By Edwin Maganjo, Verdant Frontiers Fintech Fund
Having been a founder for 10 years, I’ve pitched startup ideas to investors countless times. Looking back, I recall the frustration of not receiving a response after working hard on a deck and submitting it.
It is really interesting sitting on the other side of the table where I’m now reviewing decks as an investor. I can see areas that I could have addressed that would have heightened the chances of moving my deck further along due diligence pipelines.
At Verdant, we actually take the time to read every deck submitted to us and get back to the founders with specific feedback. To that end, I’ve compiled this list of tips to help founders heighten their odds of moving along the due diligence pipeline.
1. Know the thesis
Before submitting your deck, take the time to do a bit of research on the fund, which investment areas the fund is focused on, and why. It doesn’t matter how compelling or well-presented your concept is, if it’s off thesis, it will not get a second look.
2. Know your customer
A surprisingly few number of the decks I’ve reviewed contain in-depth target customer descriptions. “SMEs” or “Small holder farmers” are broad categories that can be split into tens (if not hundreds) of potential niches. Here’s a good example of a target customer description for reference:
HEADLINE: targeting 2,500, medium-sized, hardware retailers, located in lower income settlements in Kenya. Starting with 500 in Kawangware, Nairobi.
Description:
● Hardware retailers -> a type of SME
● Doing $50k - $100k in MRR -> a type of hardware retailer
● Located in Kawangware -> a type of the type of the type
My heart melts when I see detailed customer descriptions because this signals several key things about the founding team:
a. They’re likely to build a compelling MVP. The better you know your customer, the better you’ll understand their problems, and the more likely the odds that you will deliver a product they are willing to pay for.
b. They’re likely to understand distribution. The better you understand your customer, the more likely you will know their value chain and potential channel partners within it that can be leveraged to scale faster.
3. Know your TAM
I’ve written about this in another article, but as a VC in Africa, I’ve gradually come to the realization that TAM numbers are not the most reliable in terms of communicating a business’ upside. Africa and her countries are highly fragmented culturally, behaviorally, etc., so stating that there are 20m farmers in your market doesn’t hold as much weight as sub segments within that cluster that the wider number is not addressing.
I think what’s a lot more useful is something we at Verdant call Channel Driven Market Sizing. This is an exercise where founders derive their market size from the cumulative access that various distribution channel partners give them to a specific customer segment.
This approach kills two birds with one stone because:
a. It provides a starting point when it’s time to scale
b. It provides a more accurate market size number, aligning mine and the founders’ expectations
4. Know your distribution
A large number of the decks I review share percentage-based growth projections or make claims about the revenue to be generated by a pre-determined date. The challenge I have with these projections is that they don’t tell me how the business will go about achieving that growth.
Here’s where channel partners come in. A channel partner is essentially an organization that serves your target customer, which stands to gain monetarily from giving you access to that target customer.
It is very encouraging to see founders who have taken time to identify and validate potential channel partners. This gives much needed substance to the growth projections we typically come across.
5. Know your unit economics
At their core, unit economics display whether or not the business can scale profitably. I can’t help but smile when I see a clean and clear unit economics slide. It gives me the impression that if I pour X dollars into this business, I can expect Y return. It is hard to credibly arrive at such a level of simplicity.
A lot of excellent content has been written on the topic, so I’ll be brief. At a high level, there are largely two things you’re looking to communicate in your unit economics slide:
a. How much it costs to acquire a new customer (i.e. CAC - Customer Acquisition Cost)
b. How much you expect to make from the customer before they churn (i.e. LTV - Lifetime Value)
For early-stage startups, calculating LTV can be moot as there is not sufficient data to determine how long you expect customers to stick around. That said, I do appreciate seeing a breakdown of your monthly net revenue/user. This figure is useful because with it, I can calculate your payback period and this allows for an early sense check of your model → the shorter the payback period, the healthier the model and vice versa.
Monthly Net Revenue per User / CAC = Payback Period (Months)
6. Clean deck + clear storytelling
Deck review fatigue is real. The more work I have to do to understand your business, the less it communicates that you understand your business. I can’t quite explain it, but there’s a confidence in founding teams that simple decks help to build. Some principles to observe:
a. One big idea per slide - avoid packing tons of information into a single slide.
b. Make it look nice - if design isn’t your forte, use platforms like Pitch and Canva to design your presentation.
c. Get feedback from friendlies - ask a known investor or founder to share feedback on your material before sending it.
d. Sleep on it - wait a couple of days before sending it. I’ve often found that a deck I was super impressed with on Monday looks “meh” on Wednesday. Take time to optimize your material before sending it.
e. Cover the key topics - generally we expect to see the key topics listed below in your material. As it is a competitive process, failure to cover one or more of the areas below may be sufficient to disqualify you from further consideration.
Topic | Tip |
Founding team | If you’ve had previous startup experience, talk about that. Also, keep it short - a sentence or two is sufficient. |
Customer | The more specific the target audience, the better. |
Problem | The less generic, the better. We come across a lot of “SME credit gap-esque” problem statements. A hack to sounding more authentic at this level is having a narrow customer segment. The narrower the segment, the more focused your problem description sounds. |
Solution | Keep it simple. Multi-layered solution offerings at an early stage are tricky to pull off and can communicate a lack of experience. Also, we generally tend to frown upon startups looking to raise capital to build a tech platform for a market for which they are yet to validate demand. |
Business model | Present your unit economics! |
Traction | Don’t be shy about showcasing small numbers. As it is an early-stage investment, what we’re mostly looking for is demand validation and not huge revenue numbers. Conversely, don’t lie. We can see through numbers that don’t make sense, and it’s hard to come back from a dishonest deck. |
Channel Driven Market Size (CDMS) | I’ve talked about this concept in other articles. Swap the massive TAM numbers for realistic, Channel Driven Market Size numbers. The Channel Driven Market Size (CDMS) figure is the cumulative value of the ARR derived from potential distribution channel partners. |
Competition | Include non-tech competition in your landscape analysis. In Africa, manual workarounds (pen & paper, Excel, WhatsApp groups, etc.) are typically your largest competitor. Yet I very rarely come across decks that showcase these. |
Ask | Present a fair valuation. Now, I know “fair” is subjective, but I can’t tell you how many pre-revenue decks I come across with valuations > $5m. Sense check your valuation with a friendly investor or founder before submitting it. |
Conclusion
I’ve raised >$1.5m in my career and something that’s worked well for me in the past is raising smaller amounts tied to certain objectives. I know this isn't a popular view, but I’ve found this approach helps build rapport with investors who over time get comfortable writing larger checks as they observe my team and myself executing. It has also kept me on my toes and laser-focused on profitability.
Sometimes, the thing sitting between you and a successful fundraise is a lofty fundraising target. It’s not that the funds aren’t available, but rather, that the business is in too early a stage to efficiently and responsibly deploy the amount of capital being requested.
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At Verdant Frontiers Fintech Fund, we not only invest in startups, but we leverage our decades of entrepreneurial experience to help our portfolio companies accelerate PMF. Reach out to us here if you would like to learn more.
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