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Venture capitalists are always on the lookout for the next big thing, and most of them review hundreds of decks monthly. Seasoned VCs need 30 seconds to decide whether the pitch deck is worthy and whether they should proceed and arrange a meeting with the founder.
If you’re an entrepreneur looking for VC funding, you need to understand what investors are looking for in a company before they decide to invest. Here are five things that should be in your deck, without which Leta Capital won’t invest in your company.
Related: Seeking Funding? Here Are Five Tips for Creating an Effective Pitch Deck
1. A clear and compelling problem statement in conjunction with the timing
First, you sell the problem, not the decision. The market need, not the product. VCs are looking for companies that solve real problems for real people. Your deck should clearly articulate the current state your company is changing, why it matters and then how you do it. The problem statement should be clear, concise and compelling. It should show that you’ve done your research and understand your target market. For example, Airbnb’s problem statement was: “People need affordable, safe, and unique accommodations when they travel.” This statement makes clear that Airbnb is solving a real problem in the travel industry. Moreover, people travel as much as ever before, so the timing was perfect.
2. Realistic projections and a scalable model
There is nothing worse than unrealistic and unprovable projections. If you claim that today you have $10k MRR and two customers, but next year you will make millions, and in 5 years, you will have an IPO, no one will believe you. You just don’t have enough data to convince people! Keep in mind that VCs want to invest in companies that can scale and generate significant returns on their investment. Your deck should show that you have a clear and scalable business model that can generate revenue and profit over time. That is why your traction, your business model and your projections should match.
3. Full focus and commitment from the founders
VCs want to invest in companies that have a strong team with a track record of success. But even more than that, VCs want to see the absolute commitment of the founders if we are talking about seed/series A stages when entrepreneurs need to work really hard and invest all the energy and time to boost their startup. Of course, the deck should show that you have a team with the skills and experience necessary to execute on your business plan. The red flag here is if you say that you need to raise money to hire a technical co-founder or lead engineer. In that case, VCs will think that you can’t attract and convince technical talent. You should figure out how to convince people to join you on your own — otherwise, how will you create a game-changing company?
Related: Five Best Pitch Decks of All Time
4. Competitive advantage and a POD among competitors
No competition? No market. You should admit that if the problem exists, someone is already solving it somehow. Don’t belittle competitors, and don’t say they are stupid (especially corporations or startups with a proven track record or huge funding). However, VCs want to invest in companies that have a competitive advantage over their competitors.
Your deck should show that you have a unique product or service that sets you apart from your competition. For example, Tesla disrupted the automotive industry by offering electric vehicles that were more environmentally friendly and had better performance than traditional gas-powered cars. Their competitive advantage and POD were their focus on innovation, sustainability and design.
5. A clear path to exit
VCs want to invest in companies that have a clear path to exit. Of course, investors don’t want to fund founders who haven’t built the company already want to sell it, but still, your deck should show that you have a plan for how investors can eventually make a return on their investment. This is an art, but nobody promised this would be easy!
If you’re looking to secure VC funding, your deck needs to show that you have chosen the perfect timing to solve a real problem, that you have a scalable business model executed by a strong and dedicated team, you have a competitive advantage, and your company will give an investor the desired returns after 5-10 years. By including these five things in your deck, you can increase your chances of securing the funding you need to take your company to the next level.
Related: How a VC Wants to Be Pitched