Essential Venture Capital knowledge, Fundraising top tips

Ultimate Blog: How to build your pitch deck 2022

Harrison Faull
October 30, 2022

Ultimate Blog: How to build your pitch deck 2022

A pitch deck is critical to your fundraising success.

As a founder, it can be hard to know whose advice to follow when it comes to building your pitch deck. Everyone has their own opinion.

I have analysed sample pitch decks from leading Venture Capital funds (Sequoia Capital, Y-Combinator, Accel, Greylock) and high-growth startups that successfully raised venture capital (Airbnb, LinkedIn, Facebook) to create the ultimate pitch deck guide.

Your pitch deck should not be made to close an investor. It should be designed to gather interest from a venture capital fund so that you get a first meeting.

In your first venture capital meeting, you will get the chance to demonstrate your ability as a world-class startup founder and convince your potential VC investors whether to invest in you or not.

Most venture capital investors recommend that your pitch deck is only 11 or so pages long.
Given the fierce competition for funding, a poor pitch deck hurts your chances of fundraising. If you demonstrate that you are not able to communicate effectively with your potential investors, how will you manage any better with your customers?

Venture Capital funds are flooded with fundraising proposals, with most receiving between 3,000-5,000 annually.

Luckily, all venture capitalists ask the same questions when analysing a pitch deck.

Below is the ultimate guide on how you should structure your pitch deck.

Here are 11 critical slides every pitch deck should contain (and how to build them):

1) Cover Slide

Your cover slide should include your company logo and contact information.

Keep it clean and crisp. Look at the famous examples above. Don’t reinvent the wheel, this is a simple slide.

My personal advice is to exclude the date, you don’t want to accidentally send a venture fund an deck with an old date.

2) The Solution

You don’t have much time to convince a venture capitalist that your pitch deck is worth reading. I suggest that you lead your pitch by explaining the solution you have or are planning to build.

Here you can showcase why your solution is a clear winner. Take a look at some famous examples I have pulled together from Sequoia, Airbnb, Uber, YouTube and Peleton.

3) The Problem

Keep your description of the problem succinct. Where possible evidence your claims with supporting statistics.

Here are the problem slides from Airbnb, Uber and Tinders’ pitch decks. They do a fantastic job at explaining their individual problems succinctly.

4) Traction

Demonstrate your progress to date. If you already have customers, a venture capitalist will ask the following questions:

How many do you have?
What is your average CPA (cost per acquisition of each new customer)?
What kind of churn are you experiencing, and what strategies do you have to stop/slow it?
Do you charge these users, if so, how much and how often?
What is your conversion rate of free to paid users?
What does your pipeline of future deal flow look like?

DO NOT fabricate or show misleading cumulative metrics.

Given the current financial climate, my personal recommendation is that you show a clear path to revenue (if you’re not already there).

5) TAM (Total Addressable Market)

New entrepreneurs tend to use their forecasted TAM to peak an investor’s interest.

The problem is, most venture capitalists don’t trust a founder that provides no depth or explanation to how they calculated their TAM.

You are unlikely to have enough data to be 100% certain of your TAM. If you are creating a new category or disrupting an existing market, the answers are just unknown. And that’s okay. Venture Capitalists rarely deal with certainty. It’s their job to make a judgment call on the probability you will achieve a venture-sized exit in your space.

I recommend showing the niche customer segment you are focus on. This creates a foothold in the market from which you can then grow. Just look at Amazon:

I picked books because there were more items in the book category than in any other category. And so you could build universal selection.

There were 3 million in 1994 when I was pulling this idea together — 3 million different books active in print at any given time. The largest physical bookstores only had about 150,000 different titles.

So I could see how you could make a bookstore online with universal selection. Every book ever printed, even the out-of-print ones was the original vision for the company. So that’s why books.

Jeff Bezos

Jeff didn’t even know that Amazon would become an everything store when he started it. In 1997 he actually asked 1,000 randomly selected customers:

Besides the things we sell today, what would you like to see us sell?

The responses were all pretty lengthy, but the way they answered the question was whatever they were looking for at that moment.

I recall that someone answered: windshield wiper blades. That’s when I thought to myself, We can sell anything this way. So then we launched electronics and toys and many other categories over time.”

Jeff Bezos

Airbnb started as an idea to help owners/tenants earn additional income by renting out not even an entire spare room, but simply any space large enough to fit an air mattress.

Y-Combinator didn’t initially want to accept this idea alone, which just tells you how some of the most visionary people in the world struggled to see how such a niche could turn into such a huge business.

