How VCs And Investors Read A Pitch Deck

How VCs and investors read a pitch deck?

When you think about it, this is probably the single most important question that startup founders and aspiring entrepreneurs should be asking. Well before considering any design ideas, bullet pointing out a framework for slides, or practicing a verbal pitch.

Of course, no one does that. At least, it is very rare. This may also be why so few startup pitches get funded.

All too often, entrepreneurs are just focused on what they want to say and convey, and how genius and unique their business idea and technology is. Which is rarely what investors really care about.

So, if you actually want to get your startup funded, and create a successful pitch deck, what is it that investors are looking for? How do they actually read, evaluate and process them?

Three Minutes, And 20 Seconds

According to data from Docsend, the average time investors spend reviewing pitch decks is just three minutes and 20 seconds.

That is not a lot of time. Especially not to convey all the important data angels and venture capital investors are looking for, and to check all of the boxes on their list of criteria.

Even more so if you have only been focusing on what you want to say, and not your prospective investors’ needs and perspectives.

If you don’t accomplish this within this amount of time, then you are not going to get funded.

Remember that this is an average. Those that already have strong relationships with investors, or who have truly exceptional decks for later-stage startups that justify lots of data, may enjoy an extra minute or so of investor attention on their slides.

That also means quite a few pitch decks are only glanced at for a minute or less. Many probably do not make it beyond the first one to three slides. This is still only if you make it that far. Angels, angel groups, VC firms, and startup incubators and accelerators receive thousands of pitch decks each week.

So, only if you land in their inbox, and connect well enough to get opened, and hook them well enough to open up your pitch deck, will you even get those three golden minutes of attention.

Even then, you really have to nail it, wow them, and build the momentum to keep them moving by giving you a term sheet and funding you. Understanding how VCs and investors read a pitch deck also helps.

Getting Your Pitch Deck Slide Flow Right

One of the first things that investors are going to look for and notice is the flow and order of your pitch deck slides.

It is something they instantly notice, and you’ve either nailed or blown. If you didn’t get this right, that’s the end of the investor reading your pitch deck.

Be sure you stick to a short slide count. This is one of the most basic and essential factors of a successful pitch deck. If you can’t do that, then nothing else matters.

Then you need to know the order of information and slides that investors are expecting to see. Do not deviate from that. Otherwise, you might as well just save all of the expense, time, and effort of creating a pitch deck because it isn’t going anywhere.

Now let’s look at some of the most important slides in your pitch deck, and how startup investors look at them.

Keep in mind that in fundraising, storytelling is everything. In this regard, for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.

How VCs and Investors Will Read Your Pitch Deck Slides

The Cover Slide

First impressions are everything. That doesn’t mean you should overdo it. Though the cover slide needs to look like you’ve sought out great advice, have invested well in your pitch deck, and have the makings of a valuable brand.

This slide should immediately grab their interest and show that this is a fit for them and their portfolio. Your tagline or slogan is probably the best way to accomplish this. Though your colors and fonts will also play a role in this psychology.

In addition to your logo and company name, this slide should include your contact information. Which makes it easy for investors to actually contact you to discuss this further, invite you to an investor meeting, or send over a term sheet.

The Problem Slide

Everything rides on the strength of the problem. Investors want to know what it is you are trying to solve. Your solution, products, team, and more can all be changed to tackle this problem. Though if the problem isn’t right, then you don’t have a venture anymore.

They want to know if this is a real problem. That you have validated it, proven it, and have great clarity about what the problem really is. Even better if they can relate to it. More so if it is truly an urgent, hair-on-fire problem that your customers are already spending money to solve.

Market Size Slide

This is one of the most critical slides from the investor’s perspective.

In order for your deck to be worthy of viewing any more slides, you have to have a big enough market. A huge, and growing market, is the only way that investors, especially VCs, are going to have a chance at getting the types of returns they need.

Your market size slide should be a simple and rapid-to-digest graphic that checks this box on their list and keeps them moving through your pitch deck. Keep these nuances in mind when learning how VCs and investors read a pitch deck.

The Competition Slide

While typically underestimated by startup entrepreneurs, the competition slide is incredibly impactful.

