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From Lab to Venture: Pitch Deck Essentials for Deep Tech Startups | Deep Tech Catalyst

A chat with Carlotta Ficorella, Investment Analyst @ Matterwave Ventures

How do you build a compelling pitch deck for a DeepTech startup? And what aspects do VCs prioritize and look for? 🤔 🎯

Welcome to the 31st episode of Deep Tech Catalyst, the channel by

where science meets venture!

Today, I'm excited to host Carlotta Ficorella, Investment Analyst @ Matterwave Ventures!

In our conversation, we explore the essential elements of crafting a compelling pitch deck for DeepTech startups. We focus on the critical aspects of a startup journey, emphasizing how to highlight strengths (including design), and most importantly, offering insights into what investors prioritize when they first review a pitch deck.

Here's a summary of the episode:

  • 🧗‍♀️ Crafting a Compelling Pitch Deck for Investors

  • 🍰 Tips for Market Sizing

  • 💼 Business Models: Hardware vs. Software Expectations

  • 🤝 The Importance of the Team Slide

  • 🎯 The Ask Slide

  • 🎨 Make it Readable: Communication and Design

🎧 Prefer to Listen?


🧗‍♀️ Crafting a Compelling Pitch Deck for Investors

For scientists aspiring to become entrepreneurs, understanding how to effectively pitch your startup to investors is crucial. Analysts often review numerous pitch decks in venture funds and prioritize clarity and focus right from the start.

Here's what to focus on first:

  1. Clear Problem Statement: What exact problem does your startup aim to solve?

  2. Proposed Solution: How does your solution address this problem effectively?

  3. Unique Value Proposition: Does your startup have intellectual property (IP)? If so, who owns it? This is especially relevant if your venture is a spin-off from a university.

  4. Target Customers and Market Position: Who are your potential customers, and where does your technology fit within the industrial value chain?

This segment typically includes a deep dive into the technology and product, outlining how it differentiates from existing solutions.

Understanding the Competitive Landscape

Including a competitive analysis early in your pitch helps set the stage for how your solution stands out. This overview should answer 2 key questions:

  • What are your main competitors and their offerings?

  • How your technology or solution is superior or different?

🍰 Tips for Market Sizing

Market analysis and validation can be intimidating, particularly for Deep Tech founders with a scientific background.

However, the market size slide is crucial in the investment decision-making process, providing key insights into your startup's potential growth and revenue capabilities.

Having already covered the basics of market sizing in a previous episode, we're now taking a different angle. Here are some tips to enhance your understanding of the VC's perspective as they review this slide.

Where to Find Reliable Market Data for Estimating a TAM?

The first number that VCs often look at is the TAM. However, coming from a scientific background, it may not be intuitive to understand where to find basic information about a specific industry. Here are 2 helpful approaches:

1. Online Industry Reports

A straightforward approach to gauging market potential is by accessing reports from prominent consulting firms. These organizations often produce detailed, research-based insights about market growth and trends. Although comprehensive reports can be expensive, summaries are typically available for free and can provide a substantial amount of useful information. However, if several reports from different reputable sources converge on similar figures for market size, you can consider these estimates reliable.

2. Engaging with Industry Leaders

Direct interaction with industry leaders can be invaluable. These professionals can verify the accuracy of your market analysis. Their insights ensure that your assumptions are grounded in industry realities, enhancing the credibility of your projections.

Estimating SAM and SOM

Understanding your customers and identifying your target market segment are crucial steps in estimating your SAM and SOM.

in simple terms, if you know your customer base and your business model, you can estimate how many potential customers are in your target area. However, treat these numbers with caution, as market estimates can be inherently uncertain.

Assessing SAM and SOM effectively can be challenging, especially when trying to quantify a market's potential realistically. However, a well-defined and substantiated SOM can significantly increase investor confidence, demonstrating that the founders have a clear and achievable vision for penetrating a specific market niche.

💼 Business Models: Hardware vs Software Expectations

Navigating the different expectations for revenue generation in B2B software versus hardware startups is essential for tailoring your business strategy effectively. Here, we explore what investors typically look for in each type and why these expectations differ.

  1. Software Companies:
    For B2B software companies, generating revenue early in the company's lifecycle is often expected. The business model usually involves lower overhead costs, as these companies do not require physical plants or large teams. Revenue often comes from subscription services or one-time payments, making the financial model relatively straightforward.

  2. Hardware Companies:
    The situation for hardware startups is more complex and varies greatly depending on the product and market. Hardware companies are generally more capital-intensive and may require significant initial investment for production facilities. These companies often need larger teams and physical spaces to manufacture their products. Given these complexities, generating early revenue is less straightforward, and investors might not expect it as soon.

The Role of Letters of Intent (LOIs)

For hardware companies in particular, LOIs serve as a crucial indicator of market interest and can be a valuable asset when pitching to investors. These documents demonstrate that potential customers have a genuine interest in the product, which can help compensate for the lack of early revenue.

The Business Model Slide

In your pitch deck, the business model slide should clearly articulate the differences between software and hardware business models:

  1. Software Business Model:
    Typically less complex, focusing on software delivery through subscriptions or single purchases. This model benefits from lower startup costs and often faster scalability.

  2. Hardware Business Model:
    Usually involves detailed planning for production, including potential partnerships or licensing agreements for manufacturing. The financial plan should outline the required capital expenditure and provide a roadmap for scaling production.

