Overview

Now more than ever, the ability to communicate a clear, simple, and persuasive vision is critical in building momentum for your business and developing an effective fundraising strategy. Gone are the days of the traditional “business plan”—a thick, phonebook-like tome detailing every minute detail and hypothetical of a business operation. Building a business today means accepting uncertainty and ambiguity and yet one thing is certain—change. The business, industry, and environment will surely change. Communicating how your business fits into this ever-changing world and how you expect to navigate the ups-and-downs of entrepreneurship is a key differentiator that investors look for when evaluating a business. In this chapter, we will introduce different ways to communicate an effective narrative and present a compelling view of your business, which is not only important to potential investors but also to future customers and employees.

Today’s “business plan” equivalent is a combination of materials based on varying stages of an investor conversation—getting an introduction, the first meeting, a meeting with the broader investment team, and diligence process. Knowing that a highly-detailed plan is guaranteed to change in the early stages of a business, investors often focus on the specifics around a company’s team, product, and market. Investors look for signals that show how an entrepreneur thinks about the future and expects to grapple with anticipated challenges. Strong materials make it easier to distinguish the signal from the noise and serve as an opportunity to guide investors to the most important aspects of the business. Done well, great materials can generate sufficient interest in a business, turning a ~5-minute email into a ~45-minute meeting and a long-term relationship.

As with any effective communication strategy, it’s not only important to present your message but also important to be thoughtful regarding your intended audience. Keep in mind that any information you present is the beginning of a relationship with your audience and the materials on the page are merely a facilitator. Effective materials should elicit deeper questions from an investor that forms the basis of a meaningful conversation. You should anticipate the questions investors will ask and use the content and discussion as an opportunity to not only tell a high-level story but also showcase depth of understanding. Anything that you do not share or convey, you allow someone else to interpret and imply on your behalf. So know your business and control the narrative, or you may risk a VC firm’s analyst, a competitor, or even a customer doing it for you. At the same time, a healthy degree of self-awareness around where the business is today and what hypotheses are left to prove will also go a long way in communicating your strategy.

While investors have a finite set of criteria and signals they look for, keep in mind that every investor is different. Depending on size, scope, and traction of your business, as well as the investor’s own style, their questions and expectations will vary. To oversimplify, consider a meeting as a mutual first impression, with the goal to learn more about one another and test for personality fit. It goes both ways—investors should be thoughtful, interested, and engaged in your business. And investors are looking for an athlete—someone who can set a thoughtful strategy, navigate unexpected situations, and get the business across the finish line to an IPO or acquisition.

It can be physically taxing and mentally exhausting—traveling across time zones, being away from home, running the business while  also running a process. In my own experience   at the end of 2001 in starting a business, I met over 87 investors and travelled over 30,000  miles to barely make payroll. So prepare and be ready for everything. Spend the time upfront to create an efficient and effective process  and try to minimize stress on your body, mind, and business. And it’s not all for nothing. In fact, many high-quality materials are often repurposed for other uses. Fundraising is a way to sharpen, refine, and practice business communication (for future investors, recruiting candidates, and potential customers).

As outlined below, the materials needed for successful fundraising should focus on communicating the most important information, anticipating common questions, and minimizing back-and-forth logistics to get to the final answer (yes, no, or the ever often “not right now”).

From the investor perspective, there are four key questions:

• Do we want to learn more?
• What do we have to believe about this business for it to be successful?
• Do we want to invest in this space?
• Is this a deal that fits in terms of size and stage?

The following chapter focuses on  specific content and a process to design materials so that you can respond quickly to inbound requests and remain in control of fundraising at a pace that fits your business needs.

Materials primer

As you embark on the fundraising process, there is a common set of materials that an investor might inquire about or expect, depending on the phase of the investment cycle.

The first step of fundraising includes generating interest and excitement about your business, often through either a cold email or preferably a warm referral. After the initial introduction, someone within the firm will determine investment fit and next steps. The decision is usually based on the information provided as well as the relevance of the referrer to a firm. A VC firm is more likely to prioritize an email from a portfolio founder or coinvestor over an inbound email from an unknown contact. Warm referrals create credibility and demonstrate an ability to build relationships within the community, and so they will typically be more compelling. A cold email is not necessarily a nonstarter; however, you have a single opportunity to grab attention so plan accordingly.

