What is a pitch deck?
A pitch deck is a presentation which provides an overview of a business. It is prepared by entrepreneurs to inform potential investors and clients about the business, its products and services, as well as its goals and strategies.
A pitch deck should prompt an investor to learn more about your company. Every pitch deck should have the following ten components.
1. Company purpose
The purpose of a company explains the reason for the company’s existence. For example, “Refresh the world. Make a difference” is Coca-Cola’s purpose. “Connecting people. Uniting the world” is United Airlines’ purpose.
Notice that the purpose of a company is not to provide a certain product or service. Rather, it is a statement of the effect the product/service intends to have.
This explains the problem a company’s product/service will solve. For example, Bkash solved the problems faced by unbanked people when transferring money across Bangladesh, by providing a fast and easy method of money transfer.
In the problem section of a pitch deck, a company should describe the inconvenience faced by target customers at present as well as the limitations of existing solutions, which will reveal the market gap the company aims to fill.
In this section, entrepreneurs should explain how their product/service solves the existing problem or addresses the existing market gap. This may be done by describing the core functions of their product/service. Here, they should focus on the benefits they offer to customers instead of the features of their product/service.
For example, Uber’s solution to outdated taxi service was “a fast and efficient on-demand car service”. Nextflix’s solution to the inconvenience and high cost of renting videos from local stores was a subscription-based streaming service.
4. Market Validation/Why now?
This section should explain why the timing is appropriate for a company to launch its product/service, or to scale it. This should address the question why this product/service has not been developed or offered before now. What makes the market ready for the company’s product or service, and how will the company use this opportunity in its favor? What are the favorable conditions at present for the company to launch or scale its offering? Examples of such conditions may be market trends, technological innovation, or changes in consumer behavior. For example, when Pathao begin its delivery service in Bangladesh, it was tapping into a growing market of consumers who wanted to shop from the comfort of their home instead of going out. This was an emerging trend based on changing consumer behavior which Pathao facilitated using technology.
5. Market Potential
This section explains the prospects of a business in its target market. It gives essential information to investors on a company’s target group, market size, growth potential, barriers to entry and possible risks. This part of the pitch deck should reflect an entrepreneurs’ understanding of the market so that they can convince investors to provide capital.
6. Competitive Analysis
This section includes information about direct and indirect competitors as well as their strengths and weaknesses. Your direct competitors provide products/services which are similar to yours, and their offering can be purchased as a substitute to yours. Indirect competitors are those who sell a different product/service, but these can be bought as alternatives to your offering, like tea and coffee. Information on whether competitors are local, regional or global may also help investors to assess their competitiveness.
In this section, you may insert a table comparing your company and its offerings to those of your competitors. If your product/service is completely new, i.e., you are operating in a new market with no direct competitors, you can compare your market with the old market against which you are competing. For example, Uber raised funds successfully by comparing its service to traditional taxi service.
7. Business model
This slide shows how your company generates revenue. There are various models of revenue generation, like retailer model, fee-for-service model, subscription model, franchise model, leasing model, etc. For example, Netflix applies a subscription model, where customers pay monthly subscription fees. This is important for investors as they want to know how a company plans to earn profit.
8. Management Team
A startup and its founder are often compared to a horse and its jockey. That’s because investors expect a founder’s vision to guide a startup’s growth, just like a jockey rides a horse.
VCs look for founders who have a proven history of building businesses with high return. For example, way before Elon Musk founded Tesla or SpaceX, he founded an online, searchable business directory called Zip2. His initial investment was $28,000 in 1991. The company was sold for $341 mn in 1995.
VCs also look for entrepreneurial skills, technical competence, as well as manufacturing and marketing abilities in founders. When we think of successful startup founders, we often think of Bill Gates, Jeff Bezos or Steve Jobs, who founded their companies from ages 20 to 30. However, according to research done by Harvard Business Review, the average age of a successful startup founder at the time of founding their business is 45 years.
Apart from founders, some information on key personnel who manage the business may also be included in a pitch deck.
For early-stage startups which have no financial history, founders should include the amount of funding they are seeking along with the milestone they want to achieve with that funding. For example, an E-commerce platform may state “We are looking for $500,000 to reach 100,000 transactions in 12 months”.
Startups which have been operating for a few years will have financial history to share in the form of income statements, balance sheets, cash flow and cap tables. When a founder is sharing his/her pitch deck to get introductions, references or meetings, s/he should not disclose their company’s financial history or projections. These should only be shared once a connection has been established with investors.
This section will outline what a startup plans to achieve in the next 5-10 years. What percentage of the market will the startup capture? Which new products/services will it launch? Which new markets does it plan to enter? These projections should be realistic and based on available market data.
Including these ten components in your pitch deck will give the investors the information they need at the screening stage of investment. Best of luck with pitching and fundraising!
Need help preparing a pitch deck? Contact us for expert advice here!