What story are you trying to tell to potential investors?

 
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Lately I've found myself giving a lot of pitch deck advice for seed rounds. Usually I point people this post and tell them to a) stick to six slides with mostly images/graphs; b) drop any financial projections; and c) drop any executive summary or even longer stuff.

Then last week I read a @bryce post entitled You Can Never Size a Market in Excel. I agree with his specific point about market sizing, but I think it can be usefully generalized as well. The following is the end of the post, which frames that generalization.

An investor's instinct around something as fundamental as whether your business can reach the scale needed for venture capital returns is one that won't be found scouring the latest market forecasts from Forester or Goldman Sachs. It won't be found in endless meetings and it won't be found in detailed financial forecasts or market sizing exercises.

It will be found in the connection an investor makes to you, your product and your vision. Either they will believe it or they won't. If they do, they'll want to invest. If they don't, they'll simply keep wrestling with the question of "how big can this get" in an unresolvable circle of swirling doubt. All of the Excel wizardry in the world won't resolve it.


Your story either clicks with an investor or doesn't, and in my (albeit limited) experience that clicking either happens really fast or it will take too long to matter.

This is why that first impression, including your email, intro path and pitch deck is so important. It's your chance to make that click happen, or blow it. It's hard to recover from the wrong framing.

So with that in mind, I'm changing my pitch deck advice for seed rounds to be a bit higher level. Yes, you should stick to six slides blah blah blah, but you should be thinking more about what story you are telling to potential investors. And if you're really good, what story you are telling to a particular investor.

For me at least, I think you want to nail four things in your story:

  1. What will it take to get this business to 1-3M revenue? This part of the story shows you've thought about how this could be possible, how many customers you'd need, how much they might pay/convert/draw in/whatever, etc. None of it needs to be correct, but it needs to be plausible. If you already have some traction, perfect -- use that as a lead-in.

  2. What are the possible medium and longer-term exit opportunities?  This part of the story shows you understand your space, how you align strategically with it, and how big you're thinking. Again, be plausible. Anything else is a red flag.

  3. What about your team says you can execute on this? This part of the story shows you personally, and I'd get really personal.

  4. Why are you raising money? Every story needs an ending, and this is usually it. We're trying to hit this milestone by doing a, b and c. That milestone is important because of x, y and z.

Entrepreneurs like to include all sorts of other stuff in their presentations. I think anything that isn't on story is irrelevant. Your goal is to make that story compelling so it clicks with as many people as possible.

Of course there are many other ways to tell the story. You could take the where we've been, where we are and where we're going approach. You could concentrate on what you think is your most compelling piece of data/traction and tell the story behind that. There are actually a bunch of options.

The point though is pick the one that you think has the highest probability of clicking. If it clicks, that doesn't mean someone will invest quickly or at all, but it is usually a necessary condition to investing. A corrolary to that is if you don't think you clicked, then you should probably move on. 

Generally, but not always, you can feel if someone is excited or not.  Body language helps a lot here, which is why it is a good idea to try to meet in person or at least push for Skype video. 

I hope it goes without saying that when you have that meeting you should be telling that story. I wouldn't walk through the presentation at all unless someone asks. Instead, just start story telling.

Update: I have some evolved advice now.
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