For initial outbound communication, we recommend creating brief and concise “teaser” materials. A well written 100-word description and a basic high-level pitch deck can be used to facilitate the warm introduction and spark interest. The full pitch deck is typically used later in the investment cycle during the formal investor presentation and provides the most comprehensive information for an investor to make a decision. For reference, materials we don’t see any more and do not recommend spending time on developing include long-form investor business plans (e.g., Word documents), private placement memos, and nondisclosure agreements.

100-Word Description: This is your opportunity to answer Toyota’s favorite question—why? Why should the recipient pay attention? Communicate your vision clearly and concisely to grab an investor’s attention and get a prompt response. You can dual purpose this piece as an “elevator pitch”—a brief voiceover that can be articulated in 60 seconds or You’ll be asked often—at dinner parties, networking events, press mentions, customer introductions—so be thoughtful and intentional about the way you describe your business. And consider evolving it over time as you grow and garner feedback. An elevator pitch should include a brief personal introduction, the company vision, description of the product, and one or two pieces of traction points. Keep it simple. Be memorable, be specific, and use examples.

“Teaser Deck”: Today’s entrepreneurs and investors live and die by “the deck”—a well- designed presentation (often Windows PowerPoint, Google Slides, or Apple Keynote) that can be reviewed quickly to get a full picture of the business. It is helpful to produce two types of decks, the short teaser deck for email distribution and the full pitch deck for a formal presentation. The short teaser deck is a five- to six-page presentation intended to be shared with a broader audience. It provides enough information for an investor to determine if the business is interesting and can be a starting point before an in-person meeting, but it does not have sensitive and confidential information. The teaser deck is often a condensed version of the full pitch deck with select slides removed (think: metrics that you wouldn’t want to get into the wrong hands) and is sent in advance of an initial meeting.

“Pitch Deck”: The full pitch deck is a 15-20-page presentation used in conjunction with a meeting, with additional backup material in the appendix. It should represent your business visually and stylistically and serve as the document to facilitate your voiceover in a pitch meeting.

Today, there is a commonly used framework to tell the story and facilitate the pitch. In fact, Google’s presentation product includes a “pitch” template that provides a step-by-step process for communicating the vision of your business.

The following outline provides a framework for a typical pitch meeting discussion. But most importantly, consider the intended audience, take a step back, and constantly sanity check yourself. Pitch decks that tell a cohesive story that is true to a founder’s vision end-to-end will stand apart.

Contents of the pitch deck

Company purpose: Develop a simple one-liner that summarizes your business and makes it real, using simple language. Articulate the problem and a relevant solution to that problem. The first tell for investors is whether you are addressing a real need, or just a “nice to have.” Be clear and thoughtful about the problem and your company’s value proposition to relieve the pain point.

Market size and analysis: Investors like to see large, growing markets that are poised for change. We want to believe that you’re going after a big problem in a big market that will only grow over time. That said, there are multiple stages to your plan of attack. Your market today will hopefully evolve, so showing the near and far term can be helpful. We recommend coming prepared with thinking around the total addressable market (TAM), the Serviceable Addressable Market (SAM), and the Serviceable Obtainable Market (SOM). From there, investors can consider not only how you think about the market, but also how you plan to enter and sell to that market and how the strategy shifts over time.

In many cases, timing is just as important as size of market. Be sure to describe any recent favorable trends or why the timing of technology deployment is right for right now. Is now the tipping point for smart-phone penetration? Is there a demographic shift? Companies can be too soon to market or get derailed because consumer behavior is not quite ready for a particular innovation. Are you a first-mover and is that an advantage? Have others come before you and failed? Be prepared to discuss why the right time is now.

Competition: While a large and well-timed market are both important, a company’s positioning and competitive dynamics are also relevant. Be prepared with a list of competitors and your differentiation within the field. Do be upfront about competition and if there are obvious competitors missing from this section, expect to be asked about it in the meeting. If you do not volunteer a competitive set in the meeting you miss another opportunity to control the narrative, and you can expect a firm’s analyst or associate to find them in diligence. A simple 2x2 matrix or an xy-axis chart with relevant labels is sufficient in providing a landscape. As an investor in Pinterest, we view the competitive landscape from the lens of consumer intent as well as time spent.

