“We are going to have Series C fundraising.” My boss is so excited to tell me. “I can assure you, it will be really tough, and you are going to be exhausted in the coming few months. However, trust me, you will really enjoy it!”
Simple Pitch Deck
This is what my boss told me few days ago.
Months ago, he already told me about the plan of fundraising and asked for my help on building am excel Model for 3 years forecast. He told me to be ready for the next fundraising project. Until few days ago, he was happy to officially announce that plan to me.
“I am going to have a first meeting with our first potential investors this afternoon. I have been working on this pitch deck with senior management in the past few months.” He was so confident when he was talking about this pitch deck, which had around 60 pages in total. He really thought it was a masterpiece.
“You know, I could use your help! Just talk a look and comment on it! You might bring us some ideas that we might have missed.” My boss really meant it when he said so. He immediately sent me an invitation email to get access to the pitch deck saved on the Google cloud.
I am flattered. To be honest, I have watched a few Youtube videos about preparation of pitch deck for fundraising in the past few months. By that time, I never thought I could use the knowledge in reality this soon. I know that they might be a bit different from each other as the videos I have watched are related to the 1st time fundraising while my company is going to have its 3rd time fundraising. However, I believe the key parts are more or less the same – it should be simple and focus.
Today I have going to share the 5 key parts in fundraising, based on what I have learnt from Youtube videos and what I have seen in my company’s pitch deck. With these 5 parts included perfectly, I believe the pitch deck will be unstoppable.
1st Part: Problems and Solutions
Not all the ideas can be converted into businesses. To become a business idea, that idea need to be the solution of an existing problem. When that existing problem is actually a real concern of some people, the solution of that problem will be the investment opportunity of the investors.
Example:
Years ago when digital marketing was just a new ideas to the world, my former employer, one of a new SaaS company in the world by that time, expected a bloom of digital marketing in the sooner future and decided to build up a platform for email marketing.
By that time, there was only a few options for digital marketing. Email marketing was one of the option but not a mature option. There were no dominant email marketing service provider in the market by that time. My former employer saw a business opportunity and started working on a email marketing platform.
They successfully raised their first funding with that business idea.
Later, when artificial intelligence (AI) was introduced to our world, people were busy to put AI into different products. My former employer decided to add AI into their email marketing platform and built different new features like email recommender, predict recommender and smart insight. These features could help the customers to predict the impact of the email marketing on their business (eg, the impact on the Revenue growth).
As a result, they persuaded more investors to invest with these new features.
In other words, my former employer successfully identified a problem in digital marketing (ie, digital marketing was still a new idea and there were no dominant email marketing service provider by that time) and found a solution (ie, built a platform for email marketing). That became one of the investment opportunities for the investors.
2nd Part: Tractions
Tractions is important to every business. It means something we need to succeed or make progress. For entrepreneurs, it means stories of the business. Every business needs its own story and become attractive to investors.
Example:
The perfect tractions of a business should include its financials. For example, my current employer has achieved 40x growth of Revenue in 2 years. I am not sure if the professional investors are excited about this Revenue growth, but I would. If my current employer wants to conduct fundraising activities now, I am sure the tractions would be
- What did they do to achieve 40x Revenue growth in 2 years?
- What difficulties did they face and how did they overcome?
- What did they do to out-perform other competitors in the market?
This tractions help differentiate our business from others. With the same / similar products, how could we win more customers and earn more money than other competitors? That might imply a more capable management, more experienced team, more successful tactics / strategy, etc.
All these are good materials in the storytelling and could result in wonderful tractions. This tractions help the investors to paint the future of this potential investment. Imagine if there was no tractions available, the investors would not have any ideas of how fruitful the investment would be.
The investors might be able to see part of the future based on the financials we gave them, but they could not verify if the financials are conservative or aggressive without the tractions.
3rd Part: Competition
When it comes to running business, the first key thing that people would think about is competition. Some people tend to avoid competition because they see competition as a monster or a disaster that we should escape from.
However, believe it or not, most of the investor would not prefer to invest in a business that has too few or none competition.
On one hand, a market with keen competition might mean low Revenue. On the other hand, it might also mean high demand. If a market has too little demand, it means low return on investment to investors even the investee can dominate the market. Hence, the investor might look for other investment opportunities with higher return on investment.
If a market has keen competition, it might mean low Revenue earned, but if the investee could achieve some breakthrough in the products development or service provision, they could obtain higher market share and win more customers from the competitors. This would imply a better return on investment than other investment opportunities.
Competition is also an opportunity for investee to prove their capabilities. In order to outperform other competitors, they need to have better product development, better customer service, better marketing strategies, better cost control, etc. All of these are the factors that investors would take into consideration when they decide to invest their fund.
4th Part: Market
The size of investment of investors depends on the size of market. In general, the bigger the market, the larger investment investors are willing to make. However, when it comes to the market size, investors are expecting accurate figures.
Example:
Few years ago, my current employer was trying to enter China market. Being the world’s most populous country with a population of around 1.4 billion, there were so many companies who wanted to enter that market and earn a fortune from that 1.4 billion people. My current employer was one of those companies. It used bottom up approach to determine the total sales in China and hence the potential shares of China market to be landed.
When a company is analysing a market, it either uses top down approach or bottom up approach. Top down approach is an approach to determine the total market and then estimate the companies’ share of that market. Therefore, companies may say something like if they are selling their product to China market and managed to land 5% of that market, it will make them 1.4 billion x 5% = 70 million sales.
On the other hand, bottom up approach is an approach to estimate potential sales to determine the total sales. This is a more accurate approach to determine the market share that companies can get, and the results are more acceptable by investors.
After all, it is more important to determine the accurate share of a market instead of just knowing the size of a market.
5th Part: Competitive Advantages
This is actually the technical part of the business ideas. If the companies doing fundraising are startup, they should have significant part of technology included in their business ideas.
Example:
My current employer are using online platform and apps to deliver service to the customer. They might be able to recognize the problems and able to come up with solutions. They might also have some sound figures to create a good tractions, and estimate accurate market shares it could obtain from the market as well as the competition status.
However, if they could not build the platform and the apps successfully, they could not persuade the investors to make the investment.
This is why this part is also important in the pitch deck. It shows to the investors that the company can bring a business ideas into reality. The stronger the competitive advantages the companies have, the higher chance that they can gain the trust from the investors and obtain the fund they need for the business.
Conclusion
The pandemic in the past year has locked up a lot of money of investors around the world. Most of them are looking for new investment opportunities for their money. Therefore, it might be relatively easier for companies to do fundraising. However, those companies still need sound pitch decks to attract investors. By focusing on following 5 key parts in the pitch decks, their fundraising projects would be more promising.
- 1st Part: Problem and Solution
- 2nd Part: Tractions
- 3rd Part: Competition
- 4th Part: Market
- 5th Part: Competitive Advantages
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If you have any questions or have anything things to share, or you would like to be a partner authors with me, you can reach out to me via email learning@iamdelusionman.com.
Besides, if you want to know more about what I have learnt from other successful people, you can click the below link. This could the one of the life-changing articles for you:
