How To Impress Investors with A Flashback Pitch Deck [In 2019]
In their best-selling book Traction: How Any Startup Can Achieve Explosive Customer Growth, Gabriel Weinberg and Justin Mares write about the importance of traction:
Traction is the best way to improve your chances of startup success. Traction is a sign that something is working. If you charge for your product, it means customers are buying. If your product is free, it’s a growing user base. Traction is powerful. Technical, market, and team risks are easier to address with traction. Fund-raising, hiring, press, partnerships, and acquisitions all become much easier. In other words, traction trumps everything.
Traction is often the great differentiator for startups raising money. If investors compare a company with $1 million in ARR and a 15% month-over-month (MoM) growth rate vs. a company with $250,000 in ARR and a 12% month-over-month growth, all else being roughly equal, they’ll want to fund the first company every time.
When pitching investors, founders typically get one to two minutes to catch their attention. If you fail to pique the investor’s interest, he or she might tune out and make a snap judgment not to back your startup.
In light of this, you may have already guessed the most important question you should be asking: “How can you capture investors’ attention from the get-go?”
While founders start their pitches by stating the problem they’re solving or telling an interesting anecdote to highlight the pain point they are addressing, if a startup has significant traction for its stage, founders can use a “flashback technique” to pique investors’ interest.
To understand the flashback technique, think about a movie you’ve seen that starts with a flashback. The first couple of minutes of the movie offer a flashback to a critical scene, and the rest of the movie brings you back to that specific moment. The flashback hooks you and makes you want to see the movie to learn how the characters got to that point. Movies like Titanic and The Social Network use this technique to great effect.
And, if your startup has compelling traction, revenue, trials, customers, or other growth metrics, you can use the flashback technique to great effect as well.
Here’s how to incorporate it into your pitch:
Your deck’s first slide should be a cover slide that says your company name, your name, your contact information.
On your deck’s second slide, you’ll give away the ending of your pitch by incorporating a snapshot summary of all your most important points. If this summary is captivating, you’ll catch VCs’ attention and they’ll want to learn more. If it’s not compelling, then your business probably has bigger issues.
For this summary, you should include a one-line or less description of the key items from your deck, including things like…
Problem - your problem statement.
Solution - how your product solves the problem.
Total Addressable Market (TAM) - total number of potential customers multiplied by the cost of your product or other components of how you’ll make money.
Revenue/Trials/Traction - Annual recurring revenue (ARR), monthly recurring revenue (MRR), number of pilots or trials, growth rate, number of customers, number of users, or other relevant metrics.
Raising - The amount of money you’re raising and your intended use of funds specially focused on the goals you’ll achieve with this investment.
After providing investors with this flashback, you can launch into your normal pitch and tell them the full story from problem statement to long term vision.
Using a company that reduces prescription errors as an example, here’s what the text on that snapshot slide could look like:
Problem: 3% of prescriptions written for admitted hospital patients are in error. These errors cause patient harm and sometimes death
Solution: Big data analytics to identify prescriptions that deviate from the standard treatment spectrum.
Market Size: ~6,000 hospitals in the US. Annual Contract Value of $200,000. US TAM = $1.2B. Initial market: leading academic medical centers.
Traction: 3 hospitals using the product as customers. 6 hospitals trialing the product.
Raising: Raising $5M Series A to achieve $10M ARR in < 24 months
With a snapshot slide like the one outlined above, you’ve set the hook that will get investors to pay attention to the rest of your pitch. Most investors want to hear about what you’ve de-risked, your traction, how much you’re raising, and what milestones their investment will fund.
When you provide all of the compelling information in a condensed format up front, it will set you apart.
Plus, if you don’t give investors this information at the start of your pitch, they may think you’re trying to hide something. To this point, Andrew Ackerman, Managing Director of Dreamit Urbantech, has a great saying:
If I don’t hear about traction in the first few minutes of a pitch deck, I assume it’s because they don’t have any. Otherwise, why wouldn’t they tell me right away since it’s so critical?
Despite traction and the size of your next round being so important, many startups leave these items until the last 20% of their decks.
Don’t be like them. Instead, come out swinging so you pique investors’ interest and inform them about the critical points of your business upfront. Then, and only then, go into the full story.