Product: Above all, product demonstration (product demos) speak louder than pitch decks. Investors like to see or touch a product or service to bring it to life. The more information you can provide here, the better. If you’re early in the cycle, a detailed product roadmap, wireframes, or renderings are helpful. A product demo is preferred when a product is beyond the alpha or beta stage of development. Keep in mind, investors will understand prototype, demo phase, and anticipated development cycles. We don’t need it to be perfect, we just need to see it work. At FirstMark, we’ve seen an on-demand delivery company place an order at the start of a pitch and we enjoyed the delicious cookies that arrived from a nearby bakery just minutes later into the meeting. We’ve also experienced a new virtual reality software through a headset that took us to the sandy beaches of San Diego.

These are powerful moments when you can let a product speak for itself, ideally leaving an ever- opinionated investor speechless!

Business model: The specifics of the business model are a key way that investors can understand how you think about positioning, growing, and scaling your business. Investors want to understand who the customer is, how do you reach that customer, how much they’ll pay for a product, and how long they will use the product or service. We want to learn about your customers and revenue and how you plan on growing both. Most importantly, be prepared to discuss your assumptions and thought process.

Investors will often ask how you determined a metric like customer acquisition cost: Is it blended? By channel? An estimate or actual? You should expect questions surrounding revenue, pricing, unit economics (including customer lifetime value and acquisition cost), customer pipeline, and sales and distribution model. Have the fundamentals down pat but also be open- minded to differing perspectives and views from an investor or industry expert. A handful of key metrics for technology include:

Consumer	Enterprise
Users: sign-ups, downloads, registrations	Monthly, annual recurring revenue
Daily, weekly, monthly active users	Annual contract value, payment terms
Retention	Customer acquisition cost/customer lifetime value
Time on site/app	Sales pipeline, cycle and duration
Behavior of customer	Customer concentration
Monetization strategy	Gross churn, net churn, logo churn

Team: The team that you’ve assembled to execute the business vision is just as important as the business itself. Highlight the founders and management team with relevant expertise and complementary skillsets through short bios and photos. Tell us why this is the best team to execute the vision. Expect investors to reference the team as well. It’s helpful to prep a few relevant contacts for diligence calls and be willing to make introductions if asked.Beyond the pitch deck, investors may ask for detailed financials as interest evolves. More important than the actual numbers is the thinking about the complexity of the business as well as expectations for future growth. Investors will be looking for assumptions on growth, expense management, and burn rate. You can expect requests for the following materials: financial model, income statement, balance sheet, and capitalization table.

Financials: At the end of the day, the pitch is a deal. Don’t be shy about outlining the deal terms, specifically the amount you intend to raise, a clear perspective on use of proceeds to get to the next fundraise, and ultimately the anticipated cash-out timing.

Appendix: A pitch deck should strike a good balance around level of detail. Share enough information to move the conversation along and hit the key points without bogging investors down with details that detract from the story.

Over the course of the fundraising process, you can and should expect common questions to emerge as investors engage with you and your business. It’s helpful to have an appendix with relevant backup slides to reference if needed.

Developing materials

The process to develop these materials is time consuming and requires an ability to synthesize large amounts of information into digestible insights. Throughout the process, stay organized with sourcing and citing research.

It is also helpful to include calculations and assumptions in a footnote or an appendix slide. In recent years, we’ve seen some entrepreneurs work with a designer to polish the deck and extend brand continuity. There are mixed opinions about using a designer for a deck, but a helpful rule of thumb is that if brand and design are key components of your business, any presentation materials should reflect that focus and attention to detail.

Conclusion

The goal of the materials is to communicate and generate interest in your vision. The best presentations show thoughtfulness and preparedness, making it easy to understand the business and why you are the best person to execute this vision. Additionally, being responsive and quick to provide requested information makes the process go smoothly and accelerates the ability to make a decision. While this chapter outlined the materials that you can prepare, do expect the venture firm to run some diligence of their own. It’s very likely they’ll be looking for market indicators, running analysis on your materials, and even calculating some of your metrics themselves. Investors want to know what they are buying when they agree to finance the business, so it’s not unusual to be  on the receiving end of requests for additional information. It can be very beneficial to have all anticipated materials ready to send out quickly so both parties can get to an important decision point. Ideally, the materials produced can be used for several different purposes, and they serve as a vehicle to get to know potential investors. Every conversation is an interview from both sides of the table, so do not be afraid to ask your own questions and conduct your own due diligence to find the right partner for your business.

Rick Heitzmann, Founder and Managing Director, FirstMark Capital

Caitlin Strandberg, Vice President, FirstMark Capital