If you’re going to raise a Pre-Seed round, you need a good deck. There’s no getting around that fact–unless you’re a multi-time founder. The purpose of the pitch deck is to get you meetings with potential investors. Broadly, in your deck, you should share enough information with VCs to show them that they don’t already have any competing investments and convince them that your idea is interesting enough to warrant further conversations. But the question a lot of people have is, what do I put in this thing? What’s in the decks of other successful founders?
Although some founders will share individual decks, at DocSend we move beyond anecdotal data and dig into a larger number of decks to find trends in successful (and unsuccessful) fundraising. This allows us to say with more certainty what, in aggregate, goes into a successful deck. Failed decks from founders who weren’t able to raise also have things to tell us, since when viewed in aggregate they can show us where pitches break down.
Time Spent On Your Pitch Deck
The first thing to keep in mind is the amount of time investors spend on your deck. In 2020, the average viewing time for successful decks in our data set was a little over 4 minutes. Considering how busy VCs are and how many decks are sent, this is a lot of time! VCs are downloading a lot of information or making a lot of assumptions in those 4 minutes. That’s why the pitch deck system exists: VCs can go through thousands of decks by spending 4 minutes on each (if you’re lucky), and they simply don’t have time to devote a 30-minute or hour meeting to every company that crosses their path. VCs are putting together their own story about your company in those 4 minutes–that story needs to match up as closely as possible with the one you’re trying to tell.
The average time spent on a deck has shifted in the last year. In 2019, successful and unsuccessful decks (determined by whether or not they raised their target amount) averaged about the same amount of view time. Last year, though, there was a big difference. Successful decks averaged 4:10 of viewing time, whereas failed decks averaged just 1:36, and we even saw many decks receive 20- and 30-second views, meaning an investor most likely bounced out of a deck after just the first slide or two. This past year without conferences and travel, investors had more time on their hands than usual. Therefore, they are looking at more decks than ever before but cutting out the noise sooner. That said, they do have money to spend and SaaS companies have never been doing as well as they are today. With every software IPO, that money gets recycled back into the startup fundraising ecosystem.In 2020, successful pre-seed decks avg. 4:10 of viewing time, whereas failed decks avg. just 1:36, and we even saw many decks receive 20- & 30-second views, meaning an investor most likely bounced from a deck after one or two slides. Click To Tweet
Make your first impression count
Investors are very active but also increasingly impatient–they’re saying “no” faster and being more efficient with their time. The key takeaway for founders is that if, say, slide 8 is your best slide, you need to keep in mind that investors might not even get that far in your deck. If there’s a bumpy beginning to your deck, investors will bounce. This means that your narrative has to be very buttoned-up and your deck needs to flow .
Founders often complain that they don’t receive feedback on their decks, but VCs simply don’t have the time to provide personalized critiques. With DocSend’s analytics, you can see if investors are dropping off at a certain point in your deck: armed with this knowledge, you can have feedback sessions with other founders or existing investors. Keep in mind that you can have a great company that deserves to be funded but still miss out because your deck couldn’t hold viewers’ attention.
Investor viewing behavior means that having a good pitch deck is all about making your first impression count. When we look at data for first visits versus subsequent visits, successful decks will have a little less time spent on subsequent visits. In these cases, investors may read through the deck once and then go back for confirmatory information later. Unsuccessful decks may still have subsequent visits, but longer viewing times here mean that investors are often confused about something.Investor viewing behavior means that having a good pitch deck is all about making your first impression count. Successful decks have more viewing time than unsuccessful decks. Click To Tweet
The Formalization of Pre-Seed
If you go back 7-8 years, Pre-Seed was really just a “friends and family” round; most companies didn’t have a lead investor. And the criteria of what made a good pitch, or deck at that, was all over the map. Now, there are more professional investors leading Pre-Seed rounds and they’re bringing a level of professionalism to the process that wasn’t there before. By and large, this is a good thing because it means there’s more money available at earlier stages.
I also think it’s preferable to raise money from a proper firm because they can give you a term sheet and credibility, which can expedite the process of filling your round. Angels are happy to join when they see a term sheet in place–they know another professional investor has done due diligence with you and that makes a big difference. Term sheets make a round faster and easier to fill, but the flipside is that the sooner you raise from proper firms, the sooner you’ll have to professionalize your reporting to investors, prove traction, and show real growth. You’ll need to consider whether this route is right for you, but it’s true that having someone lead your round does make it very easy to get commitment from other investors.In 2021, there are more professional VCs leading Pre-Seed rounds and they’re bringing a level of professionalism to the process that wasn’t there before. By and large, this is a good thing because it means there’s more money available at… Click To Tweet
3 Big Shifts in VC Interest
As the Pre-Seed round is becoming more standardized, investor metrics and criteria (what they expect to see in Pre-Seed companies) are becoming more standardized, as well. There were a few big shifts in our findings in 2020 that we expect to carry forward into 2021.
