It’s a commonly accepted wisdom that you need between 10 and 20 slides to tell the story of your startup. A lot of founders don’t seem to realize that not all slides are the same, however. Some slides carry more weight than others — and three of them are absolutely crucial. Today, I’m taking you through why those three slides are so important.
The way to use this article is to think about which of these attributes you have in your startup to help organize your pitch deck. For example, No. 1 in this list is traction. If you have amazing traction, that should probably be the first slide in your deck. If your traction is flat (i.e., not growing, or even shrinking), poor or non-existent — maybe don’t highlight that and think instead about how else you can tell your story.
1 — Traction is king
Up and to the right. Which makes sense. Up and to the left would be time travel, and if you can do that, you have an even more valuable company than you thought.
Your traction slide is, by some considerable margin, your trump card. If you are showing a huge amount of revenue and rapid growth, all other sins are forgiven.
It doesn’t matter if you have an inexperienced team, a terrible product or a dubious market. If you can show that you have money coming in and growing at 9% or more week over week, you will raise money.
There’s a hierarchy in terms of what type of traction helps:
- Profit. If you are cash-positive and growing rapidly, you probably don’t even need venture capital — but if raising cash helps you grow even faster, you’re in a great place.
- ARR. If your annual recurring revenue is growing rapidly, you’re in luck. Recurring revenues and SaaS dynamics mean that you are onto something.
- Active users. If you’re growing your number of users exponentially, without necessarily knowing how to monetize them, that’s still an impressive feat. If you can show that you can build a huge, sticky audience, you can probably find a way to make money off that down the line.
- Sign-ups. If you’re seeing huge growth in the number of sign-ups to your product or service, but they aren’t generating revenue or sticking around, there’s still value in that — although your traction slide should be paired with a solid “How is this going to make money?” slide.
2 — Team trumps (almost) all
Go team!
If Elon Musk starts another venture, investors will line up around the block to invest. Why? Because he has proven that he knows how to execute. He has shown that he knows how to surround himself with smart people. He has been resilient.
OK, but you’re not Musk*. That doesn’t matter — your team can still be awesome. Here’s how to highlight your top players:
Founder with multiple great venture-backed exits. If you’ve had one or more great exits after raising VC money, unless your idea is truly insane, you’ll probably raise money. Actually, if you’re Elon Musk*, the “truly insane” thing doesn’t matter — you can start a rocket company, a car company and an underground high-speed-train-vacuum-tube company all at once, because rules don’t apply to you. Regardless, if you’ve made one or more venture capitalists a lot of money, chances are you’ll have a pretty easy time raising money.
Founder with bootstrapped exits. If you have had one or more great exits without raising VC capital, you clearly are a proven entrepreneur, but be prepared to answer questions to ensure that you understand venture dynamics.
Expertise. If you just finished a Ph.D. and you have a small patent portfolio, making you the most knowledgeable person in the world on one very specific topic, that can be tremendously valuable. As the founder, you become the “moat” that prevents other startups from stealing your thunder — and you can brag of great founder/market fit.
Intrapreneur turned entrepreneur. A lot of great companies are started by founders who were trying to solve a huge problem within a large company but got tired of the red tape and internal politics. It’s often easier to leave, start a company and then sell the product back to your alma mater than to solve the problem from within. The added benefit is that this type of founder comes with an automatic exit strategy (if they add enough value, the company they just left may acquire the startup) and deep domain knowledge.
Founder with previously failed startups. Don’t underestimate the power of hard-earned experience. Remember that your investors will have seen a lot of failures over the years from great founders. The fact that you’ve run companies before means that you’re de-risking the investment somewhat: At least you know what you’re in for, and you decided to come back for another swing at the ball.
Expert customer. Imagine you ran a tire-fitting shop for 25 years, and there is one specific aspect of your shop that is a massive pain in the ass. You want to fix this problem. You start a company. The advantage you have here is that you are an “expert customer.” You may not know the market inside and out, but you know the problem you are trying to solve. There’s nothing wrong with “scratching your own itch,” and the more niche the expert customer is, the better. Tire-fitting is pretty common so perhaps isn’t the best example — but if you happen to have been the manager of a nuclear power plant, a job you only share with 59 other people in the U.S., well, that can be turned into a compelling narrative.
* If you are Elon Musk: Hi, Elon! You probably don’t need this article, but thanks for reading anyway.
3 — Market
The market slide is also crucial in the dynamics of how and why you build your company.
Rapidly growing, promising market. If the market you operate in is smallish, but undeniably exploding, there’s a strong argument that you’ll probably raise a ton of cash. The reason is that even if you only capture 10% of a market, if your market share stays steady but the market itself grows 30x, your company is going to capture a lot of value. Or, put differently: A rising tide raises all boats.
Fashionable market. If you are starting a company in a hot market, you’ll probably get more meetings than if you are not. Crypto, drones, micromobility, social influencer marketing tools — they’ve all had their time in the sun. If you happen to be riding a wave, you’ll be doing well. Investors get FOMO and bidding wars ensue.
Huge, mature market. Some markets are steady (i.e., not growing exponentially) but well covered by incumbents. If you can show that your startup is doing something very different in this space and you have a plausible plan for taking significant market share, you can weave a great narrative: The market is there, it is proven, you just need to go capture it.
What if you don’t have any of these?
So, what happens if you’re a founding team that isn’t addressing a huge problem in an interesting market, you don’t have a team that jumps off the page and you don’t have traction? Doesn’t it matter that you have a great product? Well … no, it really doesn’t. Not as much as you think, anyway.
Don’t get me wrong; it is possible to run companies like this, but chances are that you will have a very difficult time raising VC funding. Ask yourself a really hard question: Why the hell are you starting this company, and why should a VC firm put its resources behind you? Either you need to fix your narrative so you do fall into one of these categories, or you need to consider whether the VC route is the right choice for you — it may be that bootstrapping is a better option.