12 MUST HAVES FOR AN INVESTOR DECK
Preparing an Investor Deck is a piece of cake!
Ever spent late nights agonising over what to include in a deck of slides? Preparing any set of slides, whatever the occasion, can be a laborious and painful process and the stakes are heightened when it comes to preparing an Investor Deck. You just have to be disciplined about it and make sure that you keep the presentation short, simple and to the point. On that subject it is best to follow Franklin D. Roosevelt’s pithy advice on speeches in general – “be sincere, be brief, be seated.”
Much of the thought process though should be about the order – and not just about the content. Should you keep your powder dry and wait until the end of the pitch to provide a real impact or should you keep it up your sleeve until the end? Creating presentations is an art form in itself (and is the subject of many self-help books) but the basic rule should be to hit them with the “wow factor” in the first four slides – like Jerry Maguire go on, get them at hello!
Also bear in mind that the deck should be visually attractive (with graphics) so putting a great deal of effort into the design and production values will bring its own reward.
One other general point about presentations is that it is difficult to find anyone who thinks that they are bad at them! The basic key is to prepare properly and if you do want advice on this subject then give us a call for a copy of 7 Steps to Brilliant Presentations.
But, whatever the order you decide on the deck needs to include these 12 “must have” slides:
“One liner” pitch statement
This is literally a 3 or 4 sentence paragraph that sums up your entire pitch. The Executive Summary if you like, but it is your basic proposition wrapped up, not in an enigma, but in one clear paragraph. This can very broadly be described as a short description, where the product or service fits in the marketplace and what the proposition is.
A bit of background, shown as a graphic, highlighting the main milestones (by year) starting out from when the company was founded, when new services or products were added, when certain financial targets were hit, through to the most recent highlight.
The Market Opportunity
The purpose of this slide is to define the market size (with the emphasis being on size) as clearly as possible and to back up one’s point by using respected third party data. Crosshair graphics (on an X and Y axis) also work really well here.
It is worth straining every sinew (and if necessary loosening the purse strings) to get objective research data, because if you think about it, relevant data from a third party has 5 to 10 times the authority compared to your own.
The particular problems we solve (for our clients) and why this is valuable
Remember you are not trying to sell the benefits of your products or services (and make a one-off sale!) but you are trying to show that there is a market for them. So what is the problem (that you intend to fix) that this industry or this type of person in this walk of life has? And why will they value (and then of course buy or endorse) your solution? Make this clear (again with 3rd party data) and you are halfway there.
How we will do it (product/service overview)
Having identified that there is a large and growing requirement for your offering this is the time to demonstrate what you will be doing to fill that need – in a way that can make money and ideally can be scaled up. Important investment considerations include “What makes you so different” and “Is it scalable.”
You will always hear the refrain “know your market” and it is so important to how you build your business. No business can ever really make progress unless you really do know the competition inside out, and know how the competition are perceived, positioned and promoted. What is their business model, who are they targeting, what are their price points and what are their differentiators?
A well-designed, simple (authentic and accurate) table is required to clearly define everyone’s place in the market. Better still, add in a slide on an X/Y axis showing where you and every relevant competitor are positioned.
In a sentence – how do you make your money! But there is more to it than this. What is your customer acquisition and revenue model? How much does it cost us to bring on a new customer or client, how long will you keep them and how quickly do you recoup the cost of acquisition? This brings us onto defining LTV (Lifetime Value) ratios.
Finally what are the churn ratios? It is all so very good bringing on new business but if it is dropping off quickly at the other end then you will not be able to scale the company as quickly as you (or an investor) would want.
Growth Strategy (Marketing)
Any investor, whatever they may say about the long term, will naturally want to make as high and speedy a return on capital as possible. The investor will also want your proposition to be scalable. It is therefore important to demonstrate that the market is growing (3rd party data again!) or, for a new market that it will be large, and to explain how you are going to dominate that market. Just saying that you are going to major on and improve SEO rankings and the like is never enough – it has to be a clear well-thought out plan. The investor has to be confident that shareholder value will be increased.
The only argument that anyone has about this subject – the quality of the management team- is whether it is the first, second or third most important consideration when deciding to invest. According to research by the University of Glasgow’s Adam Smith Business School, a lack of faith in founders rather than scepticism about the business itself tends to be the biggest “deal killer”. In their survey of 238 experienced angels, 59 % said that the people running the business were the most common reason for them to turn an opportunity away. Many of the biographies presented for this purpose lack personality and are bland, so it is worth taking the extra time and care to address highlights and be as detailed as possible.
In a sentence don’t be complacent and sell (but don’t oversell) the team.
This is reasonably straightforward (albeit hugely important) and depending on circumstances you might want a couple of slides here and have one slide for the Summary Income Statement and another slide for the Summary Balance Sheet and Summary Cash Flow. Usual practice is to cover a minimum of 3 years going forward but keep it simple and make sure it is supportable. Lastly, don’t fall into the common trap of presenting financials that show a different cash need than the “use of funds” projections show.
Use of Funds
This is a subject that often gets left out, but believe it or not investors want to know exactly what you are going to do with the money! They want to know how, when, where and why you intend to invest their money. So, explain clearly and in the right depth of detail (with actual figures) identifying where you will be allocating spend and how long the money will last. Time is money so the quicker you put it to work the better the proposition. Don’t ask for money that will be needed in 2-3 years’ time and don’t be greedy. Ask for the right amount and allow for a small amount of headroom.
You can call this slide Investment Case or Key Investment Considerations (KICS) – the choice is yours. Either way this is the “big sell” and the slide should consist of (approximately) six key selling points that back up why an investor should invest. Such points could be about the experience of the management team, the cash generative revenue model, visibility of earnings, the high growth of the market, market leading software, immediate scalability and any number of other points. However, one of the bullets should also cover off the exit strategy.
And don’t forget that these key points will need to be consistent with your written IM (Information Memorandum) or Profile document.
What does the future hold? This element is about setting down the expected timetable and cost for any new acquisitions and product/service developments, that are in the pipeline.
If the subject is IT related then make sure that the Phases going forward have been properly described, timed and costed.
Finally make use of the “13th man.” Either add an appendix with customer testimonials (quotes) endorsing your products/services or better still make sure that the deck is peppered with relevant customer testimonials that really do endorse the points being made in the presentation.
That’s it. Produce a deck that has all these 12 points covered clearly and concisely and you might well find that Christmas comes early!