How to pitch to investors: What fundraising collateral do I need?

What documents do you need when fundraising and which are the most important? Octopus Ventures expert Simon King provides the answers

So, you’re trying to sell some equity… Just as with selling any other product, there is a sales process to go through: prep, introduction, qualification, presentation, objection handling, closing and follow up. To do this right, you’re going to need sales collateral for your equity.

For the unacquainted, sales collateral or marketing collateral, as it’s better known, is the collection of supporting media or documents utilised in the sales of a product or service. This guide will focus on providing advice on the right supporting media and documents to use when fundraising – fundraising collateral.

Again, just as with sales, the fundraising collateral you use will go ahead of you and may tilt the balance in favour of, or away from, getting a meeting or even investment. But what do you need, what does it look like and what is in it?

In my opinion, there are five pieces of fundraising collateral that are important. Two are ‘must haves’ and three are ‘nice to haves’.

What fundraising collateral do I need?

#1 – Pitch deck = Must have

As jargon goes, ‘pitch deck’ is pretty bad, but the PowerPoint deck of slides is the backbone of all investor pitches and it is something you will need. The best ones can be sent alone and will have the same impact as when you present them. It won’t be longer than 20 or so slides and it ideally will pique the interest of the investor while at the same time answering all the key questions they might ask about the business.

As impossible as this sounds, it is doable, although it’s challenging and will take time to get right. This example is a great overview of what to think about when putting a deck together, but searching online for ‘best pitch decks’ or similar will surface lots of useful examples. A good collection of decks can be found here.

How to pitch to a venture capitalist – a Growth Business guideA Growth Business guide to what VCs are looking for, preparing for a pitch, and how to behave in that crucial first meeting

A quick review of pointers:

  • Don’t include more than 20 or so slides
  • Make sure you explain what the business does early on! We don’t know when we start reading and it is likely nothing will make sense until we do
  • If you’re sensitive to revealing information then watermark it and PDF it, mark it for a specific investor, or take out the most sensitive info. Expect to send it in advance, most likely without signing an NDA
  • Typical topics to cover include: elevator pitch, team, market, problem, solution, business model, competition, projections, the ask

#2 – Financial model = Must have

Even if your business is focused on ‘engagement first’ and building a user base before monetising, you will still be spending money. How much money? We want to know and we will ask for this document at some point. In form, it is an Excel workbook with monthly forecasts of profit and loss until the business either runs out of cash or breaks even. It doesn’t always have to be complicated, but it needs to be based on sensible (ideally data backed) assumptions. The crucial question we are looking for an answer to when we view this is to what extent the business can miss its targets and yet still achieve meaningful goals that mean it will be worth more at the next funding round/exit.

#3 – Exec summary / two pager = Nice to have

This is a pretty common document, but not necessarily a ‘must have’. It contains all the information that the pitch deck does, but in a two A4 page, prose version. This can be useful for investors or interested parties before sending a full deck.

#4 – Investment memorandum (IM) or business plan = Nice to have

This is the in-depth, behemoth of an investment document that starts with the executive summary (as above) and goes through business proposal, market, route to market, barriers to entry, and business model. Please DO NOT SEND IT AS THE FIRST DOCUMENT YOU SEND TO AN INVESTOR. We speak to hundreds of businesses a week and will not read a 40-page document to find out about what your business does in the first instance – there simply isn’t time. The reason that this is still ‘nice to have’ rather than a waste of time is that it does have two uses:

  1. Writing it can be a useful exercise. It means re-evaluating the business model, market size and route to market and properly articulating it, which is helpful as investors will ask you about all of this at some point. If you have been through the task of writing it down, you will probably be able to come up with a good answer when someone asks the question.
  2. It saves us time. Should a VC decide to invest, there will almost certainly be some kind of internal process involving the writing of a paper and presenting it to an investment committee. If there is an existing IM, then it makes writing that paper a lot easier and avoids further, predictable, questioning for you.

#5 – Data room = Nice to have

The data room is the folder where you keep all the in-depth company detail. It is a time saving device because if you are raising money, then at some point in the diligence process someone will ask to see the employee service contracts, signed copies of the memorandum and articles of association, signed copies of all your customer contracts and so on.

If you have to pull them together, scan them and send them over at the point when they’re requested, it is going to take a lot of time during a period when you’re probably spending too much time fundraising and not enough time running the company anyway.

The two must-have documents aren’t meant to be exhaustive and there may be additional specific information that an investor asks for (other common pieces include sales pipeline, detailed competitor analysis, details of full team and IP documents among others).

As a final thought, a lot of what goes on in a business is sales in one form or another – whether you’re selling the vision of the company to a prospective grade A employee, a product or service to customers or as a prospective investment to us. As investors, we often use the fundraising pitch as a proxy for ability to sell more generally. So get out there, write a great pitch deck and start selling that equity.

Simon King joined Octopus Ventures in 2012. He leads up the deep tech team and is the lead fund manager for the Octopus Future Generations Venture Capital Trust.

This article is issued by Octopus Ventures which is authorised and regulated by the Financial Conduct Authority for use by journalists in their professional capacity and should not be relied upon by retail clients. The value of investments, and the income from them, may fall or rise. The information in this document should not be construed as offering investment or tax advice.

More on fundraising collateral

Ten essential slides you need for your next investment pitchCreating the perfect pitch can be difficult. We take a look at the essential slides that business men and women need in their investment pitch.

How to improve your pitch deck #6 – The Beauty AppAn investor spends three minutes looking at a pitch deck. Don’t bamboozle investors with too much information, explains Anthony Rose of Seedlegals

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