Startups often ask us a very basic question: which materials or documents should they send to VC firms?
While the exact fundraising materials you need varies widely by VC, there are a few basic things that you should create before you hit the fundraising trail. Of those, at the minimum, you need the following three essential documents:
1) a short description of your business or an elevator pitch
2) an executive summary, and
3) a presentation often known as “a PowerPoint” or a "pitch deck"
Whatever you send an investor should be clear, concise, interesting, and easy to process alone early in the morning in the darkness of a home office. If you need to talk the investor through it, you have lost the battle before you’ve started. Do not make the common mistake of thinking that you’ll send out a teaser and then get to talk through the details at a meeting. Realize that whatever you send a VC is often both your first and last impression, so make it count.
1. Short Description of Your Business
You’ll need a summary that you can email, often called the elevator pitch, meaning you should be able to present it during the length of time it takes for an elevator to go from the first floor to your prospective investor’s office.
The elevator pitch is one to three paragraphs that describe the product, the team, and the business very directly. It doesn’t need to be a separate document that you attach to an email; rather, this is the bulk of the email. Often it is wrapped with an introductory paragraph, especially if you know the investor or are being referred to the person, and a concluding paragraph with a very clear request for whatever next step you want.
Format: One to Three Paragraphs
Content: Product, Team, Business Model
2. Executive Summary
The executive summary is a up to three-page document which is short, concise, well-written description of your idea, product, team, and business. It is the first substantive document and interaction you will likely have with a prospective investor with whom you don’t have a preexisting relationship. Think of the executive summary as the basis for your first impression and expect it to be passed around within a VC firm if there is any interest in what you are doing.
Work hard on the executive summary. The more substance you can pack into this short document, the more a VC will believe that you have thought critically about your business. The executive summary is also a direct indication of your communication skills. A poorly written summary that leaves out key pieces of information will cause a VC to assume that you haven’t thought deeply about some important issues or that you are trying to hide bad facts about the business. Our inner grammar nerds suggest you have someone not involved in your company proofread your materials.
In the executive summary, include the problem you are solving and why it’s important to solve. Explain why your product is awesome, why it’s better than what currently exists, and why your team is the right one to pursue it. End with some high-level financial data to show that you have aggressive but sensible expectations about how your business will perform over time.
Format: Up to Three Pages
Content:
- Problem you are solving and why it's important to solve
- Why your product is better
- Why your team is the right one to do it
- Market Size
- Plan
3. Presentation or a Pitch Deck
Once you have engaged with a VC firm, you will quickly be asked to either give or email them a presentation. This is usually a 10- to 20-page PowerPoint presentation consisting of a substantive overview of your business. There are many different presentation styles and approaches, and what you need will depend on the audience (one person, a VC partnership, or 500 people at an investor-day event). Your goal with the presentation is to communicate the same information from the executive summary, often with more examples, but using a visual presentation.
Over time, a number of different presentation styles have emerged. A three-minute presentation at a local pitch event is as different from an eight-minute presentation at an accelerator’s investor day as it is from a 30-minute presentation to a VC partnership. Recognize your audience and tune your presentation to them. The deck you email as an overview can be different from the one you present, even if you are covering similar material.
Work hard on the presentation flow and format. In this situation, form matters a great deal. It’s amazing how much more positive a response is to well-designed and well-organized slides, especially if you have a consumer-facing product where user experience will matter for its success. If you don’t have a good designer on your team, find a friend who is a freelance designer to help you turn your presentation into something visually appealing. Put some extra effort into this as it will pay off many times over.
"Less is more” when it comes to an investor presentation. There are only a few key things most VCs look at to understand and get excited about a deal: the problem you are solving, the size of the opportunity, the strength of the team, the level of competition or competitive advantage that you have, your plan of attack, and current status. Summary financials, use of proceeds, and milestones are also important. Most good investor presentations can be done in 10 slides or fewer.
Format: 10 - 20 slides. Most presentation can be done in 10 slides.
Content: Same information from the executive summary but more examples, visuals or a demo, prototype of your products, services.
In the next article, we will address other materials which are also important: Business Plan, Private Placement Memorandum, Detailed Financial Model and The Demo
* This article is adapted from "Venture Deals" - 4th edition by Brad Feld and Jason Mendelson