“The best decks provide a narrative and have a cohesive story”
The pitch book is the first communication tool to help you raise money with a potential investor. The content of the pitch book, along with your presentation, can help the investor to determine whether or not to continue evaluating your business opportunity.
In many cases, your pitch book will be your calling card: It’s what investors will see even before they agree to meet with you. The investors we spoke to tell you what should go in it — and what shouldn’t. Ultimately, preparing a pitch book is an exercise in communications — you must tell a story that hits all the right notes.
In this article, we provide important advice for creating a strong, thorough, and engaging investor pitch book, along with guidance on presenting to angel and venture capital investors.
So why is it so important?
Raising capital from investors is difficult and time consuming. Therefore, it’s crucial that a startup creates a great investor pitch deck by articulating a compelling and interesting story.
It helps the potential investors to decide whether they should invest in the business or not and it gives summarized view of the business.
Structure of a pitch Book:
Situation, or “Current State”: Business is looking for growth.
Complication, or “Problem”: Business growth rate has been slowing down.
Hypothesis, or “Solution”: Acquiring a growing company can meet the business need for growth.
Step by Step Guide for Creating an Investment Banking PitchBook
- Capabilities and Qualifications of the Investment Bank
- Information about market updates, trends and the environment
- Transaction Section:
Transaction section gives the company the bank’s perspective on the following:
- Potential buyers and sellers in Mergers and Acquisitions
- Amount of capital that can be raised and it’s pricing
- Timing and Process for the transactions
- Valuations for sale or acquisition targets
The following is the primary analysis that you may find in the Transaction section:
a) Comparable Analysis
This analysis includes benchmarking the company against its peers.
The statistics that are considered in the comparative analysis are sales, earnings, valuation multiples like PE Multiple, PBV multiple and other trading multiples, etc.
b) Financial Model
The most important skill for an analyst is to Build a financial model. It is the most crucial analytical tool used by the deal team to perform some important analysis.
Financial Models are used for Accretion/Dilution analysis in the case of Merger & Acquisition Pitch.
In the case of the Debt Issuance Pitch, Financial Modeling is used to show how a debt issuance can be serviced and repaid.
In IPO Pitch to see the show, the company’s financial profile will look after an IPO transaction.
Types of Investment Banking Pitch books
- Main Pitch Book
These types of pitch books include all the details and information about the investment banking firm.
Also, the statistics related to recent deals, profits, successful investments, recent trends, and deals in the market are demonstrated in the pitch book. Hence such a pitch book needs to be updated regularly.
- Deal pitch book
It is created specifically for a particular deal.
It is used to explain details of mergers & acquisitions (M&A), IPO’s & debt issuance.
- Management Presentations
When the company finalizes the deal with the investment bank, management presentations are used to pitch the company to the investors.
- Details included in the management presentations are-
Information of the company
Key financial ratios
Company’s goals and how the investment firm can help achieve them.
- Combo / Scenario Analysis
It is prepared when the company isn’t sure whether it wants to go public or sell.
It is created by stating both scenarios and showing the trade-offs between the two.
- Targeted Deal PitchBook
It is created when a buyer approaches the company with an acquisition offer.
In this case, it shows accretion/dilution under different scenarios.
- Sell-Side M&A Pitch Books
These are created when a company approaches an investment bank stating that they want to sell themselves and are looking for Potential Buyers.
It is specifically customized, stressing the points why the company should choose that particular Investment bank. These types of Pitch books are more exhaustive and long.
- Buy-Side M&A Pitch Books
It contains similar information like the Sell-Side M&A Pitch Books but differs on the following point-
- It contains information about the Potential acquisition candidates
- These are shorter than the Sell-Side M&A Pitch Books. Check out the Sell-side vs. Buy Side – Key differences
Important points that must be incorporated in a Pitch Book are-
- It should be concise – only detailing the important points
- May concentrate on a single concept per page
- Always make use of appendix
- Must be as crisp as possible
- Support your points with case studies wherever possible
Graphs & Charts
- Use Graphs & Charts to emphasize key points
Look and feel
- Please make a point to use colours wherever possible properly but do not overdo it.
- It should be professional-looking.
- Must leave a lasting impression on the investors.
Anatomy of a pitch book
- All the details in the Pitchbook must be accurate and up-to-date.
- There is no scope for any mistakes that may negatively impact the investor.
- The information should be brief and to the point.
- It should be simple but must have a professional layout.
|Title||Include your business’s name, your name and title, and contact information.|
|Problem||Explain your investors the pain that you’re alleviating. The goal is to get everyone nodding and buying in.|
|Solution||Describe how you alleviate this pain and the meaning that you make. Ensure that the audience clearly understands what you sell and your value proposition.|
|Business model||Explain how you make money—who pays you, your channels of distribution and your gross margins.|
|Underlying magic||Describe the technology, secret sauce or magic behind your product or service.|
|Marketing and sales||Explain how you will reach your customer and your marketing leverage points.|
|Competition||Provide a complete view of the competitive landscape. Too much is better than too little.|
|Management team||Describe the key players on your management team, board of directors and board of advisors, as well as your major investors.|
|Financial projections and key metrics||Provide a three- to five-year forecast containing not only dollars but also key metrics, such as number of customers and conversion rate.|
|Current status, accomplishments to date, timeline and use of funds||Explain the current status of your product or service, what the near future looks like and how you’ll use the money you’re trying to raise.|