If you’re planning to fundraise anytime in the near future, let’s get one thing straight off the bat: Investors aren’t interested in simply helping you keep your company afloat. They want to understand how their capital will help you build a foundation now that will drive growth in the future. This means you need to think two steps beyond “How will we survive this crisis?” and show that you’ve done so by updating your business model.
The first step will be getting investors on board that your business is tackling an urgent need — and the “Why Now?” slide is the way to do that. We’ve talked a lot about how the “Why Now?” slide is something that you have to have in your pitch deck. This is especially true during the COVID-19 crisis, because VCs are looking more critically at their investment decisions. In our recent pre-seed research, we identified a particular pitch deck page order as the most successful, and it still applies here. When you’re fundraising now, the key will be to use the “Why Now?” slides along with your Business Model slides to let them know that despite the current environment, you’ve thought through your growth strategy and have the right combination of factors to help your business thrive.
Do the mental work of updating your business model first
This isn’t just about making a change in your pitch deck. You need to take a long look at your business model to be able to show investors that you’ve thought through the potential implications of the current state of the economy. Ask yourself some questions, including:
- Is my business model likely to be effective in this crisis?
- What specific initiatives will be more challenging for the next 6-12 months due to restrictions and circumstantial limitations?
- How can I adapt my business model to overcome these challenges?
- Knowing there are uncertainties, where do I expect the business to be in a year, and what indicators do I have to back it up?
- How can I account for the inevitable uncertainties that come with launching a startup during a global health emergency?
These questions are the bare minimum of what you should be able to explain to investors in a potential pitch meeting. But, it goes without saying that some business models and product ideas will fare better during this time. If your business is one that is too highly impacted by the crisis, it’s likely not the right time to fundraise. After thinking through your business model, if you can’t justify answering the above questions favorably, it likely makes sense to hold off on fundraising for the time being.
Having a thorough understanding of how your business model will weather this crisis is crucial. But you won’t put all of this information in your send-ahead deck. So, how do you use your pitch deck to signal to investors that you have thought through all of this information? The key is in your “Why Now?” and Business Model slides.
Updating the “Why Now?” slide
We’ve talked with several investors, and one thing they have in common is that they all want to know how founders expect to monetize their businesses in the context of current economic challenges. Aileen Lee, Founder and Partner at Cowboy Ventures, said this in a recent Extra Crunch podcast:
“Founders, if you were raising a month or two months ago, it’s really important to go back and almost start from scratch with your pitch. You should rethink how you tell your story and why you’re raising now and what you plan on getting done.”
The way to convey this is with the “Why Now?” slide. In our recent pre-seed fundraising research, we found that the average length of the “Why Now?” section in successful pitch decks was 1.4 slides. Given the current environment, it’s reasonable to use up to two slides to explain why now is a sound time to invest in your business.
As always, you want to explain how your business is addressing a problem that is urgent now and that will remain urgent. But you should also use one of your “Why Now?” slides to specifically address some of the top-level takeaways from the questions in the exercise mentioned above. You don’t need to dive into your business model just yet. But you should give an overview of how the problem you’re solving is still urgent despite COVID-19.
How to tackle the Business Model slides
Our pre-seed research found that investors: 1) spent the most time on the Business Model section over any other in the deck, and 2) spent more time overall on Business Model sections for decks that were ultimately unsuccessful in getting funded. What these data points tell us for sure is that even outside of a global pandemic, the Business Model slides are an integral part of your deck. Investors want to know how you plan to monetize. So you can be sure that these slides are even more important in the current economic environment.
For the content of this slide, go back to the responses you had to the questions above. You already explained that your business is viable despite the crisis, so now is your chance to give the evidence. Again, what are the challenges you expect to face, and how is your monetization model well-poised to help overcome them? Let these challenges be the backbone of the structure of this slide. They’re what investors will want answers for. Also consider: What is your go-to-market strategy, given there will likely be minimal face-to-face interaction for the foreseeable future? In some ways, putting together your business model slides isn’t any different than normal. You don’t need to have everything exactly right, but you need to show that you’ve taken into account the current environment.
Ultimately, updating your deck to is not just a matter of doing more work to convince investors. You need to understand your business plan within the wider context of the implications of the crisis. Once you have that understanding, you will be more able to get investors on board. Nothing convinces like conviction. You have to first lay the groundwork for your own understanding of your business in this new context.