The Startup Docs You Need To Pitch With

If you are thinking about raising capital (which you probably should reconsider even before you consider it), you need to understand the specific sequence of events you need to go through to be able to take the capital. This may be a simplistic repeat lesson for most of you out there, but for many new to startups this is a really important message.

But the first question really is do you need to raise capital at all? If not, then you don’t need to go through this particular set of exercises. Just go out and do your business… and not worry about this stuff. Well, let me at least say actually creating these docs will answer a dozen problems, questions and may ultimately help you change into who you need to become.

But if you really, really need to raise capital, then you definitely need to have this type of paperwork ready. By paperwork, I mean PDFs are perfectly fine. And you don’t need it all. You just will find yourself at a disadvantage if you don’t have it all ready to go.

1. An executive summary (Good to have)
2. A pitch deck (Must have)
3. Pro Forma Projections (Good to have)
4. Business Plan (nice, but not necessary)
5. Cap Sheet (rarely)

First off, what are these docs and what are they used for?

1. An executive summary
An executive summary is a 1 to 4 page written summary of the business and should cover a variety of areas from product service and business description, business history, market you are serving, go to market strategy, financial summary, management and exit strategy (if necessary). The executive summary can be one page only. It can be more graphical than written. It can take on a little bit of a different method, and visually appealing is always a good thing. Overall, it is a written doc that investors use to peruse the business and decide if they are interested in going forward. It can be exchanged for or replace a pitch deck. It is a pretty much standard thing investors look for.

2. A pitch deck (Must have)
The pitch deck has become the go to document startups raising capital have been using for the past 15 years. More specifically a pitch deck tends to be a series of screens in PowerPoint that convey all the basics of a startup. There are several example pitch decks you can mimic, one of which, AirBnB, I like to use as great examples. But it is also a more showy form of an executive summary. It is meant to be presented, not read. So it is for crowds who are listening as opposed to be read at home in an easy chair. It is a production in some sense. The actual slides in the deck can be more than just written slides. They can often be cartoons, productions unto themselves with graphics. Some people toss in video, but that has often been an issue. More recently the pitch deck gets saved as a PDF file and shared that way.

3. Pro Forma Projections (Good to have)
I say financial projections are a good to have, but quite honestly it is a critical part of raising capital. You need to be able to tell a financial story that conveys why you are a great investment. And most important, you need to be able to show a 3 year profit and loss summary. A lot of ventures think this is a moot point, as they point out that the exercise is made up of make believe numbers. But those numbers are based on assumptions and they tell the investor you can think in a financial mindset. So you really need to do these. You can get away with it during your pitch, but investors will want them immediately after the pitch. So if you want to be prepared have them ready!

4. Business Plan (nice, but not necessary)
I have written a bunch of beautiful business plans. They are really not a necessity, but let me give a couple great reasons to actually write them. Well, first off, always write one for yourself if you can. The actual task of writing it will completely change and enhance your entire business thought process. That is what a business plan is, it is a way to bolster and challenge assumptions you have come up with about the business you are going into. I would hold off on writing a business plan until you have started the overall project, made some revenue and know what you are actually doing. After that, go for it. If you get past the pitch, have shown off your financials and now investors are getting real serious, then it is time to have this plan ready.

5. Cap Table (rarely)
Pretty rare day to have to have this ready for investors. Basically this table shows all the current equity ownership positions and who owns what and what deals they have in place. Investors want to know who else is involved. I would not worry about this whatsoever early on. Just learn the language of capital and what it means when they mention it to you.