This is part one of "The Ultimate Pitch Deck Guide for Startups," a fundraising guide made in partnership with DECKO, a leading pitch deck development company that’s helped ~180 startups raise over $100M from investors.

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Before you begin working on your pitch deck (and waste valuable time developing slides that don't make an impact), you must have a clear understanding of the audience of investors you are targeting and how they make decisions. Understanding your investors and their decision-making processes can turn your deck from another rejected pitch in their inbox to the driving force behind a successful fundraising round.

Investment decision-making processes vary significantly among different types of investors. Venture Capital Firms may have investment committees and formal processes that require extensive due diligence and data. Angel Investors, on the other hand, often make decisions based on their gut feeling and personal relationship with the entrepreneur. Corporate/Strategic Investors may be more interested in how your product fits into their larger company objectives. Recognizing these differences can help you adequately prepare and provide the right information at the appropriate level of detail.

In this blog post, we will delve deep into the world of Angel Investors, Early-Stage Venture Capital Firms, Late-Stage Venture Capital Firms, and Corporate/Strategic Investors. We will explore their unique characteristics, decision-making processes, and the elements you should emphasize in your pitch deck to appeal to them.

This is part one of our blog series "The Ultimate Pitch Deck Guide for Startups," a collaborative project between DECKO and The Pitch. Our aim is to help entrepreneurs understand the intricate details of creating pitch decks that drive successful fundraising outcomes.

Angel Investors

Angel Investors are individuals with disposable income to invest. According to the Angel Capital Association, approximately 300,000 Americans have made an angel investment in the last two years. However, around 4,000,000 Americans are legally qualified as Accredited Investors, which means they can still invest in your company even if they haven't invested in any startup to date. So, your company could very likely become their first angel investment.

Angel Investors invest across stages, but their check sizes are not large ($15,000 - $250,000). Therefore, they typically go direct on Pre-Seed to Series A deals and then participate in Special Purpose Vehicles, which are entities that exist specifically to invest in one company by combining multiple small checks into one larger check, for Series B+ opportunities.

How Angel Investors Make Decisions

Since they invest with their own money, Angel Investors have no mandate or timeline to invest in companies. Unlike professional investors, Angel Investors are not likely choosing between investing in your company or another in your space. Instead, they are more likely deciding whether to invest in your company or use the funds for personal financial decisions, such as going on vacation with their family, buying a new car, or making a down payment on a new home.

While Angel Investors seek substantial returns like any other investor, they also develop personal relationships with the companies they invest in and often require lighter due diligence. Their decisions are based on their connection with the team, product, or market the company is operating in.

Angel Investors are social creatures at their core. They often make investment decisions by collaborating with others and actively promote the companies they invest in to potential customers, other investors, and anyone else who will listen. 

Many invest together in groups known as Angel Groups, where companies present to large numbers of Angel Investors simultaneously. They discuss among themselves, sharing their perspectives from their own experiences, and make individual investment decisions.

Some Angel Investors make investment decisions themselves, sometimes even committing to invest in the company after 1-2 meetings.

The most important thing to know about Angel Investors is that each one is unique, and they must have a personal relationship with the company you are building.

What to Focus on in Your Pitch Deck for Angels

Since these investors are under no pressure to invest in any specific deal and understand that they don't have the same due diligence resources as institutional investors, your deck should strike an emotional chord with the investor while providing as much credibility to your company as possible.

To establish an emotional connection, use your deck to let the investor experience your product. Include plenty of product images, links to demos, customer testimonials, and anything else that can make your product feel as real as possible. Additionally, emphasize your company's mission and the problem you aim to solve. If an Angel Investor feels personally connected to your mission and understands how they can support it, they will be more likely to invest.

To establish credibility, metrics and logos are your best friends. Do you have strong revenue growth, monthly active users, retention, margins, and other relevant data? Great! Make sure to include those wherever possible. Numbers are difficult to challenge and, when used correctly, can tell an exciting and bulletproof story about your company. 

Additionally, if you have existing partnerships or institutional investors, be sure to include their logos throughout your deck - typically in your summary slide, team slide, and fundraising priorities slide. When Angel Investors see that venture capital funds and established companies with more due diligence resources have chosen to be involved with your company, they will feel much more comfortable and excited about getting involved as well.

Early-Stage (Pre-Seed to Series A) and Late-Stage (Series B+) Venture Capital Firms

Who They Are and How They Make Money

Early-Stage and Late-Stage Venture Capital Firms have similarities in structure but differ significantly in what matters to them and how you should tailor your pitch deck for each. Understanding the fundamentals of how these firms are structured is important because it plays a key role in their expectations of your company.

