Raising a round for a startup, without ever seeing your investor in person, is the reality now.
The recent news proves it: on July 21, legendary VC firm Andreessen Horowitz gave up its physical headquarters in California and announced, “The firm is now virtual.”
Other VC firms will likely follow them soon. Alexis Ohanian, the founder of a venture firm “776” already told his followers on Twitter that 776 had been fully remote from the very beginning. So, if startup founders have their online communication in disarray, they’ll have a hard time raising money in 2022 and further.
Flyer One Ventures has already made several investments entirely online. US startup Hacker Noon is one example: I met its founder on LinkedIn, we had a couple of video calls, emailed each other and—boom—our fund participated in a $1.5-million round.
It’s a rare success story, however. Unfortunately, more often the communication falls through, as founders don’t really know how to present data online.
Here’s a couple of quick fixes that will help you do better.
Build your ‘data room’
A “data room” is a virtual space with all the necessary documents that demonstrate the capabilities and performance of your startup.
Founders would often send such docs separately and I needed to download every one of them onto my computer. It takes time to sort through them and makes it hard to find a particular doc when I need it fast.
Nowadays there are more tools to make the experience smoother: all the docs can be stored in the cloud, using Notion, GoogleClickUp, DocSend or DropBox. It can even be a website.
Another thing is to know exactly what documents you need to make it easier for investors to make a decision to invest in you. Here’s a checklist of what you need in your data room:
A PDF file with your pitch deck.
A Loom video with a 5-minute pitch.
Your vision explained: market demand, your solution, target, key benefits and features.
A short explanation of how the product works (text/Loom video)
The key metrics that demonstrate the startup’s growth.
Founders' experience in detail. Tip: Instead of phrases like "12 years in marketing," provide the name of the company and the concrete results achieved.
Competitive advantage explained. Tip: What will motivate customers to switch to your service or product?
A file with your financial model and forecast data.
A file with financial results.
A file with user feedback.
A file with the amount of investment requested and how it will be used.
Presentation: How to make it better
A slide presentation can often make the first impression on an investor. Make it positive and memorable.
Many founders tend to overload their presentation with additional information about the market. However, VCs do a deeper market research themselves later on. For the presentation, it’s enough to add just a couple of key metrics that confirm the relevance of your startup in this field.
Also, do not describe the team's future plans excessively—it is better to concentrate on what has already been done and what results are achieved.
20 slides are overkill nowadays, as every VC gets tons of decks every week. It’s better to make a short and concise deck of 5-10 slides and give VCs a chance to find out the rest from the data room and during the call.
Structure of a perfect 5-slide deck
Slide 1: Problem & How You Solve It.
Explain the problem your startup solves and the size of the problem globally. Use numbers. Tell how your product/service solves the problem.
Slide 2: Business Model.
Show how you plan to earn money by solving the problem & how much you can earn on each client in revenue and ROI.
Slide 3: Marketing & Sales.
Tell the investors how you plan to sell the product/service and how you plan to grow your sales and expand to other markets.
Slide 4: Numbers.
Share your most recent numbers with investors to demonstrate traction and growth. Include LTV, CAC, retention, revenue & growth.
Slide 5: Summary & Round Info.
Repeat all points in one slide and tell how much cash you need to grow further.
Any animation or visual effects—if applied—should be easily viewed on a smartphone. Yet, it’s even better to have a presentation without any animation.
Last word: Consider generation gap
While Generation Z is more used to working 100% online, Generation X (1965-80) and even Y (1981-96) are used to solving work issues offline or over the phone instead of messaging and emailing. And the average age of an investor is 40+.
Try to use neutral words understood across different generations—no slang. Give investors a chance to ask clarifying questions during your call and don’t turn it into a 45-minute monologue.
If you are about to have a video call, it may help to write down the structure of your conversation and all important questions in advance to avoid jumping from topic to topic.
Staying neutral and flexible in communication will help make a good first impression on anybody.
Create a data room in a cloud, collecting all your startup presentation documents in one place.
Prepare a 5-to-10-slide presentation that works well on both desktop and mobile devices.
Think about who you are pitching your idea and adapt—you need to be on the same page with your investor.