Typically speaking, a TAM of £300m or less is too small for most venture capital funds. They need to see a greater market size, as venture capitalists will never assume that you will be able to capture 100% of your TAM. And they need to believe that your company has the potential to 10-15x in your Series A valuation.

Above and below are the slides from Uber and WeWork explaining their TAM to potential venture capital investors.

Business Model

Venture Capitalists will want to know your plan to monetise your product/service. Will you offer different price levels? Venture capital funds like startups to replicate tried and tested business models. If you are trying to reinvent the wheel, try communicating your strategy as an iteration/improvement on an existing, proven model.

I found a video where Reid Hoffman discussed the common objection venture capitalists had about LinkedIn’s Series B:

The classic objection was that the network wouldn’t be valuable to the first members, so why would it grow? The network's value is zero for the first 500,000 or so members. What I knew that many didn’t was that a combination of curiosity and a viral game mechanic would slowly get to a million people, at which point the network becomes valuable.

Reid Hoffman

Competition

Apart from patent or regulatory protection, no company is 100% defensible. This is true even for large companies, as the average lifespan of a FTSE 100 company has fallen from 67 years to 15. Unless you’re in healthcare, venture capital investors don’t look to see if your idea is easily replicated.

The competitor landscape slide is not about defending yourself or talking badly about your competitors, but an opportunity to share your unique insights into what makes you different and why you are positioned to win.

Venture capital investors look to see if:

A) You have been honest with your own analysis and identified all your potential competitors.

Please don’t pretend that you have no competition. Start-ups face both direct and indirect competitors.

Direct competitors are easy to find. They compete on the same keywords that you do on Google. They go to the same venture capital conferences.

Indirect competitors are harder to spot. They might sell a similar version of your product that as a by-product happens to solve the same problem that you are solving. Perhaps it is not even marketed as a solution to your problem. But customers find and use it on maybe Reddit forums and repurpose it to solve their issues.

B) You are positioned to win.

Mark Peter Davis a VC at Interplay capital explains this well:

“In order to assess your company’s barriers VCs will spend time thinking strategically about the means of competition in the market. If success is solely based on your team’s ability to operate more efficiently than your competitors, VCs will need to know who is managing your competitors. If barriers are created through scale, then the VC will spend a lot of time thinking about whether your company is positioned to grow the fastest. Do you have the best model, the greatest access to customers and partners and the most desirable product?”

There are two ways to show this graphically:

1) A Feature Grid

I like the feature grid as it gives a founder more power when explaining how you have built a superior product in the keyways that matter to consumers. However, the name of this grid can be a little deceiving. You don’t want to simply list out all your product features, a good feature gird goes far beyond this.

In descending order, list out the major benefits of your product/service in order of user importance.

The use of a grid like this is empowering as you aren’t confined to only explaining product features.

You can include bits of your business model or strategy that will help you win in the long run.

Wherever possible, try to quantify your metrics. I know the graphic above has ticks, but if you can say that your user reviews are 4.8 stars, Bings are 2.2 etc, therefore you are more customer-focused than they are. Try to make it easy for a venture capitalist to agree with your conclusion by informing their own opinion rather than trying to sell them on your opinion.

2) A Magic Quadrant

This image shows the competitor analysis Airbnb presented investors in 2009 where they ended raised $600k from Sequoia Capital and Y-Combinator. As you can see, the team chose Affordability and online transactions to map out their competitive landscape.
The story the founders are trying to tell is that yes there are competitors in the space, but we will because we focus on affordable online bookings.
However, they didn’t do much to explain why they are positioned to win against hotels.com, which is plotted the closest to them.

For me, it would have been nice to see this done as a feature grid, because Airbnb could then showcase the main benefits that come with being online only and exclusively focused on affordability creates.

They could showcase how much further ahead they are than their competition when it comes to making online bookings. Perhaps this is the checkout time or product features to reduce fraud.

In addition, I think giving more colour as to why they have chosen to focus on affordability would be helpful. I imagine there was a far greater TAM for affordable accommodation than there was for luxury bookings, but a venture capitalist looking at this deck might interpret hotels.com to be the better investment. Perhaps luxury listings result in higher transaction commissions, enabling the online marketplace to become profitable quicker.

If you do decide to go with a magic quadrant-type chart, then pick your axis very carefully. Underscore.vc created the following list of questions to help founders pick the right axis to choose:

What aspect of your product is the stickiest?
Can these competitors compete on this axis?
Can this competitor cross this axis? What would that take?
Why do your customers need this differentiator?
What are you intentionally not?
Are there other competitors in your quadrant? If so, how else are you different?
Is your product better for a certain segment than another competitor?
Which attributes will you really lean into and build your advantage around?

