The Importance of Standing Out
WTFisVC: Sharing my learnings as an early-stage startup investor
Ever wondered what makes or breaks a startup progressing past the first screen at a VC? This article runs through the the Do’s and Don’ts of a great pitch deck.
If you're a founder looking for VC money... this one's for you.
The Legacy of Danny Lim
For most Sydney-siders, we can agree on a few things: our public transport is not the best, Parramatta road is not fun to drive on, and irrespective of your political beliefs, Danny Lim is a sight to behold.
Walking through the city, you are often surrounded by a crowd of blue collared shirts, chinos, suits, dresses, and RM Williams boots. Heads down, on the phone, AirPods in ears.
But sometimes, you are lucky to have a break from the mundane. You come across political activist Danny Lim.
Rock N Roll: Ask-Hole Pollies
Standing out from the crowd of blacks and blues, Danny can be seen grinning, wearing colourful sandwich boards with often provocative political commentary (which sometimes gets him into troublesome situations).
There's no defined schedule for when or where he appears, you randomly come across him.
For a lot of us, this piques our curiosity. His sandwich boards never fail to draw a reaction because you don’t see anything like it anywhere else.
The crowd looks up, takes it in, often smile (some may yell "get a job") and move on. It breaks up the usual trudge into work.
Standing out gets attention, and like Danny Lim, when you’re applying for funding…
You need to capture the VCs attention fast.
Danny Lim, Sandwich Boards and VC
What's been one of the hardest things I have to do each week? Review 20-50 startup pitch decks in our initial screening process.
At Investible, everyone on the climate tech fund reviews every pitch deck we receive through our channels each week to reduce individual bias.
It's safe to say I am not over reviewing all the ideas. In fact, I love it. We try to give feedback to every pitch deck that comes across the desk, and it's pretty damn cool seeing so many fantastic ideas.
To be more efficient with my time, there are two key things that I find myself doing.
Assessing against my 3 P’s
As time is limited, the first screen focuses on identifying great opportunities inline with our investment mandate. For me, I have a model of assessing a startup against 3P’s. These are:
Product
People
Primary market
Most investors have their own take on this. I will distill mine in an article later on; however, I am looking for a killer product that solves an unmet need and often includes defensibility where necessary; killer people leading the charge; and a killer primary market or beachhead that shows the start of a strong goto market strategy.
Hunting for something different
VCs out there will review more or less than me; however, the core lesson I want to share today applies to founders approaching any of these VCs.
The lesson: show your uniqueness quick
Easier said than done, but founders overthink what uniqueness has to mean. Like the first impression of Danny Lim, how can you give an investor a first impression that makes your startup stand out from the crowd?
Making your unique product stand out
Most people go for the product; our product is unique…
For example, I’ve seen several electric aviation opportunities.
The best pitch deck quickly distilled what they do that their competitors don’t and the defensibility around the product. How’d this particular startup get there? Decades of research at a university.
While it’s the most common option, as I’ve been experiencing a lot, unless you’ve got some brilliant piece of technology, usually spinning out from years of research, it is unlikely that it is truly unique.
The VC you are sending the deck to has likely seen it.
What about a unique growth strategy?
Sometimes it comes down to a fantastic team, a distribution agreement, your first customers, traction… There are plenty of ways to convey it.
The team that did this the best? A carbon credit platform that clearly highlighted a key customer. They utilised the recognisable logo of the customer to grab my attention and then explained why this is an excellent path to market and the added defensibility against new entrants. Even though the rest of the deck was similar to the others, I left thinking, “no one else has achieved that.”
Other ideas: do you have a ridonkulous LTV:CAC? Growth? Retention or Churn? If it’s compelling…
Don’t bury your lede
Do not bury your unique value in the pitch deck or, as a newspaper edit may say, “bury the lede”.
I have seen a few unique insights buried behind pages explaining the problem or technology; a brilliant customer contract is mentioned as 1 dot point. Fortunately, I dug them up, but my colleagues or I could have very easily missed them.
If it is worth talking about and attention grabbing, make it a key takeaway.
What the other VCs say
Here are some suggestions for making your pitch deck stand out from other investors in the Australian VC community.
For transparency, their answers were to the following question: “I am making a blog post on the importance of standing out/conveying the unique value proposition on a pitch deck. Whether that be product, g2m or the team. Do you have anything you'd like to add via a quote on how a pitch deck can stand out for you?”
Here are their responses:
Why this? Why you? Why now? 🤔
“For me I begin by boiling it down to three questions. Why this? Why you? Why now? If after 5 minutes flicking through I’m struggling to find an answer, then there is 9/10 I’m passing.”
- Harikesh Pushpapathan, Stoic VC
Unique Insights 🕵️
“For me, there has to be a unique insight or approach for an investment to progress at all. Without a unique insight or approach (which could range from a unique understanding of the customer, to unique tech, to a unique G2M), how can the investors make the leap of faith that the Founders will be able to out compete competitors when they inevitably arise following the Founder's initial success?”
A Clear Narrative 📖
“A very clear narrative is important to me, with everything matching up from the problem, to the solution, to the target customer and the total size of the opportunity. And that is not the size of the market with every company’s solution - just the size of the market if the company sold to all customers in their geographic catchment. I find often there is no articulation of the business model, and there is no forward P&L so I can understand how all the parts of the puzzle fit together. Extra points for understanding exits and their multiples. That makes my life a whole lot easier when I come to do my diligence and understand if there will be a return for us, or not.”
Customers Love Your Product ❤️
"If you can show me that a) customers love your product (with NPS, retention/churn metrics, or customer quotes), and that b) your customer base is growing rapidly (MoM growth), I get pretty excited."
Quantify Your Impact 🌏
"Leading funds are increasingly taking impact into consideration when making investment decisions and it's a great way to stand out from the crowd. Tailor your pitch so that the impact proposition and traction are clearly stated and, where possible, quantified. Giant Leap looks for a measurable unit of impact for every dollar of revenue, an example would be Work180, which measures the number of women affected by improved policies to support women in the workplace"
Clearly State Your Metrics 📈
“As SaaS investors we love seeing numbers, particularly evidence of traction. Putting your key metrics (ARR, YoY Growth, # of Customers, ACV, engagement etc.) across one or two slides demonstrates that you have a finger on the pulse of the business. Don't underestimate the power of diagrams. Using them to explain things like how a product works, where a solution sits in the value chain / tech stack or who interacts with it can provide a lot of helpful context.”
Bringing it to a close
So, there you have it. It's almost a bit of a checklist for you to use before applying for funding with any of the above.
Guess what for those of you who think it's a little obvious…
People forget to make those points stand out.
We are all a little different on what we like to see, but demonstrating the above quickly always wins. Some of us see more deals than others and have less time to decide on each deal.
The quicker you can convey your unique advantage, the quicker you can stand out from the others, and the quicker you will progress to the following stages!
And, don't be afraid to treat me (and all of the above VCs) like 12-year olds. Treat us dumb. I am okay with it, and I am sure they are too. That doesn't mean you become condescending and pinch our cheeks; it means you clearly and concisely explain your unique value proposition in terms a 12-year old can understand. Cut the complexity.
Thanks to Nic Hurrell, Franko Ali and Luca Monk for the feedback on the draft and to all the investors who contributed.