What a seed round is and discusses how to create an effective pitch deck to secure funding from investors during this initial financing stage.
What a seed round is and discusses how to create an effective pitch deck to secure funding from investors during this initial financing stage. It covers typical seed round valuations and the distinction between seed and Series A rounds.
Hello, everyone. This is Alejandro Cremades, and today we’re going to be talking about the best pitch decks for Seed Rounds. Before we get started, make sure that you hit that Subscribe button, and this way, you will never miss out on any of the videos that we roll out every week. Seed Rounds of financing are essential. They are the very first round of financing that you’re going to be getting for your startup, from outside capital, from investors. In today’s video, we’re going to be breaking it down for you so that you get a good understanding as to what is going to be the pitch deck that you’re going to require to put together to come out with a bang, to convince those investors and to get that money in the bank. So, without further ado, let’s get into it. First and foremost, what are seed rounds? Seed rounds are any round of financing before a Series A. Series A rounds are, in a
sense, the very first institutional round that you’re going to be doing with your business when you have venture capital firms, private equity firms investing. Anything before that is a seed round. It doesn’t matter if it’s pre-seed or micro-seed; it’s still a seed round. Seed rounds typically go anywhere from $250,000 all the way up to $2 million, and the valuation is all over the place where you’re going to sometimes have an equity round, where you’re pricing the round, and that could be anywhere between $3 million all the way to $10 million. In essence, what you’re doing, and what many people are doing, is using a convertible note or a safe note, which is taking the money in some form of debt that would convert later on into equity ownership. That’s, essentially, a seed round. Now, in a seed round, typically, the investor is going to be more interested in the founding team in the
roadmap that you have. It’s not so much about historicals, what you’re doing, and where you’re coming from. It’s all about the future, and it’s about possibilities. That’s what you want to capture in the essence of your story and also in the pitch deck when you are putting it together for your seed round. The investors that you’re going to go after when we are thinking about a seed round and who those investors are who are going to be reviewing your pitch deck. And, by the way, when it comes to pitch decks, you should download, below, the pitch deck template that entrepreneurs are using all over the world to raise millions so that you don’t start from scratch. In essence, the investors that you’re going to go after are going to be angel investors. Those are individuals that are senior executives that qualify as accredited investors. That is someone who is making over $300,000 a year,
with their spouse, or that has, without counting their residence, $1 million in assets. That’s typically in the U.S. Otherwise, the investor can’t invest in the company; he’s not an accredited investor. The other ones that are going to be investing at a Seed Stage could be angel groups, which is a collective group of people. There are some of those former groups like the Houston Angel Network, the New York Angels. Those are angel groups that invest in Seed Stage companies. The other ones that you’re going to go after are venture capital firms and micro-venture capital firms. Typically, my recommendation is that you shy away from venture capital firms at a Seed Stage because you still don’t have the wheel already turning, that wheel that venture capital firms like. So, if you need to pivot the business to adjust to whatever the market is telling you, you may run into the problem that it
could be a turnoff for that venture capital firm, and if they don’t reinvest in your next round, then that is going to send a negative signal to the market, and that could leave you to die. So, that’s why I always try to recommend to shy away from those institutionals, from those VCs, and perhaps go more the individual route, where they’re going to be more flexible, and they’re going to be more understanding in the event that you need to change your business model. Typically, the money that you’re raising from a Seed Stage financing round is going to be allocated for hiring more employees, more team members to get that leadership in place. And then also to create the minimum viable product, what is called the MVP. That could be for creating your product, for creating your service, but that prototype that you want to put over on the market so that you can start to get some validation and
some feedback from customers and potential customers that you can use in order to optimize whatever you’re doing that is going to get you to the next round of financing, which is the Series A, which could happen 18 to 24 months from the time that you close your seed round. Seed Stage pitch decks ultimately could be seen as a brochure. They’re going to be between 15 to 25 slides, and that’s it. Obviously, you want to have the right type of flow, the right type of structure and in a way which is compelling, so it needs to be gradually getting the investor excited. You don’t want to start with a bang at the beginning because then it’s going downhill from there. It’s like a story that you’re sharing that ends with a very powerful end that is going to trigger more meetings, or that is going to trigger more questions because, at the end of the day, more questions that you get to address, more
concerns that you’re also able to put out of the way. When there are no concerns is when the money is in the bank, and that’s why and what you want to go after. Next is gathering all your data. Before you even go into preparing the pitch deck, you want to gather all the data; you want to understand what will be those key pieces of information that you’re going to be including in your presentation, whether it’s metrics, whether it’s milestones, but you need to have those in a way that they’re accurate and in a way that you could validate those whenever the investor is asking you. Or you need to go into due diligence, which is validating whatever claims that you’re making. Now before you’re even sending your pitch deck or even thinking about the pitch deck, you want to understand who those investors are going to be. Typically, the investors that you’re going to go after, you’re going to do
so because they are checking the mark on the investment thesis that goes with your opportunity, whether it is your geographic location, where you’re located. So, obviously, if you’re in Europe, you’re not going to go after investors that are investing in the U.S. Also, the other thing that you’re going to go after is your segment. If you’re in healthcare, you’re not going to go after investors that are investing in fintech. The next is the financing cycle. If you’re going after seed-stage investors, depending on your ticket size and valuation, you’re not going to go after Series A or Series B financing rounds type of investors because it’s going to be outside of their investment thesis and mentality. Again, you want to make sure that you’re gathering that list, those people that you’re going to go after, and you can use tools, as I have mentioned many times, like Crunchbase, Mattermark,
and PitchBook. Next, you want to choose how you want to design your pitch deck. You definitely want to use a nice balance between visuals as well as text because when it’s too texty, it’s going to be overwhelming for the investor. Remember, investors only spend two minutes and 41 seconds (2:41) reviewing those pitch decks based on data. That’s it. They’re literally skimming through the presentation, so you need to put the presentation in a way in which the flow is super nice when you’re skimming through it, and right away, they’re going to get what you’re doing. That’s why, as they say: an image or a visual could be worth a million words. There are many principles that identify and define a super-successful pitch deck. For example, on our Inner Circle, which is the fundraising training, where we help from A to Z with raising capital, you would see in there—and, by the way, you can see it
on the link below this program. In essence, you can see there some of the successful pitch decks of startups today that went IPO, where, back in the day, they were doing their seed round, their Series A, as great examples that you could use as a form of inspiration. In any case, the key factors to keep in mind that determine the success of a raise based on your pitch deck are the following: Simplicity Clarity Demonstrating Focus Establishing Credibility and Capability Conveying the Attractiveness and Fit of the Investment Compelling Real Action In terms of structure, you need to nail it! And the structure of your pitch deck, the one that you want to follow, is going to be the following: The Cover Slide: Which is where you put your contact information or where you put a super beautiful picture of what you’re doing. The Problem Slide: Listing what you’re facing. The Solution Slide: What
you’re…