This three-part series on investor outreach aims to find the most effective recommended investor outreach strategies by looking for common recommendations across 41 expert resources. Part 2 discusses investor and consultant recommendations in preparing pitch collateral. Missed Part 1? Read it here.
Out of a hundred startups that attempt to raise funds, only one succeeds.
Why?
Well, funding a startup is, as investors say, a risky business.
Investors only back startups that share the same goals and motivations as theirs. On top of that, investors are looking for disruptive ideas executed by efficient and qualified teams.
So, out of hundreds of pitch decks sent to investors on a weekly basis, only a few grab their attention and even fewer get funded.
What is considered ‘good’ in the world of pitch decks and pitch marketing collateral?
Our study across 41 expert resources aims to answer this question.
In our previous article, we provided an overview of our study from methodology to analysis. However, Part 1 is only the tip of the iceberg.
In this article, we delve deeper into the first step of investor outreach: Preparing Outreach Collateral.
A major part of a startup’s pitch collateral is the infamous pitch deck.
Winning pitch decks and pitch collateral must be data-supported, clear and simple, personalized, well-researched, and aligned.
During our research, we found 103 unique recommendations that fell into the category of Preparing Outreach Collateral. Due to the high number of opinions, we segmented them into five sub-categories.
- Data-supported: Establish credibility with data points and facts
- Clear and simple: Write pitch collateral with brevity
- Personalized: Customize collateral to your audience
- Well-researched: Know your startup’s industry inside and out
- Aligned: Establish consistency across all channels and team members
The methodology behind this study can be found in Part 1 of our investor outreach series.
Let’s delve into the data.
Data-supported: Establish credibility with data points and facts
Data is the support system in fundraising collateral. A pitch deck alone requires data as proof that the startup is profitable and scalable.
Investors won’t make a decision without seeing the numbers and the facts. Would one consider investing because of a passionate opinion? Not really.
Valuation, market size, and traction data provide valuable insights to investors. And if startups try and manipulate the numbers, it shows. In a previous study we’ve conducted about top mistakes that first-time founders make, inaccurate and false claims ranked fourth on the list. Data-driven collateral ranked as the top priority across 41 investors and consultants earning 38% of mentions.
Under this sub-category, founders are expected to:
- Provide key data points on valuation, market size, and competitive advantage.
- Base valuations on industry and peer analysis.
- Use data to emphasize the extent of the problem being solved by the startup.
- Create financials based on existing internal data and forecasts.
Digital transformation service provider, MindSea highlights the important of traction:
‘What far too many entrepreneurs don’t realize when raising capital is that investors are looking for more than a pretty product. They want to see signs that you’re a great founder who can execute a vision. They want to see traction.’
Clear and simple: Write pitch collateral with brevity
Communicating complex ideas in a simple way is a skill that’s crucial everywhere, but especially in the world of fundraising. Ideally, the faster and more deeply an investor understands the information at hand, the better.
Brevity is all about making all pitch collateral clear and precise. Docsend claims that the average investor reads a pitch deck for less than four minutes. That’s not a lot of time to read blocks of text in a single slide. It’s only enough time to read about 66 words per slide.
The rule of thumb? Don’t write something in three sentences when it can be written in one.
This sub-category received 36% of mentions under Preparing Outreach Collateral. Consequently, it was the second most popular recommendation across 41 investors and consultants in our study.
Under this sub-category, investors and consultants advised to:
- Keep outreach material concise and easy-to-read
- Create no more than 15 slides for a pitch deck
- Avoid using jargon and complicated words
- Optimize documents for skimming
Holloway, a reputable online publication, believes in striking the balance between being specific and being concise:
'Don’t be vague in the hopes that the person will make an offer to help you with exactly what you’re looking for… But specificity does not mean over-explaining. You also want to keep it short.’
Personalized: Customize collateral to your audience
Every investor is different. They have different goals, different motivations, and different backgrounds. All of these differences play a major role during the fundraising process.
- Some investors are more interested in seeing traction and milestones.
- Some may be more interested in the extent of the problem.
- Meanwhile, others cater to specific industries only.
