In the last 3 years, at Cisneros Interactive we have talked and seen many entrepreneurs wanting to raise capital. Honestly, 90% of them may have a great idea but their “Pitch Deck” (usually a powerpoint presentation) is very poor. I do think that Latin American entrepreneurs are far behind their peers in other countries but that’s because the start-up ecosystem is far more recent and smaller. It will get much better in the next decade. However, there is no excuse for a bad “Pitch Deck” since there are so many online resources that can guide you through this process, and a “Pitch Deck” should be formulaic.
So I will try to give entrepreneurs some advice of what we like to see in “Pitch Decks”:
1. STATE THE PROBLEM CLEARLY AND HOW YOU WOULD SOLVE IT.
- What is the problem your potential client has? You should be able to describe the problem in one slide and have a very clear vision of who the “buyer” is.
- Understand how these “buyers” are solving the problem now. If no one is doing it, then the problem is not that important for them. The best news is that they are sort of solving their problem but with multiple tools and none of them are streamlined and/or cost or solution effective.
2. HAVE A BIG VISION – HOW BIG IS THE MARKET?
- Data is hard to find in Latin America, but it exists. If you don’t have data, then you don’t really know your market quite well.
- Use external data sources, make extrapolations from other markets, interview experts. Do whatever you need to do, but show how big the market is size. Dream Big!
3. DETAIL HOW MUCH MONEY YOU NEED AND HOW YOU WILL USE IT.
- It really surprises me at how weak this section is, and it is because most entrepreneurs lack financial expertise. This is a topic for another blog, but entrepreneurs underestimate the importance of having proper accounting and finance processes and expertise.
- In order to know how much money you need you need to do a cash flow projection, and I mean a cash flow projection not a Profit and Loss. I almost never see a cash flow projection and an understanding of working capital. If you don’t know what these terms mean, you need to hire or bring in as a partner someone who understands this.
- Also, unless this is your first raise and are getting started, it is very important to understand your historical financials. Obviously you want to show revenue growth and if possible improving gross margins and EBITDA
- Finally, how exactly will you use the cash? Better and more people, equipment, working capital, marketing, and so on.
4. METRICS, METRICS, METRICS.
- Know which are they key metrics for your business and show how you are tracking against them. Also show the future in terms of these metrics. This goes hand in hand with your financial projections.
- All ecommerce or paid services will have metrics such as Customer Acquisition Costs and Lifetime Customer Value. As long as LCV is less than CAC you have a viable business but you have to show in detail how you are calculating each of these metrics and your past performance.
- We invest in digital advertising companies, so metrics here are a little bit tougher to get. But it’s doable- think revenue per sales person, ratio of ad operations people to sales people, etc.
5. TEAM: SHOW PRIOR EXPERIENCE IN THE INDUSTRY AND COMPLEMENTARY ABILITIES.
- This is the easy part and most entrepreneurs get this right. Make sure you describe your top team, including founders and hires.
- You must show that you or someone in your team has deep expertise in the industry.
- Also, my experience tells me that it is easier to launch a company when its not a solo adventure. If you have other partners, I hope they have complementary abilities. If someone has a financial background even better.
The deck has to at least have these 5 components, and It does not have to be long. I would do a 15-20 page powerpoint, with appendices at the end with more detail.
I hope this helps– this is basic stuff, but it’s how powerful and convincing you make each point that will enable you to raise money at fair valuations!