As an investor, you may receive pitch decks from startups that are interested in your financial contribution to their company. It can be difficult to know all the information about a startup just by looking at its pitch deck. How can an investor know whether an investment opportunity is right for their portfolio? In this blog, we’ll talk about how to evaluate a pitch deck by looking at some key things to review and how to tell if you may need additional information from the startup.

Evaluating Pitch Decks

What is a Pitch Deck?

 A pitch deck is a brief presentation that gives potential investors an overview of a startup’s business plan, traction, growth, and products/services. Many startups send their pitch decks out to multiple investors to gain advice or financial support to help them get off the ground.

A 2022 study by Docsend suggested that the average investor spent less than three minutes looking at a startup’s pitch deck.[1] A typical investor in a venture firm receives roughly 5,000 pitches in a year, reads about 600 to 800 of them, and may fund up to two startups or none at all.[2] With the potential for a multitude of pitch decks in an email inbox, it can be important to parse through which parts of the pitch deck may be most valuable to quickly consider the investment opportunity.

Understanding Pitch Decks

Pitch decks should clearly explain a few key questions. First, investors can look at what needs the startup is solving, why this startup is different from others, and why an investor should consider investing. Additionally, investors should look at who is on the team and how these people may specifically be able to lead the startup. Finally, investors can consider how the startup plans to make money and gain customers with their business. Ideally, all this information is clearly outlined in the pitch deck, highlighted in the slides below.

Some Key Slides in a Pitch Deck

The Problem & The Solution

The problem and solution slides provide exactly what they are – the problems that exist in the market and how the startup is providing a solution. The problem slide can be critical because it sets the stage for why the startup exists. Additionally, the solution slide is an opportunity to show how the startup is addressing the problem previously identified. Investors may want to look at these slides to gain a better understanding of the business and determine if the startup is something they are interested in supporting financially.

Market Opportunity & Business Model

After reviewing the problem and solution slides, investors may want to look at the market opportunity and business model slides. The market opportunity slide can show investors that the startup understands the current market that they are trying to enter. The business model slide should show the investors how the startup plans to generate revenue. As an investor, these slides may give you a good idea about the startup in the current market and how they plan to navigate their challenges.

Traction/Milestones & Team

After an investor has reviewed the above information, it can be important to review the startup’s traction, their milestones, and who they have running the important aspects of the company. The traction and milestones slide should show an investor the momentum, growth, and validation in the market. Some important points to look for in this slide is revenue growth, customer testimonials, as well as product releases, and media mentions.

Historical Financials & Projections

Finally, the investor can look at financials and projections. Startups may provide historical financial information as well as future financial forecasts like revenue projections and expenses. If the startup does not provide all this information, an investor may want to reach out to the startup and ask for current or more relevant financial information in order to determine if they would like to set up a follow-up meeting with the startup. It can be important for an investor to remember to take these projections with a grain of salt since past performance does not always determine future performance.

Gathering a Full View

Evaluating the Presentation

When evaluating pitch decks, it can be important to remember a few key things to allow for an unbiased review of a startup. Not every pitch deck that an investor reviews is the same because different startups have different priorities and needs and may even include different slides. An investor may also consider reaching out to the startup for additional financial information before requesting a formal follow-up meeting. Attaining financial statements that were not included in the pitch deck may also help investors make informed decisions.

Key Considerations

There are some things that investors may want to keep in mind when evaluating, aside from what has already been discussed. Pitch decks are marketing tools and therefore, some pitch decks, if not most, might contain fluff. Determining which pitch decks have valuable information amongst the fluff can be important for determining where the investor’s time should be spent.

Follow-Up Meeting Potential

These decks are not meant to cover every single detail of the business, rather they are to capture the attention of an investor, so it is okay if an investor is left with a few questions or needs more information to consider investing. If the startup appears to be a fit for an investor’s portfolio, the investor may decide to schedule a follow-up meeting to dive deeper into their business and gain a better idea about the potential opportunity.

Final Thoughts

While pitch decks may be designed as a primary way to give a brief snapshot of a startup, investors can still gain a lot of valuable information from the slides included in the deck. By focusing on the right elements of the deck and asking for additional information when necessary, investors can determine if the startup is worth a follow-up meeting and potentially a financial investment.

Want to learn more about evaluating startups? Check out the following MicroVentures blogs to learn more:

• Interpreting Business Models in the Private Market: What You Need to Know
• The Psychology of Investing: Navigating Investment Bias
• Investing in Crowdfunding as an Accredited Investor
• What’s It Worth? Navigating Inflated Startup Valuations
• Tale of Two Metrics: Market Cap and Market Value

Are you looking to invest in startups? Sign up for a MicroVentures account to start investing!

 

[1] https://techcrunch.com/2022/09/22/science-of-pitch-decks/

[2] https://www.harrisonclarke.com/blog/pitch-decks-three-keys-to-success

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The information presented here is for general informational purposes only and is not intended to be, nor should it be construed or used as, comprehensive offering documentation for any security, investment, tax or legal advice, a recommendation, or an offer to sell, or a solicitation of an offer to buy, an interest, directly or indirectly, in any company. Investing in both early-stage and later-stage companies carries a high degree of risk. A loss of an investor’s entire investment is possible, and no profit may be realized. Investors should be aware that these types of investments are illiquid and should anticipate holding until an exit occurs.