Being an entrepreneur is complicated. There are many pieces to put together, including: ideation (the light-bulb), forming a team, building the minimal viable product (MVP), pilot testing, generating first revenues, raising capital (multiple rounds), growing operations, achieving profitability, and lastly, producing a sizeable liquidity event for founders and investors. This is especially difficult for first time entrepreneurs and can seem overwhelming. The initial hurdle for many companies comes at the intersection where entrepreneurs and investors meet. Entrepreneurs often stumble when faced with: 1) building the pitch deck and effectively pitching and 2) raising capital and learning the fundamentals of how financing works.
So where do you start? Your pitch! You can pitch even before you have a fully-functional technology or any business operations. As long as you can present a convincing argument that you have an opportunity worth investing in and you have the right team to execute the plan, then checks can be cut and you're off to the races. What does a perfect pitch look like? There is no one size fits all, but there are general guidelines entrepreneurs can follow and key parts that investors look for in every pitch. To view an aggregation of wisdom from some of the top accelerators, angels, VCs, and entrepreneurs, you can check out and download "The "Best" Startup Pitch Deck & How to Present to Angels & VCs", which goes into detail on the pitch deck template below:
The "Best" Startup Pitch Deck (Template can be easily modified to a 5 slide, 10 slide, and 15-30 slide presentation):
0) Cover Slide
1) Elevator Pitch Slide
3) Board Members & Advisers & Future Hires (Optional, combine w/ team slide)
4) Market Opportunity: Define Market, Size & Target Client
5) Market Problem & Current Solutions
6) Your Solution (1-5 slides)
7) Traction & Awards (Optional, if none yet) (1-3 slides)
8) Market Fit / Competition (Optional, can be explained in slide 5 & 6)
9) Competitive Advantages (Optional, can be explained in slides 5 & 6)
10) Business Model: Key Revenue Streams
11) Marketing Approach & Strategy: Key Expenses / Time-Efforts
12) Financial Projections
13) Exit Strategy (Optional)
14) The Ask: Capital Raise / Uses / Intros
15) Closing Slide: Questions? Contact Details
Once the pitch deck is done, don't work on a 50-100 page business plan. No investor is going to read it and it will change too many times over the course of your startup's existence. Start pitching! Test your pitch on a few potential clients (not just your mom!), and then start pitching to investors. Be sure to avoid the Top 10 lies that entrepreneurs tell investors. One of the major things to keep in mind when considering venture funding is that Venture Capitalists (VCs) usually expect to see a return on their investment within five years and achieve an internal rate of return (IRR) of 30 percent or higher (View IRR / Return Multiple Table). Not all businesses are high growth businesses and not all businesses require VC funding to become profitable and generate a strong stable income, especially life-style businesses.
For those companies that are right for VC funding, many will require multiple rounds of financing over their life-time to achieve ultimate success. A great resource for understanding how various rounds of financing affect ownership, how capital is distributed to founders and investors, and how an IRR and return multiple are calculated: Click here. You can view and download the simple financial model, play with plugging in numbers, use it to understand key investment terms and concepts, and identify whether your startup is a good candidate for venture capital.
This capital raising financial model demonstrates:
• How various rounds of investment affect ownership using pre-money and post-money valuations
• Raising a seed round using a valuation cap and/or a discount that converts into the Series A round
• A Waterfall Analysis: Preferred stock with liquidation preferences vs. common stock
• Anti-Dilution Rights: How ownership changes in the event of a down round
• IRR/Return Multiple Analyses: Given an acquisition/liquidation, what is the financial return to investors vs. founders?
J. Skyler Fernandes is the founding partner of One Match Ventures, an angel/seed fund focused on internet, media, and high-tech investments. Mr. Fernandes is also a venture capitalist at Centripetal Capital Partners, an early stage venture fund with an innovative investment structure, which invests across industry sectors, such as digital media, SaaS, telecom, energy, nano-technology, healthcare, and consumer retail. Centripetal maintains a portfolio balanced in return multiples, ranging from 3-20x+ on capital invested.