A startup’s pitch deck is often the first impression an investor gets of both your business and leadership team. While every slide is important for telling your company’s story, the Use of Funds slide plays a particularly crucial role. This slide breaks down precisely how you plan to allocate capital from investors to fuel your startup’s growth.
Crafting a compelling Use of Fund’s slide instills investor confidence by demonstrating financial responsibility and strategic alignment with your objectives. As the CEO of a firm that assists startups in pitch deck creation and fundraising, I’ve seen both highly effective and detrimental examples firsthand. In this article, I’ll share key insights into creating the optimal Use of Funds slide.
Conveying Your Startup’s Strategic Priorities
Foremost, your Use of Funds slide must convey your strategic priorities for applying investment capital. Avoid generic or vague categorizations like “Working Capital” which could mean almost anything. Instead, provide precise and detailed breakdowns that map back to your startup’s core business objectives over the next 12-18 months.
For example, if a key goal is expanding your engineering team to accelerate product development, call that out explicitly as a line item with a percentage allocation. Outline what objectives key expenditures will achieve, whether it’s hiring talent, product R&D, patent applications, or PPC ads. This instills confidence you have a sound, evidence-based plan.
Backing Assumptions With Credible Data
Any assumptions that factor into your expense allocations must be backed by credible data sources. For example, if your sales and marketing allocation seems inordinately high or low, support it with historical performance data, verified market research on CAC, and benchmarks for your industry.
Investors will probe the rationale behind your assumptions. Data-driven analysis lends credibility versus rules-of-thumb. Leverage market research reports, financial databases, public comps, internal metrics, and other quantitative inputs to produce realistic forecasts.
Avoiding Common Pitfalls
Many subpar Use of Funds slides commit obvious but easily avoidable mistakes. These include:
- Allocating high percentages to vague line items like “Working Capital.” Be specific.
- Projections misaligned with your startup’s business model and go-to-market strategy.
- Obvious gaps fail to account for major operating expenses.
- Hockey stick projections are unsupported by evidence.
- Lofty assumptions on burn rate, churn, and CAC without historical data.
- Failing to budget for future funding rounds required to scale.
Such oversights erode investor trust. Verify your key assumptions, expense projections, and benchmarks using empirical sources to demonstrate your command of the financial drivers.
Incorporating Visual Aids
Given the inherent complexities in conveying financial data, strong Use of Funds slides incorporate visual aids to simplify concepts for rapid comprehension. For example, accompany expense breakdown percentages with a pie chart depicting allocations. Use a bar graph to display how headcount may expand across key departments as funding enables hiring.
Visualizations provide clarity for investors digesting lots of information. Maintain clean, uncluttered designs for simplicity. Data graphics should distill complexity into easily digestible formats.
Examples of Best Practices from Top Startups
Industry leaders often set benchmarks for best practices that other startups can adapt. For example, Airbnb’s early pitch deck quickly conveyed host acquisition costs, key operational expenses, and the capital needed to achieve network scale. The clarity directly addressed investor questions on the business model’s unit economics.
Uber’s deck cites exact headcount growth figures for key roles as funding enables targeted hiring. Dropbox’s clean format depicts just enough detail across growth, projections, product roadmap, and expenses for each funding stage without getting overly complicated.
While every startup’s context differs, there is much to learn from industry pioneers in crafting pitch decks that cover the essentials with compelling clarity. The most effective presentations stay simple but thorough.
Addressing Investor Questions
Expect investors to probe your expense assumptions, growth projections, customer acquisition costs, churn rates, and other vital drivers of your financial plan. Prepare detailed answers addressing key issues like:
- Defending your market size estimates, TAM projections, and benchmarks based on credible data sources.
- The rationale behind sales and marketing allocation levels projected CAC and LTV targets.
- Specific hiring plans, salary budgets, and staffing rationale by department.
- Contingency planning for risks like higher expenses, delayed launches, or slow adoption.
Thoroughly modeling your key assumptions and business case will enable confident responses to likely investor questions, strengthening your pitch.
In summary, an effective Use of Funds slide is essential for any winning pitch deck. Concisely convey your strategic priorities, incorporate visual aids, leverage credible data sources, and learn from industry leaders. Demonstrate your command of the key financial drivers, assumptions, and growth levers that make your startup a compelling funding opportunity. Keep it simple but thorough by addressing the essential context investors want while avoiding pitfalls. This chart becomes a concise but compelling snapshot of your startup’s financial stewardship and growth trajectory.