Venture Capital Firms are professional investment firms that raise money from Limited Partners, such as High Net-Worth Individuals, Family Offices, Pension Funds, Endowments, and large Corporations. They use this capital to invest in startups. These firms operate on a "2 & 20" model, where they receive 2% of the total fund size each year for operational expenses and 20% of the fund's profits.

Naturally, venture capital fund managers are highly motivated to return a profit to their Limited Partners due to this compensation structure. However, most startups fail, and the successful ones need to compensate for the losses incurred by the failed ones. Therefore, your company must not only be successful on its own but also successful enough to make up for the fund's losses and provide a profit to the Limited Partners.

Both Early-Stage and Late-Stage Venture Capital Firms typically invest based on a mandate, which consists of a set of rules guiding their investment decisions, including company stage, industry, team characteristics, and accordance with the firm's investment thesis. They are often legally obligated to invest exclusively within their mandate, so if your company does not fit their fund's mandate, they are unlikely to invest.

Additionally, both Early-Stage and Late-Stage Venture Capital Firms have formal due diligence and investment processes. Analysts, Associates, and Principals use your pitch deck as a starting point for due diligence and investment memos. They may even directly incorporate information from your materials into their memos. These memos are then presented to the fund's General Partners and/or Investment Committee for review. If approved, the Venture Capital Firm will provide funding to your company.

What Matters to an Early-Stage Venture Capital Firm

While Early-Stage Venture Capital Firms conduct formal due diligence and generate investment memos, they are aware that the deals they review often involve highly unproven companies. Some companies may only have a founder with an idea and no product in the market. Early-Stage firms write smaller checks compared to Late-Stage firms, but they invest in a larger number of companies. They also reserve some of their fund's capital to further invest in the successful companies in their portfolio as they continue to grow.

The main characteristic Early-Stage Venture Capital Firms look for is Early Signal, which refers to early data that suggests a high likelihood of your company succeeding and providing a substantial return to the fund. Early Signal can include important indicators such as revenue, intellectual property, users, partners, co-investors, and team members. Early-Stage investors use this information, along with your strategy, to form their own opinion about how your company will evolve over time and whether it will deliver significant returns.

In addition to investing, Early-Stage Venture Capital Firms are highly focused on company-building. They make introductions to potential customers, key team members, press, partners, co-investors in the current round, and larger investors for future funding rounds. Some firms even highlight how they support startups through company-building in their investor materials for Limited Partners.

If an Early-Stage Venture Capital Firm believes that your company has a strong market signal and that they can actively support your company's growth, they are likely to invest. It is crucial to emphasize any early proof you have that your company is likely to succeed and provide an exceptional return. Since you are competing for investment dollars against companies that may not have a product in the market yet, information such as revenue, users, intellectual property, notable investors, and partners will set you apart from the competition.

Additionally, if your team has a track record of building and exiting successful businesses, be sure to prominently feature that information. Past successes serve as strong indicators of future success for Early-Stage Venture Capital Firms. 

Lastly, provide ample information about your market. Early-Stage investors conduct extensive research into market size, growth potential, competitors, and exit activity. Remember, Venture Capital firms rely on successful portfolio companies to compensate for losses incurred by unsuccessful ones, so you need to demonstrate to investors that your company has the potential to become significantly large and deliver substantial returns.

What Matters to a Late-Stage Venture Capital Firm

Late-Stage investors are primarily focused on how the M&A and IPO markets will perceive your business, as your company is presumed to be more mature at this stage. After a company goes public, private investors face a lock-up period of approximately six months, during which they cannot sell their shares. This period exposes private investors to potential losses if public market investors believe that the company was overvalued, leading to a decline in stock price.

Late-Stage Venture Capital Firms conduct thorough due diligence on the companies they invest in and expect these companies to have an extensive amount of data available for review. They delve into specific details such as margins, path to profitability, user retention/churn, revenue stream diversity, and more.

Rather than focusing on company-building, Late-Stage Venture Capital Firms aim to position companies for successful exits. They achieve this by making introductions to investment banks and corporate development/M&A teams at larger companies. Additionally, they assess the IPO and M&A markets and share their findings with their portfolio companies, enabling them to adjust their strategies accordingly.

If a Late-Stage Venture Capital Firm sees the potential for a successful exit within their target Liquidity/Investment Horizon (the expected timeframe for the company to go public or be acquired by a larger business), they are likely to invest.

