If you're an entrepreneur, you're probably familiar with the 10-14 slides that make up a typical pitch deck for investors. But do you actually know why you need a pitch deck at all? Or what to include in your pitch deck to increase your chances of financing?
We have helped many start-ups with building their application, but also with setting up a pitch deck to grow with the help of VCs and angel investors.
Today we are going to explain 5 steps that you should not miss before you start making a pitch deck.
Find your own story
3 minutes and 44 seconds. That's the average time a VC spends reading a 20-page pitch deck at an early stage. 12 seconds per page - if the investors read it at all.
It's a big misconception that you should cram everything - all the details about what makes your idea unique - into your pitch deck. The reality is very different. When you work with so little time and attention, information overload is your worst enemy.
Instead, you should build your pitch deck with one goal in mind: to grab the attention of investors, and quickly. VCs receive hundreds of decks each year and have very limited resources. They quickly flip through, inviting about 50% of companies for a 30-60 minute initial meeting or meeting with a member of their investment team. If you have focused the energy and time on the right investor, your chance of a first meeting is as good as 90%. So much more favourable!
Scoring a second meeting is the real challenge: VCs invite less than 20% of the companies they meet to a second meeting, where investors really get to work. In a second meeting, several members of the investment team will meet and discuss the core of your business proposal. They will then spend several hours verifying your story and assessing your company's potential (this is called "soft" due diligence). Finally, they will have an in-depth internal discussion to continue the process. Only 10% of companies go to the next stage (or 1% of all companies that have applied) - term sheet, full due diligence and finally receiving an investment.
After many years of working with VCs and looking at thousands of pitch decks and building our own pitch deck, I can tell you that there is only one way to go from the first meeting to the second: your pitch deck needs to be an engaging and authentic story.
Yes, you read that right. The key to scoring an investment is a good story, full of intrigue, excitement and adventure. VCs are people after all, and people love stories. Stories tap into our gut reactions, and we all—including VCs—use our guts to make the kinds of decisions that will make or break your company's chance at a second meeting.
Building on my extensive experience on both sides of the table, I've developed a five-step process to turn your company's story into a winning pitch deck. Inspired by DevOps, I call it "Content Design" because it merges storytelling ("Content") and pitch deck design ("Design") from scratch.
But before you can tell your company's story in such a way that investors sit up and pay attention, you need to find your company's story. That's what we'll focus on here first.
Why stories? It's science
First, I want to share insights from neuroscience and human psychology that will help you understand why stories matter and make a difference.
Neuroscience tells us that we actually have three different brains: the reptile-like, responsible for flight or fight; the limbic, responsible for emotions; and the neocortex, responsible for things like thinking and speaking. We like to think that our rational neocortex does most of our thinking. However, it turns out that we make most of our decisions emotionally and then justify them logically. Our brains are so good at it that we don't even know we're doing it.
There's a good reason why we don't use our neocortex anymore. Every day we all make a huge number of decisions, small and large. If we had to consciously process them all, we would burn a lot of energy. Compared to other organs, the human brain is an energy guzzler and is responsible for about 20 percent of our energy consumption.
So our body looks for shortcuts to save energy. For most decisions, the brain reverts to familiar patterns stored in the subconscious mind. Cognitive resources are used only when clearly needed, such as in a second VC pitch meeting. Usually we only operate with the reptilian and limbic brains, which ask only two questions: "Is it safe for me?" And: "Do I like it?"
Emotions influence how people eat, help, trust, delay, or praise different products. They are also a critical factor in how investors make initial decisions.
Not sure how to find the right investor for your start-up? Find out how to choose the right VC.
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So what does this mean for your pitch deck?
Stories elicit an emotional response - excitement, anger, sadness, empathy, or enthusiasm. A good story makes us feel something for the person telling the story, which helps to create connection and trust. Stories go straight to our reptilian and limbic brains and answer their questions with a firm YES - this is safe and I like it!
People, including VCs, listen to stories. They also remember them, and more importantly, they remember how the story made them feel. Stories and emotions live long after the presentation is over.
Often I see presentations that try to influence investors to invest or bribe customers, by presenting lots of facts and figures and a graphed argument. Yet Science tells us that people usually make emotional, not rational decisions!
Ouch, that hurts. Especially if you are a software engineer (like me...) who has been taught to believe in the overarching power of math, physics and good technology products. But trust me, the sooner you embrace these ideas, the faster your pitch will be noticed.