The first of these shifts is the importance of articulating your competitive landscape: we saw a 51% increase in time spent on the competition section of decks last year. We’re at a time when there’s a record number of companies getting started and getting funded–this is a good thing overall. But it also means that investors want you to have an understanding of your market. You have to understand the market you’re working in and can talk to why your company has a chance of winning out. Don’t shy away from discussing your competition. VCs will ask about this and you need to have a thoughtful answer.
The second shift is in the product readiness section of pitch decks. There was a 46% increase in investor time spent on this section last year. Pre-Seed is more and more about showing vs talking about the product. It used to be the case that you could do a friends and family or Pre-Seed round with a Minimum Viable PowerPoint, but this isn’t really true anymore. You don’t have to have be GA, but investors do want to know you can act on your ideas and build the product you have in mind.
It’s no longer the case that you can be, say, a business person who’s looking for a technical co-founder and who only has a Powerpoint about a product idea. Investors do scrutinize product slides, and you do need to have something to show. You can do a lot with your product slides: for example in DocSend, you can add an animated GIF to your PowerPoint that will actually play and bring your product to life. People also hyperlink to videos or include screenshots that talk about their product.
The last major shift in pitch deck consumption is in the business model section, which saw a 28% increase in investor time spent last year. This is where I sometimes get into arguments with founders. A founder might talk at length about a market opportunity or a great product without settling on a clear path to monetization. Investors generally don’t like open-ended answers, so you need to indicate how you plan to make money, how likely that plan is, and how risky it is. In software, this doesn’t have to be a complicated answer: at DocSend, for example, we charge a monthly or annual fee to use our software. That’s it! It’s product-led, 100% inbound, and it spreads virally. This was hard to pitch at the Seed round for us, but as we progressed our business model became empirically true. Be sure to have a clear business model in mind, and stick to your guns when pressed on it.
More Than Just A Good Idea
While the product readiness section of a pitch deck grew more important last year, this has really happened over the past five years. The pandemic just accelerated a trend that was already happening. There’s an increase in the number of people who can write code, and the number of software developers out there has changed a lot over the past decade. When I graduated from Stanford in 2006, computer science was a very tiny major. Now, CS is the largest major there, and it’s actually half-women, half-men. Since more people have this skill set, and the cost of writing code is coming down, and the productivity of software engineers is going up, people are expecting more from Pre-Seed companies.
According to our latest Pre-Seed Report, only 11% of companies surveyed had no product. 70% of companies in our dataset have an alpha or beta product, and another 19% have something generally available. What’s interesting here is that a lot of founders are choosing to link product readiness with traction: they’ll report that their product isn’t fully done yet, but also provide customer quotes and engagement numbers, the goal being to raise a Pre-Seed round to bring the product to general launch. The risk of having a product in general launch is that you’ll have to prove post-launch traction in a way you wouldn’t otherwise be expected to. That said, at the Seed stage you do need to have a product launched; at the Pre-Seed stage, you can get by with something partially built.According to our latest Pre-Seed Report, only 11% of companies surveyed had no product. 70% of companies in our dataset have an alpha or beta product, and another 19% have something generally available. Click To Tweet
How Long Does Fundraising Take?
Often, at the Pre-Seed stage you don’t have a burn rate or a cash-out date because you haven’t hired people yet, but sometimes your personal runway is an important factor. So there is some concern about how long it can take to fundraise. The good news is that 59% of companies in our dataset were able to complete their fundraise in 12 weeks. On average we found that the whole process takes 15 weeks from your first meeting to when you get money in the bank. Some people are going through the slog, though: 32% of companies surveyed took 19+ weeks to raise. For my first company, Pursuit, it took me over six months to raise $500,000 because I just wasn’t very good at it. I don’t think that it necessarily needs to take you that long–three months or less is pretty reasonable.On average, we found that the whole pre-seed fundraising process takes 15 weeks from your first meeting to when you get money in the bank. Click To Tweet
Fundraising comes down to process, efficiency, and storytelling
There are a few important takeaways here. First, when it comes to the pitch deck itself, put in the work. Sometimes, people think they can get away with throwing something together because they’re busy writing code or out selling. But your deck is important, and you’ll re-use it (or at least components of it) for hiring or sales. This isn’t to say that your deck has to be beautiful, but it does need to be clear, concise, and compelling.
Second, have something to show for your efforts. The days of Minimum Viable PowerPoint appear to be leaving. Most people are not in the 11% camp of people who are able to raise without a product, and a lot of those people are usually multi-time founders who are unquestionably very technical domain experts.
Finally, schedule your time wisely. Fundraising is time taken away from building your business, so always keep that in mind. Also, it’s just not fun to get “Noes,” and almost everyone gets those in the fundraising process. Even people who ended up raising huge rounds still got many “Noes.” Fundraising is demoralizing and time-consuming–no one will care how long you spent on it, so be as efficient as possible.
Watch a snippet of our pre-seed fundraising webinar for more tips.
To learn more about raising your pre-seed round, read our other post in this series about how gender and geography can affect your raise.
Watch the panel discussion on early-stage fundraising.Watch Here