In today’s highly competitive fundraising environment, a well-crafted pitch deck is a crucial tool to secure investor attention and funding. Taking a data-based approach to crafting the pitch is vital to maximizing investor engagement and success rates. This article examines some of the key statistics reported in DocSend’s 2022 study of investor pitch decks, and sheds light on the importance of succinct, focused decks, the crucial role of slides covering topics such as the company purpose and traction, and the varying needs across pre-seed, seed, and Series A stages.
This post is part of our series on pitch decks where we will be delving into all aspects of successful pitch deck creation and execution utilizing our approach.
Less Time, More Focus
Many founders attempting the DIY pitch deck route find that, in an effort to tell their story and demonstrate the opportunity, they often get lost in their deck, which could result in decks that are thirty slides or more, usually with little or no strong narrative. Given that investors now spend less time looking at pitch decks, this should be avoided. Simply put, investors don’t have the patience or bandwidth to sift through all that information, no matter how integral a founder may believe it is.
In 2022 investors spent 24% less time on decks than they did in 2021. In 2021, founders had just under three minutes to convince an investor to hit the contact button. In 2022, that amount of time dropped to two minutes and thirteen seconds. Founders not only have one shot to demonstrate their value and opportunity, but also have to do so in a shrinking window of time. Fail to do this and your startup, as exciting as it may be, just becomes another deck that is lost in the shuffle.
Reading Deeper into Pitch Deck Statistics
Here are some additional details on pre-seed decks for 2022, courtesy of DocSend’s study:
Time spent by VCs on the product sections of successful decks reduced by 25%.
Time spent on the business model section decreased by 42%.
The company purpose section was the third-most scrutinized section.
Traction was a different story altogether: VCs spent 41% more time on this section in 2022 than they did in 2021.
The data demonstrates that the company purpose (or ‘problem-solution’) slides can hold the key to the success or failure of the entire deck. It is of utmost importance for founders to prioritize and invest time in crafting a company purpose that is not only compelling but also effectively communicated, as it serves as the driving force behind generating interest and engagement for the rest of the deck. Founders can no longer afford to wing it or neglect this.
Traction now plays a greater role as well. While founders may have been weaned on tales of raising millions of dollars without a product or revenue, the fact is that most VCs want to see that the business opportunity is real-world viable.
Having thousands of people sign up on your free mailing list is nice, but not nearly not as attractive as having thousands of people download your product which is then converting free users to paid and growing month over month.
Understand that while the founding team of a pre-seed startup may be impressive and the business model sound, the purpose and the traction will meaningfully contribute to whether or not the VC will reach out.
Stats for Seed Stage Pitches
So what about seed stage decks? Just as with the pre-seed offerings, VC’s also spent less time on them.
Here are some additional details on seed decks for 2022:
Compared to 2021, investors spent 28% more time on the traction sections of decks that received funding.
VC’s spent 56% less time on the solution sections of successful decks.
VCs spent a whopping 233% more time scrutinizing the business model sections of decks that ultimately didn’t get funded.
Seed stage founders not only need a story that sells, but true traction and metrics that demonstrate the momentum as well as the potential for growth and high returns. However, the truth is that many founders fail to provide this.
Stats for Series A Pitches
What about the statistics for Series A decks?
Series A startups are much further along their startup journey than their pre-seed and seed counterparts. As Series A investors are more specialized, they know exactly what to look for and time spent on decks is much shorter than earlier stage companies.
Insights about Series A decks are as follows:
The product and business model sections are paramount. Series A companies need to show monetization plans for products that are more mature than at earlier stages.
Decks are longer for Series A companies as they include past performance as well as forward looking data such as customer retention strategies and market share growth.
Investors are looking at scalability and positioning for the future.
Understand that the failure rate of pre-seed to Series A startups is about 60%. VCs that look at companies who make it to the Series A round aren’t interested in purpose or the competition slides as the startup has already proven themselves by taking up a position in the marketplace.
Whether you are pre-seed, seed or Series A, founders need to give themselves every advantage that they can, especially when attempting to raise VC money. This brings us to the matter of what topics investors focus on.
Investor Areas of Focus
A successful pitch deck tells a complete story from beginning to end. It touches on key points that investors look for when they are looking for new startups to invest in. Certain slides are put under more scrutiny than others, especially their placement in the deck.
Successful decks highlight:
The team slide.
The product slides.
Financials.
Company purpose.
The competitive landscape.
The last three are paramount as the majority of unsuccessful decks fail to mention them. Having no competition is a red flag to VCs and financials are also needed to showcase an accurate prediction of the possible future revenues.
As demonstrated previously, founders have less than three minutes to get an investor to hit that contact button. Investors won’t waste their time slogging through meaningless slides such as quotes from reputable sources, multiple pictures of the product, a live video, or a story that takes far too long to illustrate. There are better decks out there that are demonstrating their own investment opportunity and in a more concise and direct manner. It pays to remember that you aren’t competing against major incumbents but other startups and their pitch decks. This is why it is essential to know how to relay a proper story in the correct order as well as include the needed information in your pitch deck. Failure to do so will result in wasted time and resources.
Thoughts on 2023 and beyond.
Figures reported by Crunchbase indicate that global VC funding is leveling off in 2023. This funding setback is impacting startups across pre-seed, seed, and Series A, with each stage down between 41% and 48% in a year-over-year comparison. Even though AI startups received massive funding rounds in May, investor interest in tech companies wasn’t strong enough to alter the big picture.
While funding may be down, founders still need capital to grow and scale. It becomes even more imperative to structure your story and your deck to industry standards as we assume that VC’s will spend even less time on reviewing pitch decks in the coming months as well as filtering who they take a meeting with.
Because there will still be meetings and funding rounds.
There will still be new startups that rise among the downturn and become Unicorns.
After all, following the dotcom crash, Facebook and LinkedIn were born. The 2008-2009 financial crisis saw the creation of companies such as Airbnb, Uber, and Slack. The value of tech stocks rose within two years from the downturn as well.
Understand that fortunes are made in the down market and collected in the up market. There is no better time than now to start a company and tell a properly crafted story that excites investors enough to back your startup, despite the market conditions and turmoil.
Concluding Thoughts
Whether you have a groundbreaking startup idea or just want to provide a better solution to what already exists in the market, you will need to have a solid deck that commands attention, tells a clear story that demonstrates an opportunity, and provides the impetus for a complete stranger to respond to you and eventually become an investor. Statistics such as above can provide some direction as to how best structure and craft a pitch, but engaging a full-stack pitch deck development team with deep experience in what works and what doesn't can make the difference between a good pitch and a GREAT pitch. At IGNITION, we know investors expect and need to know provide and how best to structure and present it for funding success. If you're ready to boost your chances of funding success and taking your business to the next level, what are you waiting for? Drop us a line and let’s get you ready to raise!