We recently published an updated list of US based Micro-VCs and as of today, we count over 600 active firms. Unsurprisingly, for those fundraising, standing out from the pack is an increasingly difficult endeavor.
As most Micro-VC’s don’t have the luxury of long and prolific investing track records, managers must convince prospective investors to invest only using limited data points and projections to support a given thesis.
One of the key documents in any fundraising is a pitch deck. A well-constructed pitch deck can create an instant visceral engagement with the reader through clear deliverance of a narrative. Having reviewed 350+ venture fund pitch decks over the past few years, very few effectively convey the message the manager intends.
Of course, a great deck isn’t a direct guaranteed pathway to an allocation, but it sure does improve the probability of one. It also presents a manager with an opportunity to fine tune/stress a pitch and potentially initiate positive momentum going into an investor call.
While decks are bespoke by design, there are some basic tips we think may be helpful to consider when putting together a fundraising venture fund pitch deck.
An effective pitch deck clearly articulates why the manager has an opportunity to be a consistent outlier performer (for seed funds, outlier performance typically refers to 3X or above cash on cash return).
As such, the deck should tangibly address the following:
a. Why the firm will have access to the most interesting companies and entrepreneurs within the thesis.
b. Why the firm will win the most competitive opportunities.
c. What makes the team uniquely positioned to execute the outlined thesis.
In addressing the items above, it’s imperative that the content be inclined toward the specific formula the firm employs for each versus basic anecdotes or generalizations. Understand that LPs are carefully evaluating how the puzzle pieces specifically fit when determining the strength of model versus others.
-Resist the urge to include proclamations or promises of fund performance (i.e. “5x target returns). Such statements carry little weight for LPs, and often infer manager naïveté.
-In certain cases, a competitive positioning slide may serve helpful in framing for investors where you “fit in” within the seed stage landscape while concurrently demonstrating keen comprehension of the competitive landscape.
-Slides with a large list of advisors rarely hit the bulls-eye, particularly for sophisticated LPs — Name brand advisor slides feel like vanity slides while a long list of non-name brand advisors doesn’t carry much impact. If you must include advisors, simply include a smaller group of network relationships that are truly meaningful to the story. A well thought out advisor slide illustrates why certain advisors are critical to the firm by conveying where they provide value (i.e. diligence/sourcing/value-add) and the firm’s ongoing engagement model with them.
-When describing track record, take great care not to mislead in any way. Offering a partial track record of only successes, trumpeting non-relevant parts of a track record, or being creative with attribution are sure paths to not getting an investment from astute LPs.
-While highlighting prior investments is fine, the attention of these slides should focus on engagement between the firm/individual and company, and not simply a summary on the company and how much additional capital they have raised. Specifically, the slide should speak to how the company was sourced, what led to the decision to invest, what allowed you to get in, and what tangible value did the firm drive to the company post-investment.
Well-crafted flow is absolutely critical if a deck is to be effective. With a crisp flow, managers can guide a reader through the lens they themselves see through.
While there isn’t a perfect blueprint, there is a general flow that I’ve seen work well.
o Slides 1–3: Focus on building credibility with the reader. Like the opening of a great movie or a great book, the first few slides will help set tone and shape how the reader interprets subsequent slides. The best way to accomplish this is to start off outlining your strengths, experience, and notable past accomplishments (investing or operating track record).
o Slides 3–7: Discussion of thesis. What is the market opportunity or challenge? What are the specific trends that support the thesis? Why is the thesis viable for the long term? Be careful not to be pedantic, and instead focus directly on clearly addressing the questions listed here.
o Slides 7–12: Execution model of the firm and specifically centered on the system administered to consistently demonstrate differentiation around sourcing and post-investment value-add. The less anecdotal and more systemized these components are, the more effective the story.
o Slides 12–15: Slides on fund specifics such as anticipated portfolio construction and fund terms.
-With regard to text, orient your mindset to stay within Twitter rules on each slide. A succinct articulation of strategy is a great way to demonstrate incredibly clarity of thought as a manager. This also greatly enhances the likely that an investor will actually read the deck.
-In terms of length, we’ve found that decks that are no more than 15–18 slides are best received (it is ok to put certain supporting information at the end through an appendix if necessary). For those that are pitching to individuals not as familiar with venture, a longer deck describing venture as a category may be needed. In these cases, it’s best to have two versions of the deck.
-Design is something that shouldn’t be ignored. Fortunately, there are plenty of options with design firms, and total cost shouldn’t be more than one or two thousand dollars (i.e. a company like Sketchdeck can do wonders very quickly).
Finally, make sure you send your deck to a few friendlies initially before using it with investors. Your deck will naturally iterate many times, and if done well, will serve as a powerful living and breathing proxy of yourself.