Show Me The Money – The Question Early Stage Fund Seekers Are Afraid to Ask
“Fundraising is the gentle art of teaching the joy of giving.” Quote from Henry A. Rosso – fund raising master
Over a long Holiday weekend, I had the chance to read through and comment on a handful of pitch decks. It may have been my good mood, but I really think the quality of these decks is getting better especially as it relates to early stage fundraisers including most of the basic components of a solid deck. There are plenty of guides out there to show what the contents of a deck should be – – in fact we have a good one at our Withum website if you just go to www.withum.com and search for “pitch deck.” So as Mona Lisa Vito from My Cousin Vinny would say, “So, what’s the problem?”
Despite the better quality, I was amazed to see that except for one deck, there was reluctance for these companies to address the “proverbial elephant in the room” – – namely stating how much money they are looking for and how they are going to use it. It appears to be like the fear of asking someone out on that first date.
So for our fundraising friends out there, here are five simple Dos and Don’ts when it comes to covering the “ask” in pitches:
- Do tell investors how much money you are looking for. Be clear about how much and how you are willing to layer rounds in, say as you achieve certain milestones.
- Do support this amount with summary (and detail if requested) calculations including a reasonable reconciliation to your basic cash flow. Provide a summary phrase that is descriptive of each major goal. A phrase like “develop a mobile app” is more helpful than “ramp up operations.”
- Do indicate to investors your flexibility as to form of investment. If you are comfortable with convertible notes, or SAFE documents or prefer a straight common stock investment, help guide a potential investor.
- Don’t show funds will be used to settle old debts or for significant owner salaries. Paying off old problems like existing debt or back pay does not move a business forward. Setting aside an amount for some minimum salary / payment to owners for their survival is not fatal but it probably helps if this can be avoided.
- Don’t imply this amount of funds is all you will need unless your projections clearly indicate this to be the case. Nobody likes the gift that keeps on giving. It is a frustration for investors and it is better to state upfront where you expect to be once the money is spent and how you will be positioned for the next stage of your growth.
The punchline here is not to forget the punchline. Just think about telling a long story and leaving that all important ending out. Listeners will look at you quizzically – – they expect – – in fact they demand you bring the story to a close. It is the same with your pitch deck. Potential investors want to know the punchline – – what do you need and how are you going to use it? Teach them the joy of giving.
