This is the first of many blogposts in a series that I’m calling the Investor Pitch Deck Series. I will create a post about each general investor pitch slide, why it is important, the common errors, and how to communicate that you have what it takes to achieve your goals for this company. Here at the Rockies Venture Club, we pitch around 100 companies per year to investors. Plus, we teach the Pitch Academy course every month where we see lots of great companies that span the gradient from Newbie (first time pitch) to Pitch Maestro (hundreds of pitches). Trust me when I say we’ve seen it all.
The Market Slide
The purpose of the Market Slide is to show that you have enough people interested to buy your product so that you can ultimately have a scalable and sizable business. An underlying, and equally important purpose of this slide is to convey that you have a plan and are capable of actually capturing those customers. In this case nothing says “capable” like the existence of real paying customers. Barring that (if your product is still in development) you can show evidence of touching your potential customers through direct surveys, polls, and other interactions.
Cringe Factor #1 – When a pre-revenue company claims they are in a $X Billion Market, they will capture Y% the first year then Z% the following year.
Why this makes us cringe – Until you have a paying customer, you cannot be sure that you can really sell your product. If you are in revenue and you can track your increase in sales over time, then it stands to reason that your sales trajectory will continue on that track for a while. Prior to gaining paying customers, we are pretty sure you are just making stuff up.
How to do it right – If your company is pre-revenue, discuss the market size, then spend your time talking about how you are going to get out there and touch that market. Use specifics such as, “Last week, we had a phone call with Julie Miller from Borders about putting our product on their shelves. Next week, we have a meeting planned with the floor manager of the local Borders.” Your go-to-market strategy is way more exciting to investors than a bunch of made up numbers.
Cringe Factor #2 – You tell us that your pro forma includes “very conservative estimates”.
Why this makes us cringe – All we hear is, “I made up some numbers, then cut them in half.” Again, the appearance of invented numbers is the culprit.
How to do it right – Two words: field research. If you have talked to potential customers and gotten their word that they are willing to pay $10 for your product and that they would buy it 5 times a year, then you have a pretty good idea that the yearly value of a customer is $50. If you talked to 100 people in the right demographic and 6 said they’d be interested, then you expect 6% of your touched market to become a customer. If you’ve done some pre-product-release marketing to determine how many people you are able to reach with your initial marketing campaign, then you know your initial potential customer base. Put all that together and you have validated numbers for your pro forma. What’s better is that you can (and should) do this kind of bottom up market research before your product is available for purchase.
Cringe Factor #3 – You have no market strategy.
Why this makes us cringe – Your product or technology might be able to save the world and if no one knows about it, you’re sunk. (Inventors, this means you.)
How to do it right – Get out there, talk to people, and find out about their relationship with your product (or your type of product if yours isn’t available yet). You might be surprised what you learn. Really listen. Work with your team to build three different go-to-market strategies. Initially just brainstorm. Be silly about it at first. List ALL of the ways you might get the word out about your product. Are you finding that you are listing any organizations, government agencies, or large companies who might be really great strategic partners for you? Are their any groups or companies who might make bulk purchases? Does it make sense to give some of your product away for free to customers as marketing? Does it make sense to give your product to other companies for free or cheap if they can somehow connect you to your customer?
When you are done thinking, planning, rethinking, testing, pricing, and planning some more, you will have a great roadmap to get you into revenue. This is an iterative process and your market strategy will continually evolve. That said, you MUST be able to recite a market strategy when you present to investors. Investors know that nothing sells itself.
The first question I ask an entrepreneur of their product, “What does it do?” The second question I ask is “how does it make money?” The Market Slide is one of the ways that you illustrate how your product makes money. There are countless websites with investor slide examples. Instead of adding my own to the melee, below I address four examples and discuss how they handle the market slide.
This slide from ReOverthinking.com shows thoughtful consideration about the target customer. Identification of the customer is important and is sometimes non-trivial. In some cases you may be thinking of the end user as the customer, but who really pays you for the product?
My favorite part of this slide is that no claims are made to capturing any percentage of this market.
I’m not wild about the rest of the slides in this example since they are too busy for a live pitch presentation, but here they are.
This example slide from Shai Goldman goes a step farther and mentions the “bottoms up” approach. If you can add bottom up research (also called ‘field data’) for any market size numbers you will gain immediate credibility. Bottom up research looks like a well set diamond in your slide deck.
You can find the rest of this deck on slideshare.
What is a discussion of investor pitch slides without an example from Guy Kawasaki, Pitch Guru? His marketing slide includes a mention to sales. I could not have put a finer point on it. Your company’s goal is sales. How are you going to begin and increase sales? What have you already done? Who on your team is driving the sales?
Here is a real-life example from AirBnb’s first pitch deck. This slide simply identifies the size of the target market. They coupled this with another side listing the number of users on two different competitors’ web sites. By pairing the total market with the real user numbers from comparable companies, they show a realistic best case scenario for early market size. Later in the deck, they show a market adoption slide covering the strategic partnerships they will use to touch their targeted customers.