Remember: your goal with your pitch deck is not to convince the investor to invest, but to schedule a second meeting. Therefore, do not present a series of facts and figures, but rather tell a very good story.
So the big question is: what is your story?
A good story has all the elements of a Hollywood blockbuster: drama, excitement, vulnerability and triumph. Each screen-ready story has a hero taking on a villain. The two confront each other, and in the end the hero wins, and then lives happily ever after.
If you think about it, you can also find these elements in your company's story. In your case, you may have encountered old, outdated products (the bad guy) that got in the way of productivity in your industry. But your start-up's innovative product (the hero) came by to take on the bad guy. In the end, the hero (your product) will prevail and make us all happy. 😉
From our own experience working with many start-ups in both the Netherlands and America, the hardest part of the process is turning the textbook idea I outlined above into YOUR own original story.
When we advise a start-up looking for their story, I like to use two complementary approaches to get my client to think about their story.
The first focuses on you, the entrepreneur, and the second focuses on the customer. These two stories are always there - you just need to find them. Once you've come up with both stories, you probably have an idea of which story is stronger, or maybe you decide to choose a combination of the two.
The Hero's Journey
The first story, highlighting the founder, is the classic tale of the hero's journey. In this story the focus is on WHY you decided to start the business, where you come from and what motivates you. Making the story personal gives you the best chance of bonding with your audience.
A classic founder-centric story might sound like this: "I've been a hobby pilot for 20 years. It may not be that well-known, but flying a helicopter is just as dangerous as riding a motorcycle. So if I get in the helicopter, I ask my passengers to help me spot other air traffic - because there is no aviation system that can do that. Every year, a lack of traffic and terrain detection causes many victims worldwide. That is why I decided to start a company that is developing an autonomous pilot system.This system will gradually improve, starting with assisting the pilot and eventually replacing the pilot”.
In that case, the pitch deck will not focus on the specifics of your product, but instead it will be about sharing your vision of the world. By changing the frame and connecting the story to a greater good, people feel connected and develop a desire to help.
So how do you get started?
Find your "why". People don't buy what you do; they buy why you do it. And what you do just proves what you believe.
The same goes for investors. During the 'why' journey of discovery, you start by collecting stories and sharing them. By looking at your company's past and unearthing the most important discussions—the experiences you shared together, the people you've been influenced by, the lives you've changed (in a positive sense)—you can identify patterns. These themes form the basis of your WHY statement. You can then prepare and refine your WHY statement (To ... (your contribution), so that ... (your impact)). The next step is to state your HOW, and that's the way you bring your WHY to life. While other companies may express their WHY in a way similar to yours, it's HOW that makes you unique.
Finding your WHY is not the full story. But it is the beginning and will be the overarching story for the entire story.
The new game
The second approach to storytelling I take with my clients is to focus their story on their client. This approach to your story does not begin with "I am," but instead describes a major fundamental change that is taking place in the world. The message, in fact, is that change is imminent and will have an impact on all of us. Those who don't adapt will disappear. But if you adapt, you will reach a promised land of better performance and success.
Just think of the companies that could work from home long before COVID-19 and had made the right adjustments such as video conferencing and digital offices vs. those who chose not to.
This approach is less emotional than the first, but it will add a sense of urgency to your story. Another advantage is that it puts you in a different league than your competition (because you're targeting the "The New Game" world, while your competitors are stuck coming up with "Old Game" like solutions).
Your story is your strategy
Once we have both stories, it's time to begin combining the two. A good way to combine the two approaches is to start with the big change at hand, then say you've seen the change for yourself and tell your WHY.
As you will see, your story encompasses all elements of your business and is in fact strongly related to your company's strategy (such as sales and go-to-market strategy).
Whatever approach you choose to tell the story (usually it's a mix), remember that your story isn't about what products can do, but what people can do with those products, how it affects them.
This is also how you should think about the story of your start-up: who are my customers? Why are they buying my product?
Summary - stories matter
If you're raising money for your start-up, a pitch deck is an important part of your fundraising toolkit. As counter-intuitive as it may be, the purpose of your pitch deck is not to raise money. Rather, you want your pitch deck to spark interest in your business and get you a second investor meeting (where investors really start to listen and engage).
Science tells us that the best way to grab people's attention and engage in meaningful conversation is to tell a compelling story. Still, finding your own compelling story may not be easy. I like to use the Hero's Journey method to figure out the right story.
The next step is to turn your story into a winning pitch deck.