People have the understandable yet incorrect belief that a Series A round is the first fundraising round that a startup undergoes since it contains the first letter of the alphabet. However, before a company even gets to that point, it will usually receive seed funding and/or have the backing of one or more angel investors. It is only after the business has been operating for a bit and demonstrated real potential that it normally takes the next step and goes through a Series A round.
Thus, even if your startup crafted an amazing pitch to obtain seed funding, a whole new presentation will be needed for the next round. It is important for the information conveyed to correspond with the expectations of investors normally involved in a Series A round. Here are some of the main topics that the pitch deck should address and that anyone delivering the pitch must be prepared to discuss:
Sustainable Business Model
When seeking seed funding, a startup obviously has to explain its business model, but at that point, it has not been tested. Granted, initial funders and angel investors will want to see a realistic model that is bound to work, but even the most well-laid plans sometimes falter. For a Series A rounding, on the other hand, the model must not only appear workable, there must be apparent indications that it has been working and is sustainable. Investors will not participate in a Series A round unless the startup seeking funding can essentially prove that it has already begun to forge a strong path forward.
And, with so many startups focusing on service-oriented enterprises, it is critical to make it completely clear how the company can and will generate revenue. In addition, the business model must be applicable over the long-term, or there needs to be an explanation of how the company will be able to adapt it to changing circumstances. Basically, the pitch deck has to go beyond demonstrating that the company has a really great idea and actually show how that great idea has been panning out and how it will continue to do so at the same or even a more rapid pace.
Growth Potential and Market Conditions
The business model and financial piece are obviously of paramount importance during any fundraising round. However, for a Series A round, given that the company seeking funding has likely been in operation for a year or more, there must be clear cut evidence that the company has growth potential. This means providing information on things like the current and potential client base, an assessment of demand for the particular good or service, any new risks that have been identified and how the company intends to mitigate them, and expansion opportunities, both product-wise and market-wise.
For this part of the deck, it is important to use concrete facts and figures and not just make lofty assertions. Clearly, during seed and angel funding, a lot of the growth potential that is touted is purely speculative. In this phase, however, the statistics, equations, and projections that have been calculated and evaluated should be explained with easy to understand charts and graphics, as throwing around numbers can make the presentation seem jumbled and confusing. In this type of fundraising round, the investors need to be wowed by the idea, the progress thus far, and the stats that make it all seem like a good bet.
Hopefully, if a company finds itself in need of an infusion of cash, it is due to the fact that it has identified opportunities that it cannot explore without the appropriate financial resources to scale the business. But, identifying an opportunity to scale a product or service across different sectors or geographical regions will not be enough to convince investors to lay out the cash for this attempted endeavor. A company must show that it has already done some of the groundwork prior to seeking the funding, such as investigating any applicable rules and regulations if it plans to expand to a new state and making connections with potential partners if it intends to enter new markets.
The business will not only need financial backing to scale a business, it must have leaders with the knowledge and skills to make the expansion both possible and successful. If a company tries to grow too fast without the requisite infrastructure, no amount of money can rectify that shortcoming. Thus, the pitch presentation must include some information on the company leaders’ backgrounds, along with its plans to scale and who will be able to oversee which facets of the expansion process.
Fundraising is exciting and exasperating irrespective of where a company is in the process, but a Series A round is particularly important because it is the first step a company must take on what is hopefully a long and prosperous road. As a result, the company’s pitch presentation and the accompanying slide deck have to knock the socks off of prospective investors with plenty of tangible examples of the company’s past, present, and future successes.