What Investors Look for in a Business Model

Investors want to see a clear, reasonable plan that outlines how your business will evolve. For software startups, this might mean detailing how the product will develop and capture market share through subscription models. For hardware startups, it involves a comprehensive financial and operational strategy to manage the higher costs and complexities of production.

🤝 The Importance of the Team Slide

In the realm of venture capital, the team behind a startup is often as critical as the innovation itself. This is particularly true in Deep Tech, where the complexity of the products demands a skilled and knowledgeable team. Here, we delve into what makes a compelling team slide and the significant role advisors play in bolstering the startup's credibility and appeal.

Crafting an Effective Team Slide

When investors reach the team slide of a pitch deck, they are looking to connect with the people behind the project. This slide should not only introduce the founders and key team members but also highlight their credentials, which is crucial in fields that depend heavily on specialist knowledge.

Here’s what should be included:

  1. Academic and Professional Backgrounds: Especially in Deep Tech, a strong academic background, such as a PhD or extensive industry experience, can significantly enhance the team's appeal. This showcases their depth of knowledge and capability to drive a technically complex venture.

  2. Role of Advisors: Advisors often can play a pivotal role in Deep Tech startups. If the startup is spun out from a university, advisors might include professors who contribute their expertise to the scientific and technological aspects of the business. Industry experts might serve as advisors too, offering valuable insights into market dynamics and sales strategies.

🎯 The Ask Slide

The 'ask' slide is a fundamental part of any pitch deck, outlining how much capital the startup seeks to raise and its implications for the company's capital structure. Here’s how to construct this slide effectively and what investors look for to consider an investment opportunity viable.

Detailing the Capital Requirement

Key Elements to Include:

  1. Funding Amount: Clearly state how much money you are raising. This figure should align with your company's current stage and projected needs.

  2. Usage of Funds: Provide a detailed breakdown of how you will use the funds. This might include product development, market expansion, staffing, and other operational expenses.

Don’t Overlook the Cap Table Dynamics

Cap Table Overview: Including a summary of your cap table in the ask slide is beneficial. It helps investors understand:

  • The percentage of equity held by founders, which should ideally be a majority to ensure that they remain motivated and have significant skin in the game.

  • The equity held by other stakeholders, including early investors and advisors.

Ideal Equity Distribution:

  • Seed Stage: Founders should hold more than 50% of the equity. Ideally, around 60-80% of equity remaining with the founders is considered healthy.

  • Series A and Beyond: It's natural for founder equity to dilute further, but maintaining significant ownership is critical to demonstrate ongoing commitment and control.

Dealing with University Equity in Spin-offs

The involvement of universities in the equity structure of spin-offs can be complex. Ideally, universities should not hold a significant portion of the equity. Excessive university ownership can complicate future funding rounds and strategic decisions.

Licensing Arrangements: In cases where the university retains IP rights, establishing clear licensing agreements that do not overly burden the company is preferable. Investors are generally wary of heavy university involvement in the cap table, preferring less than 10% ownership to ensure that the startup has sufficient autonomy.

To Recap the Investor’s Perspective:

  • Investors look for well-justified asks that align with realistic market and operational plans.

  • Over-diluted founder equity and complicated cap tables, especially at early stages, can be significant red flags, indicating potential mismanagement or unfavorable early agreements.

  • Asks that significantly undervalue the company or suggest unrealistic scaling plans relative to the industry standards (e.g., a hardware company asking for too little funding to realistically achieve production goals).

🎨 Make it Readable: Communication and Design

As Deep Tech entrepreneurs seek to make a strong impression on potential investors, the quality and clarity of their pitch deck become paramount. This final part of our discussion explores effective communication strategies and the design elements that can help your pitch stand out in a crowded field.

Tips for Pitch Deck Design

  • Visual and Structural Design: Given the volume of pitch decks that venture capitalists review, a well-designed pitch deck can significantly influence their initial impression. The design of the slides should facilitate quick comprehension and engagement, ensuring that your technology and business model are clearly communicated. If design is not your strength, it may be wise to invest in professional help to ensure that your deck is visually appealing and effectively organized.

  • Clarity and Simplicity: The language used in your pitch deck should be straightforward and jargon-free. Remember, the first reviewer of your pitch deck might not be an expert in your field. A good test is to show your deck to friends or family; if they can understand your business model and value proposition, you’ve likely achieved the necessary clarity.

Material and Formats

Initial Contact:

  • Short Pitch Decks: A concise, visually engaging pitch deck of around 10 slides is optimal for first contacts. It should succinctly tell the story of your venture, from the problem and solution to your business model and ask.

Deep Dives and Detailed Discussions:

  • Extended Pitch Decks: For deeper discussions, a more comprehensive deck (around 30 slides) may be appropriate. This version should include detailed analyses, such as market dynamics, competitive landscape, financial projections, and technical explanations.

In Conclusion

The effort and resources dedicated to your pitch deck's design and clarity are not just about aesthetics but about effectively communicating your vision. A well-crafted pitch deck not only captures the attention of potential investors but also demonstrates your professionalism and seriousness about your venture. By prioritizing these elements, you can increase your chances of standing out in a competitive funding landscape.

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Get practical insights from cutting-edge tech innovations to the most significant startups and capital moves to stay ahead, and seize new market opportunities.

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