If there’s one lesson the venture-capital market learned from last year’s hockey-stick growth, it’s this: There is currently more money to invest than qualified founders to invest in.
In just the first nine months of 2021, VCs in the U.S. produced a record-breaking $96 billion across 526 funds, beating out the $85.8 billion raised for all 665 funds during all of 2020. This fast and furious pace of investment has also brought an increased level of competition — leading investors to blaze through pitch decks hoping to find the right companies to back.
Founders may think that fundraising should be easy, given the current market dynamic. But VCs are still scrutinizing pitch decks and focusing on some key elements of those pitches. In fact our data shows that the company financials section of a pitch deck gives founders an opportunity to stand out from the pack.
It’s pretty straightforward: Establishing credibility with VCs by demonstrating that you have the experience and understanding to manage investment is a strong way to help you set yourself apart. It’s also important to recognize that showing your financial health to investors communicates the momentum of your current business. If you’ve been picking up steam and growing your business, this will demonstrate to investors that now is a good time to back your company.
7 Questions Your Deck’s Financial Section Should Answer
Your financial section should be one to three pages long and should demonstrate that your spending has been fueled by strategic decisions with a good return over time. A few questions to answer during this section should include:
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How have you deployed funding from previous investments?
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How have you managed my own capital?
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Are you spending on marketing or other resources like contractors and developers?
If you feel like your experience in managing capital is lacking, it may be beneficial to address things like projections for future growth and financial management in the fundraising ask section of your slide deck. Questions to answer at the earlier stages can include:
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What are your realistic plans for using the capital?
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What are your hiring plans?
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What does your current and projected customer pipeline look like?
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How has revenue grown historically, and what kind of projections can you make?
At the pre-seed stage, DocSend found that on average, investors spend 40 seconds of their total viewing time of 4:10 looking at the financials section of pitch decks. At the seed stage, we found that roughly a third of companies that successfully raised their rounds included this section. However when it was included, investors averaged 37 seconds of the total 3:20 spent on deck at this stage viewing this section. The takeaway is this: Investors may well give positive scrutiny to your financial history — if you have one to show.
Pre-Seed Vs. Seed-Round Financial Data
What Goes Into Your Financial Slide Section and Why
The financial slide takes investors through the specifics of your company’s fiscal history and paints a picture of how you expect your financial growth to look. This gives them an idea on how much of a return they can anticipate and when, as well as how much runway you have to continue operations (burn rate).
The financial slide section should include:
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Balance sheet: This will outline assets, liabilities and equity.
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Cash-flow statements: Provide all cash inflows from ongoing operations and external investments.
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Projections: Offer a forecast of your business's future income and expenses.
Compressing this information into a chart or graph can reduce the amount of space this takes up in your deck. Remember that the goal is to provide detail — but to do so succinctly and clearly. Typically, founders provide three years of this information.
This section should also include revenue, profit and expenses. Keep in mind that, even if this is your first raise, you can still fill in most of these sections by including how you’ve managed your own money invested into the company to date.
The goal with your financial projections isn’t to create an exact forecast of your financial future, but you should be in a position to provide investors with a realistic picture of your fiscal responsibility and future growth over the next three to five years. This timeline allows investors to see how you plan to facilitate and manage the growth of your business, and it gives them a glimpse of how well you’ve projected these categories compared to your competition. All of this makes you look more accountable, responsible and like a good investment.
Take Advantage of Increased Expectations in Your Funding Stage
The financial section of your pitch deck should act as the foundation for why you are raising money — and how you plan to use it. If you have something to show, show it! Don’t hide it, especially if you have a solid track record of managing your finances. As the fundraising landscape continues to mature at earlier stages, it is becoming increasingly important for founders to provide investors with examples of due diligence. Showing a solid history of financial responsibility is a critical step in this process.
There are plenty of resources at your disposal. If you’re crafting your pitch, check out our pitch deck template that uncovers what sections matter most and how your narrative should flow. If you are actively raising a pre-seed, seed or series A round, take a look at the DocSend Fundraising Network for an opportunity to connect with actively investing VCs and get feedback on your pitch deck. And for even more of our fundraising research, check out the DocSend Startup Index.