I wanted to include the LinkedIn competitor landscape, as it is a good cross between the magic quadrant and feature grid. As a potential investor looking at their slide, I am more inclined to conclude that LinkedIn is the best investment opportunity in their space. But they have done more than show this visually, as they included the key quantifiable statistics that they thought matter to an investor looking to compare LinkedIn to its rivals.

Team

Above are three examples of founding teams that were part of successful pitch decks of startups that went on to raise venture capital.

From left to right we have: LinkedIn, Airbnb and YouTube.

Potential venture captial investors will want to know:

Who is in your team?
Have you worked together before, and if so, for how long
Do you have complementary skill sets and a track record of sustained high performance

Good VC firms will look for any gaps in the management team. If you have one, be proactive and include a shortlist of potential candidates. You might be able to get good feedback or a recommendation from a VC over your candidate pool.

Some founders like to include a slide that discloses their current investors. It can be useful to know: Who are they, what their track record is and how much equity do they own?

Reid Hoffman had a great list of angel investors in LinkedIn and he showed that he was backed by smart minds as you can see here in LinkedIns’ pitch deck to the right.

Venture capital investors read this slide and try to determine whether you and your team are the right people to win.

Reid Hoffman had a great list of angel investors in LinkedIn and he showed that he was backed by smart minds as you can see here in LinkedIns’ pitch deck to the right.

Venture capital investors read this slide and try to determine whether you and your team are the right people to win.

Financial Model

Project your VC exit outcome

What return does your ideal venture capital investor need to achieve in order for you to be a viable investment?
Where possible, you should try to be reasonable with your projections. Every entrepreneur needs to be optimistic, but venture capitalists like to see founders that have an element of realism, as this de-risks your ability to deliver against future targets you set for the team. Demonstrate that you know what is feasible and will set and work towards achievable (but very tough) goals.

These forecasted numbers are always somewhat of a fabrication as they are rarely hit. But they are crucial for demonstrating to your potential venture capital investors what you think will be the main revenue and cost drivers for your business. How fast you can potentially scale up. What your pricing structure will be and how long it will be before you need additional capital.

Reid Hoffman freely admits that during LinkedIn’s Series B, they still didn’t know what product would generate the most revenue for LinkedIn, but he clearly outlines 3 potential revenue streams in LinkedIn’s pitch deck:

“To show potential revenue streams, we listed three products: ads, listings, and subscriptions. The blue boxes identify the corresponding markets for those products. Although the blue boxes are equally sized, we knew that the largest portion of our revenue would come from the recruiting space (the 2nd blue box labeled “Jobs”).

What we didn’t know was which product — specifically, listings or subscriptions — would have the higher dollar volume. Over the long term, we anticipated that the answer would be subscriptions, but we didn’t know how long it would take to get there. In 2005, we launched all three products — in the order of listings, subscriptions, then ads — eventually discovering two surprising insights:

The principal market for our listings and subscriptions products became the recruiting space, instead of business development and networking.

Subscriptions became the product with the highest dollar volume faster than expected.

Today in 2013, the majority of LinkedIn’s revenue comes from an enterprise version of our subscriptions product.”

Now this might have scared some investors off LinkedIn. It is very rare for a start-up to successfully execute on three different revenue streams simultaneously. The general rule of thumb is to do more customer research, work out which revenue generating activity has the most potential and pursue the best opportunity.

Fundraise Size

Every time you raise a round, you should be thinking about the next round. Who will be the next investors you pitch? What will their concerns be? What will you need to solve next? How will you raise money later?

Expect that future investors will look at today’s deck. When I created our Series A deck, I presented a growth curve that would be good enough to get an investment, but I also had confidence that I could beat it. I wanted to be able to go into my Series B presentation and say, “Here’s what I said before, and here’s how I did.” Because we beat our Series A expectations for network growth, investors could comfortably trust our promise to build revenue with our Series B financing. Reid Hoffman LinkedIn

How much capital are you asking for? What will you do with this money? VCs will evaluate your company through the theory of capital efficiency model. This is the anticipated rise in your company valuation for every additional £1 spent of the money that you raised. For example, if you can acquire customers for £1, but their LTV (lifetime value) is £10, then spending £500k to acquire new customers should increase the value of your firm by at least £5m. This becomes very important for VCs as it drastically impacts the equity dilution they will face in future fundraising rounds.

Spell out to investors how they will generate a return on their investment. Is your goal to sell the business one day? If so, who are the logical acquirers of your firm?

When showing your financial projections, you can score brownie points with VCs by forecasting three different scenarios: good, ok and bad. In each of these different scenarios, what will your growth look like?