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How COVID-19 Changed Deals Between Investors and Founders for the Foreseeable Future

Not only have we seen investors shift their focus toward greater efficiency, but a brighter spotlight has also been shone on the importance of high-quality, compelling pitch decks.

When COVID-19 first hit the U.S., neither investors nor founders had a clue about what the outbreak would mean for fundraising. While it was “pencils down” for the VC community in March and April, no one expected the explosion of early-stage funding that soon followed in the months of May and June. A big resurgence in funding has remained steady ever since.

We recently joined the folks at Startup Grind for a conversation about the current fundraising trends we’ve seen since the pandemic started and how deal-making has changed for investors and founders alike. Not only have we seen investors shift their focus toward greater efficiency, but a brighter spotlight has also been shone on the importance of high-quality, compelling pitch decks. Let’s jump into it.

Traditional fundraising courtships went out the window

It’s safe to say that the traditional dating process for investors and founders went out the window last year. Fundraising moved entirely to Zoom, moving efficiency to the forefront of the process.

Investors aren’t traveling and therefore have more time on their hands–but they’re utilizing that time wisely. Many investors are meeting with 2-3x the number of founders, but pitches that have typically been an hour in-person have shrunk to only 30 minutes.

The trends we’re seeing at DocSend support this theme of greater efficiency: although investors may be seeing more decks, they are speeding through uninteresting decks, spending 3x less time on unsuccessful pitches than on successful decks. Your first impression counts, and this past year, scrutiny was found to work in the founder’s favor.

One thing that’s been especially encouraging is that we’re also seeing a lot more opportunities open up outside of the Bay Area. COVID-19 has accelerated the democratization of fundraising, and there’s a lot more willingness from investors to do deals outside of Silicon Valley. We’re also seeing more and more VCs move to other cities, which is all quite positive for the overall tech ecosystem. In fact, most founders and VCs who began relationships in 2020 have yet to meet each other in person.

Your pitch really matters—here’s why

Your pitch deck was important before the pandemic—it’s arguably even more important now. Some early founders still question whether or not they really need a pitch deck and if it’s worth the time to craft it. They do and it is. The slide deck is the industry standard. It’s also how you get an investor to take a meeting, especially now.

At DocSend, we’re seeing a lot more scrutiny placed on the deck. The average view time for a successful pitch deck is 4:10 (mins: secs). However, for unsuccessful decks, it’s only 1:36. Most of that decrease happens in the first 20- to 30-seconds where investors are flipping through a few slides and then dropping out of the deck altogether.

How your deck is put together says a lot about you as a founder

Putting down on paper what exactly you’re doing and why serves founders well in many ways. While your mission might make perfect sense in your head, it’s often hard to articulate it in a concise way.

How you put your deck together says a lot about you as a founder. Here are three tips to keep in mind as you build and perfect the story you want to tell.

Start with clarity. A common mistake we see people make is telling a story that’s more complicated than it needs to be. A lot of founders think this makes the pitch seem more unique and defensible, but it mostly just adds confusion and ambiguity to conversations with investors. Remember your slides should simply support your story. Your pitch should be a discussion.

With 20-30 seconds to catch investors’ interest, make sure you have the most compelling slides upfront. If your best slide isn’t the second, third or fourth slide, then ask yourself if your narrative is the best it can be. And in order to grab VC attention at a glance, be sure to create slide headers with intention. Headers are an underutilized space and an opportunity for maximum clarity.

Double down on product readiness. Investors are cutting to the chase on what matters most to them, and we’re seeing more attention on the product readiness slides. Specifically, DocSend found that 90% of pre-seed companies that successfully fundraised had some kind of ready product (alpha, beta, or GA).

At the pre-seed stage, investors aren’t expecting a fully launched product, but having something will give you an upper hand. Even a simple Figma or InVision of your product that can walk investors through your vision or a demo can go a long way when compared to a static slide. It’s not about showing that you have it all figured out but instead that your founding team can make it happen.

Explain it as you would to your parents. According to DocSend data from 2019, the competition section was firmly middle-of-the-pack in terms of time spent by investors. But in 2020, investor time spent on the competition section increased by 51% to an average of 53 seconds across both successful and unsuccessful decks.

Describing your competitive landscape has become even more important during the pandemic. So if you’re in a competitive market, don’t shy away from that. Talk about it while explaining why now is the right time to tackle this space in a different way—with a different type of product or business model.

It’s pretty similar to trying to convince your parents why you should quit your job to go do this thing. Be straightforward and simple; don’t assume any knowledge on the part of the investor. It’s better to assume they know nothing about your space versus assuming they know a lot.

More than anything, we’re seeing the pandemic accelerate trends that were already happening. As a founder, this is a great time to raise money because there’s more capital than there are great ideas and people to go execute them.