers, for business partners, for companies in your supply chain. Build it for yourself and your stakeholders, so you can really understand what the business is about and explain it clearly in a sentence. Your pitch deck can be the skeleton that supports the growth of your business.
Think of it as a living document, in constant motion as you gain feedback from mentors, investors and other interested parties. Just as your business model canvas is a private collaboration among founders, the pitch deck should be a collaboration with investors and those who really care about the business.
It’s a very exciting time to be an underestimated founder because there will never be another time to be more influential than right now. The next round of successful founders, representing greater diversity than ever before, will be the benchmarks that investors use to identify winning characteristics. They will be the templates for predictors of success, but also the source of patterns within underestimated populations that could be sending the wrong messages to VCs and other sources of funding. It’s in your hands now. Break the rules, but break them wisely.
How to Get Your Slide Deck Started?
Pitch Deck templates from the Founder Institute