A pitch deck alone requires multiple versions according to our research on pitch deck versions. So, startups should veer away from creating a one-size-fits-all collateral.
Investors and consultants in our study advised founders to make their pitch personal. This sub-category gained 17% of mentions in our study, ranking third in popularity.
Under this sub-category founders are recommended to:
- Create multiple pitch deck versions
- Personalize each cold email outreach
- Specify why the startup is a perfect fit with the potential investor
- Mention how the startup found out about the investor
Jodi Goldstein, Executive Director at Harvard Innovation Labs, believes that a pitch should be personal and not transactional.
‘Whether it’s in person at a networking event or via phone or email, you’ll have to convince investors that you’re worth their time before you even get to the pitch meeting. There’s no silver bullet for doing this, but at a basic level, you’ll want to make a brief and persuasive pitch that comes off as personal, and not transactional. While you won’t go into the full-blown pitch, you can say what your company does, who’s on your team, and why you reached out to this investor specifically.’
Well-researched: Know your startup’s industry inside and out
The benefit of doing research on the startup’s industry extends beyond fancy charts in a pitch deck. Founders also gain the ability to discuss an industry with confidence and an informed opinion. This, naturally, will be reflected in a startup’s overall strategy.
Additionally, any available internal data should also be aggregated and analyzed as part of the process.
This sub-category received 10% of mentions, ranking fourth most popular under Preparing Outreach Collateral.
Investors and consultants recommend that startups should:
- Learn about the target market to determine problem-solution fit
- Know the ins-and-outs of the industry
- Research competitors and their business models
Consultant and entrepreneur, Marco Goldberg, advises startups to:
‘Have a clear understanding of your value proposition. By using internal data or other analytical tools, you should be able to comfortably answer questions about the key data points that need to be communicated in your sector – are there unique KPIs, technology developments, or even ESG metrics that are relevant to investors?’
Aligned: Establish consistency across all channels and team members
Fundraising teams that march to the same drum beat and vision are the ones who can make dreams happen. On the forefront, a startup’s message has to be consistent across all channels.
However, to achieve this consistency, each team member has to be aligned internally. From an investor’s perspective, a team has to appear as if they all agree and believe in the company’s mission, message, and goals. If team members can’t talk about the startup in the same way, they run the risk of looking disjointed and unfocused — the bane of every investor’s existence.
Alignment is the fifth and final recommendation under Preparing Outreach Collateral. It received 9% of mentions among consultants and investors in our study.
This sub-category entails that startups should:
- Make sure any public collateral is in-line with the pitch collateral
- Agree on the core message of the startup
- Ensure that pitch collateral reflects the startup’s brand voice
EQS Group, a company that specializes in investor relations, underscores the importance of alignment:
‘Discuss how you are positioning your company and your investment thesis with your Management team before embarking on an outward communication strategy. Internal stakeholder agreement is an integral part of the process and sometimes there are disagreements that need to be ironed out. It is clearly better to address these internally before risking misalignment on an investor call or presentation.’
Bottom line? Do the homework before connecting with investors.
A startup’s pitch collateral says a lot about their company. Sloppy and poorly-made documents give investors the impression of unprofessionalism and unpreparedness. Startups should dedicate ample time in finessing these documents from outreach email copy to pitch decks.
To recap:
- Data and clarity is king. The most important thing, according to the experts we studied? Pitch collateral should always, always be grounded in data, credible facts, and research. Startups shouldn't make outrageous claims or use vague descriptions.
- Make it personal. Despite receiving significantly fewer mentions in our study, tweaking and modifying a pitch deck or a cold email for a specific investor is still important.
- Do your homework. Experts encouraged founders to know the ins-and-outs of a given industry, its trends, its audience, and its economics. These two recommendations work in tandem: learn the startup’s industry, and ensure that this knowledge comes through in both collateral and conversations.
- Be consistent. The final recommendation sub-category in preparing collateral was that messaging should be aligned across pieces of collateral as well as across team members.
In the final installment of our investor outreach series, we discuss how to make meaningful relationships through a methodical outreach process. Read Part 3 here.
