February 4, 2021

How to modify your investor deck to Growth round

Written By: Tal Dekel, Allon Sasson, Gal Shefer

Image for post

In the previous article, we’ve explained why it is important to tailor your investor deck to the specific fundraising stage of your startup in order to improve your chances of getting an investment. We addressed three different phases of the fundraising rounds — up to the end of the Seed phase, first round (A) and later rounds (Growth).

We have defined for each stage the four necessary elements (marked green) in that stage, focusing on which best meet the expectations of the investor, and we have also shown the ranking between the various stages and the necessary components, as can be seen in the following drawing:

Image for post

If you came across, you are probably in the Growth round (late stage), then just for you we have written the following detailed report describing each of the presentation components necessary for this stage, and the two “backup” components.

The necessary components in the Growth investment stages:

A startup at this stage is already a mature company, which is in significant stages of growth, and had managed to raise financing in previous rounds. The company’s focus usually shifts from sales development processes, to enabling continued revenue and growth. Usually, a maturity stage will follow, in which the company will become operationally balanced, meaning that it has a regular sales turnover and it positions itself as a market player whose potential customers are aware of it and its products and value.

In the venture capital industry this stage is considered as an excellent stage for making an exit. Some companies are even performing IPO (initial public offering) at this stage, assuming that raising capital from the public will provide them with the safety net needed to grow. Entrepreneurs must make sure at this point that the management team and employees are ready to face challenges on a significantly larger scale than those the company has faced so far. In addition, they must implement within the company systems and mechanisms that will enable it to have better financial literacy and budgetary control than in the previous stages.

This stage is characterized by high self-confidence of entrepreneurs because of the tendency to interpret an increase in revenue as a clear sign of success, while in practice, profit is the real indicator of the strength of a business.

Business Metrics

What does this ingredient include? The company’s business performance includes data such as the monthly revenue growth rate, projected rate for the following year, the growth rate in the number of new customers, customer acquisition cost (CAC), abandonment (Churn), customer lifetime (LTV) and more.

Why at this stage? The company’s key performances are very important in preparation for rounds B and beyond or in preparation for an IPO. The valuation of the company will be greatly affected by the size and pace of revenue growth, and entrepreneurs who are aware of this will also focus on these parameters at the expense of the profit line. In other words, at this stage it is “legitimate” to present a growing venture in revenue and value, even if it is ostensibly financially unstable and stands on its own. The transition to profitability also requires an improvement in monitoring and measurement capabilities, which allow the company better forecasting capability.

Tip: The growth rate in addition to recurrent revenues (ARR / MRR) can be separately attached to a summary slide that will appear in the deck’s opening adding additional data (mini-executive summary) and a separate slide can dig deeper in the data and include segmentation of revenue from different types of customers / verticals.

Roadmap
What does this ingredient include? The company’s roadmap includes the following plans for its product or service: the following versions to be developed, the expansion and deepening of the target market that the company intends to reach, new offers and new Use Cases to be developed and updated features.

Why at this stage? The company’s product is already on the market, and now the company can and should present the roadmap that is in line with the large investments required to finance it.

Tip: It’s best to present a roadmap in a graphic way that relates to the evolution of the solution, looking ahead for a period of 2–5 years, in line with existing and emerging industry trends in the current market and future markets.

Financial Figures
What does this ingredient include? Following on from the presentation of business performance, this component will include the Company’s financial data, including renewable income (ARR), operating profit, cash flow vs. “burning rate” of expenses and the shared distribution table between the founders and the investors (CAP Table).

Why at this stage? The investment in these rounds is already in large numbers, and therefore the expectations of the investors are that also the financial data of the company will be much more detailed and accurate than in the previous stages.

Tip 1: The data can be presented in one slide with an emphasis on existing and expected income versus the rate of “burning” cash.

Tip 2: There is no need to expand on profit and loss (P&L) forecasts — these excel files can be shared upon request and discuss in later meetings / Due Diligence.

Investment Required
What does this component include? This chapter in the presentation details the size of the investment that the company is requesting, who are the lead investors and what the investor is expected to receive in exchange for the investment (in terms of percentages in the company, board seat etc.). The emphasis is on how the company will increase both revenue turnover and profitability through the required investment.

Why at this stage? At this stage, the company is presenting a solid and proven business model, which should attract growing and stable revenues. The required investment must be in line with the company’s future roadmap, in order to be able to understand where the company will go after successfully closing the round.

Tip 1: In the growth rounds, it is recommended to present a plans to: increase sales and marketing teams in a global geographical scale, establish new online & offline channels, expand the management team, acquire small companies to join in the existing team (or eliminate competitors…) and build a solid financial base strong enough to pass unexpected crises.

Tip 2: Investors do not like to find out about the intention of the founders to withdraw dividends from the company following the round, unless it has been agreed in advance that the developers or investors from early rounds want to dilute part of their holding (Secondary round).

Why did we mark Business Model and Opportunities as backup components for this phase?
Because these also address the company’s growth potential in the future, and there may be other factors that explain how the company is expected to reach the large expected profits and show investment returns. A business model that has proven to be profitable has recently become a necessary component in this stage. In addition, we would like to address the value component, which we expanded on in the A round article.

To list of the necessary components in ‘seed round’ investors deck

To list of the necessary components in ‘A round’ investors deck

If you have additional insights that you’ve identified in regards — please do share it with us.

You can examine investors decks of hundreds of past and present startups, including companies such as LinkedIn, Google, MySQL, Airbnb and many more — click on the link here

So far for this time…