How to Tailor Your Pitch Deck for Early-Stage Venture Capital Firms

When pitching to Early-Stage Venture Capital Firms, it is crucial to focus on providing evidence that your company is poised to succeed and deliver substantial returns. Since you are competing against companies that may not have products live in their respective markets, highlighting key information such as revenue, user metrics, intellectual property, notable investors, and strategic partnerships will help differentiate you from the competition.

Furthermore, prominently showcase any relevant experience your team has in building and exiting businesses. Past successes serve as strong indicators of future success, particularly for Early-Stage Venture Capital Firms.

Lastly, ensure that your pitch deck includes comprehensive information about your target market. Early-Stage investors conduct extensive research into market size, growth potential, competitors, and exit activity. Remember, Venture Capital firms rely on successful portfolio companies to compensate for losses incurred by unsuccessful ones. Therefore, it is crucial to demonstrate to investors that your company has the potential to become a significant player in the market and deliver substantial returns.

How to Tailor Your Pitch Deck for Late-Stage Venture Capital Firms

By this stage, your company should have a clear understanding of its customers and an established business. Late-Stage investors are less concerned about whether your company will fail and more focused on how the M&A and IPO markets will perceive your business.

Late-Stage Venture Capital Firms conduct extensive due diligence and expect companies to provide a wealth of data for review. They delve into details such as cost of goods sold (COGS), operating margins, customer relationships, user retention/churn, team composition, and path to profitability. Additionally, provide a clear understanding of all your existing lines of business and how they work together, along with future revenue streams.

Lastly, include information on potential acquirers and successful IPOs from companies in related industries. This helps investors gain insights into how the M&A and IPO markets are likely to perceive your business. Tailoring your pitch deck to address these key points will resonate with Late-Stage Venture Capital Firms and demonstrate that you have a strategic plan for maximizing shareholder value and driving your company's future growth.

Corporate/Strategic Investors

Corporate/ Strategic Investors are established companies that invest in startups to further their own company's objectives. These companies may invest directly from their corporate accounts or set up their own venture capital funds specifically for strategic investing. For example, Kellogg established 1894 Capital for their corporate/ strategic investments.

In addition to investing, Corporate/ Strategic Investors establish deep partnerships with the startups they invest in. They integrate their products, share distribution channels, engage in co-branded campaigns, and may even acquire the companies they invest in. Investment decisions within these companies are typically made by executives, corporate development teams, or dedicated corporate VC managers who act as liaisons between the startup and the larger company. In the past year alone, nearly 1,400 companies made strategic investments in over 5,700 deals.

How Corporate/Strategic Investors Make Decisions

Unlike most investors, Corporate/ Strategic Investors are less focused on financial returns and instead prioritize how the startup aligns with their larger company objectives. They spend more time establishing partnership plans with the startups they invest in. 

Their due diligence is primarily focused on the startup's components that serve their partnership plan, such as product, intellectual property, and distribution channels. If the Corporate/ Strategic Investor sees alignment with the startup's vision for the partnership, they are likely to invest.

What to Focus on in Your Pitch Deck for Corporates & Strategics

In your pitch deck, emphasize how your startup can work together with the established company. Highlight the components of your business that you believe can serve their company's needs, such as your product, distribution channels, target audience, intellectual property, and more. This will prompt them to conduct due diligence specifically on those aspects of your startup.

When developing your pitch deck for these investors, be cautious about sharing proprietary information before signing a non-disclosure agreement (NDA) and establishing a relationship built on trust. Some Corporate/ Strategic Investors may use the information they gather to develop their own internal competitors. Ethical Corporate/ Strategic Investors will be comfortable signing an NDA before delving deeper into due diligence with your company as a demonstration of good faith in their partnership with you.

BONUS: Family Offices

Family Offices are professional investment organizations that manage the capital of affluent individuals and/or their families. Family Offices combine elements from all three types of investors mentioned above. Since they are backed by one individual or family, their investment decisions may be driven by personal reasons similar to Angel Investors. 

Additionally, they often invest larger sums of money, comparable to Venture Capital Firms. Furthermore, the individuals or families behind these family offices may run established companies and can facilitate deep partnerships, similar to Corporate/ Strategic Investors.

Due to the mixed characteristics of Family Offices, it is essential to research and understand the specific Family Office before sharing your pitch deck. This will enable you to develop a tailored strategy and create the perfect pitch deck that aligns with their preferences and objectives.

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Now that you have a thorough grasp of the different investors you'll encounter along your fundraising journey, their decision-making processes, and what they seek in a pitch deck, you are fully prepared to embark on creating investor materials that powerfully captivate their attention.

Next week we'll drop part two of our guide to creating the perfect pitch deck: The Three Key Decks Every Founder Needs.