6. Your data is your best friend
[Throughout this series of articles to explain how to build an investors deck we are using the example of Pant Station, an imaginary company that sells panties for men, to illustrate the different parts. If you want to read this series of articles, I advise you to start with this one.]
Here it goes, the dreaded slide where you need to show your data. This is where you prove everything you've been saying until now. Investors expect you to show them where you could be in a few years if they invest in your company.
This part should be quick: 1 or 2 slides are enough but you need to be prepared for any question investors will potentially have. To lay out your data and show your future evolution, nothing better than using a graph or a chart, nothing too fancy but a visual aid that will catch the eye of the investor.
Prove your traction
For your first round, you want to prove investors you have growth potential. The key here is to demonstrate traction (you've got customers and they are or will be paying).
1st case scenario: You already have some traction to show and are able to show real numbers from the past 6 months or more. Those numbers should help investors understand both your growth and your acquisition metrics.
For growth, preferred indicators are monthly recurring revenue (MRR), the average revenue per customer, the monthly customer growth, the monthly churn rate and your average customer lifetime.
Concerning customer acquisition, you can show a glimps your your marketing and sales funnels with your average selling time, the size of your sales pipeline (for BtoB companies), your conversion rate and the ratio of lifetime value to customer acquisition cost (LVT/CAC). This will give an idea of the potential of your company to investors.
2nd case scenario: You are not at the point where you have any real numbers to show yet because you are still testing and figuring out how to make money. Then you should present some key assumptions based on benchmarks you've run on your industry and transform them into your potential numbers.
Here is an example we’ve made up for Pant Station:
A pair of briefs costs 10 euros, we plan on selling a lot of briefs when we get the money to actually produce them.
Our acquisition cost would be 4€ through internet, we have a conversion rate of 5% on Facebook ads and 7% on adwords and the average basket online is 20€.
In stores our acquisition cost would be a little more expensive: 5€ for a poster campaign and adverts newspapers and the average basket is 30€ (higher in stores).
We also have a great turnover as 75% of our customers will buy again in the same year. Also our Month over Month sales have doubled since we launched our product 3 months ago.
Beware of the vanity metrics
You might get the attention you need from investors with superficial metrics like download numbers which are impressive but aren't enough to prove long term growth.
If you are advertising your product on Facebook and manage to get a really high click rate then it's worth showing, it means the product is attractive. But the investor will want to dig deeper, what happened after they clicked? Did they end up buying or did most of them didn't even add it to basket?
Once again what they are looking for is to de-risk their investments. They need to know you managed to track those clicks and convert them into valuable insights on customers' behavior.
In a nutshell:
- Vanity metrics are shallow. They often are impressive, large measures which are used to attract attention but fail to predict behavior over time.
- Clarity metrics are running metrics that provide information on growth and show your competitive advantage. For example how many people use the app every day and for how long? Any behavioral information you can get to predict growth.
We invite you to go and read this article about these vanity metrics and how you can come up with more solid ones that will be valuable to the eyes of VCs.
Here's a quote from the said article that might appeal to you:
"Fuel up with vanity metrics and you might drive far enough to get an investment, but eventually you'll run out of gas."