DocSend, a secure document sharing platform and a Dropbox company, released a new report earlier this month (Nov 2022) revealing how investor rationality is changing seed-stage fundraising.
According to DocSend's third annual seed report, raising a successful round now takes 22% longer and requires 25% more meetings. In today's uncertain climate, the analysis of both effective and ineffective decks provides great insight into what VCs are looking for. According to the insights, the business model, solution, and traction sections of a pitch deck can make or break a funding round.
DocSend examined 300 seed stage startups for its new report, The Seed Round in 2021-22: Proving Market Fit and Monetisation in the Face of Uncertainty, which spans 2021 and the first three quarters of 2022. The report gives us data-driven insights about founder actions and investor reactions to successful and failed pitch decks.
One of the biggest takeaways is: Every second counts - 2min 55seconds to be precise!!!
The key messages from their report are:
Succinct storytelling and strong communication of product market fit have become the key differentiators for seed founders.
FundingHero would always argue these have always been key, but they are now even more important than ever as the data suggests.
Some key stats:
- VCs spent 90 seconds longer on business model sections for decks that didn't get funding.
- Unclear = No money
VCs spent less time than ever on seed decks in 2022:
- 40 seconds less on solution sections of successful decks
- 8 sections extra to traction sections of successful decks
More time, more meetings:
- 22% longer to raise a seed round in 2022
- 25% more meetings to raise a seed round
What works - successful decks:
- Thorough tractions presentations
- Succinct & memorable company purpose
What doesn't work:
- Unclear solutions
- Unclear monetisation plans
- Burying the team slide
So investors race through decks but slow down for traction and monetisation.
The average time spent on reviewing decks dropped from 3:16 seconds to 2:59 seconds down 9%
With a similar % drop on successful decks from 3:11 > 2:55.
"Think deeply but communicate briefly"
- 28% more time was spent on the traction slide
- 56% less time was spent on the solution section of successful decks
Tips for a compelling traction section:
- Demonstrate 1 or 2 indicators of product market fit
- For revenue generating businesses: Sales, growth & margins
- Pre-revenue: user growth, engagement metrics, retention/churn.
Product readiness of successful seed raises:
- 25% no product
- 43% launched
- 17% beta
- 15% Alpha
So 75% were in market.
Final Takeaway stats:
- Average slides are down from 19 to 15
- Average investors contacted down from 75 to 56 (this is surprising)
- Average Meetings up from 44 to 55
- Average read time down from 3:16 to 2:59
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