On one hand, it is a test of how well you know your market. On the other hand, this is a very psychologically significant slide in terms of valuation and creating a sense of urgency.

By strategically showing the right competitors in the right position on this slide, you can validate your startup idea, provide a benchmark for how much investors should be putting in this round, subconsciously project what a big outcome there could be, and have them competing against other investors.

Competitive Advantage

Building on the previous competition slide, the competitive advantage slide allows you to establish value, justify your existence, show how your investors’ capital will be protected, and give a reason for them to believe this can be a big success.

Investors want to see that you have a sustainable competitive advantage. This reduces the risk of them losing their capital. It increases the likelihood their investment will keep on growing.

Investors are also looking for a competitive advantage that is 10x to 100x better than existing solutions. That is typically what it is going to take to get customers to make the switch.

The Product Slide

One of the big questions that investors will have with this slide is whether you only have a concept or prototype, versus a real product. Try to display this in a real-use setting. Ideally, something that they can relate to.

Another major test that investors are looking for you to pass is whether you can focus enough. That is the key differentiator between startups that will make it, and the 99% plus that will fail.

You demonstrate this ability to laser focus by honing in on just one to three significant benefits. All of the other features are just nice-to-haves that they can discover later.

Traction

Investors at all levels of the startup ecosystem have very specific expectations about growth and traction.

Past performance is the best predictor of future performance. This data point is used to gauge whether you can keep growing fast enough to deliver the returns they need.

In the earliest stages, for example, prior to entering a startup accelerator, investors may be looking at week-over-week growth.

Later on, that may be measured month over month. Then ultimately quarterly and annually. And, that’s how VCs and investors read a pitch deck.

Customers

Here investors are looking at how well you know your customers. If you don’t, any investment in marketing dollars is going to yield low returns or will be completely wasted.

Who your customers are also matters for how strong your business is perceived as being. Are you a B2C, B2B, or enterprise startup? Are these big and financially strong customers?

What about their value and longevity? Do you have long-term contracts in place with recurring revenues? Are you retaining customers well? Or are they leaving quickly, with a low customer lifetime value?

Financials And Financial Forecasts

Studies have suggested that if you include a financial slide, it will be the one that investors spend the most time reading.

Of course, this may be mainly because it is more complex and technical. It just takes longer to digest. While you may want to convey some great points here, this probably isn’t the most unique thing about your startup. So, keep it simple, and keep them moving through your deck.

If you have already been operating, investors will want to see how well you are managing your money, how much cash you still have, the value you’ve created with previous funding rounds, and the trajectory you are on.

Specifically, when VCs and investors read a pitch deck, they will note how desperate you are for funds. If you are running out of runway, investors may seize on that to push terms that are more in their favor. Whereas, if you are negotiating from a more powerful position, they may be more flexible in terms and other provisions of your funding.

Now that you have a fair overview of how investors are likely to view your pitch deck, you’re ready for the next step–understanding how to prepare for investing meetings. Check out this video I have created explaining how to do that.

Other Investors

What other investors have come to your cap table in previous rounds, and are participating in this round?

Who those investors are can add a lot of credibility, and may help streamline not only getting the term sheets in, but the due diligence process too.

Use Of Funds

Investors want to know how you intend to use their funds. What will it be invested in?

Is it all going to be spent on a lavish party to celebrate this round? Will it go into hiring more talent? How about marketing, acquiring physical assets, or even acquiring other businesses?

Closing Slide

Can you sell? Can you close the deal? This is your chance to show investors that you can. That you can close them, and will be able to sell your product to customers, and secure other investors too.

Show them the next step that you want them to take right now, and lead them through your funnel to funding your startup, and getting on board.

Summary

Understanding how VCs and investors read a pitch deck is an incredibly important part of fundraising and building a successful startup.

If you get it and then build your startup’s pitch deck with this perspective in mind, you will already have the foundation of what it takes to win and will stand out from the pack.

While you still may only have three minutes to convert readers into funders, this will give you an edge, and help you focus your efforts in nailing the details of your deck.

You may find interesting as well our free library of business templates. There you will find every single template you will need when building and scaling your business completely for free. See it here.