Thursday, January 19, 2012

4 reasons to create your pitch deck before you need it

As I look back, I realize that I ended up getting a lot out of our pitch deck before ever using it to pitch. Here are four reasons I think every entrepreneur should start thinking about the pitch early on:

1. It makes you do all the market research.
When we first started InstaEDU, our research had mostly been qualitative. We’d started a tutoring company, talked to customers and identified potential solutions to some major problem areas. What we didn’t know was how big the market really is, how current online companies are doing, or even how many people give a sh*t about education. (With education startups, you’re constantly warned not to overestimate the value people put in education.)

You can’t tell an investor ‘We talked to some people. They all liked our idea. And, uh, there are a lot of students out there. We’re gonna be huge.’ So in an effort to paint a realistic picture of the market in our pitch deck, I set aside a few days to do research. Some basic questions included:

 - How big is the U.S. tutoring marketing? How about online tutoring? How is that changing?
 - How many students work with tutors each year?
 - How many students don’t work with tutors, but realistically would?

I was surprised at how difficult some of the answers were to find (or even extrapolate), but after a few days of reading, much of what I learned actually surpassed my expectations about the potential of the tutoring market. (As a side benefit, I also absorbed several studies on the overall benefits of tutoring and the effectiveness of various education styles.)

When I first started my research, I thought the actual numbers would only be important when talking to investors, but when I had them all in front of me, they became important every time I thought about our product and audience. For example, it made me realize what a small percentage of education-minded individuals are currently working with tutors. Now I’m constantly thinking about how the market is split and how we can capture both halves.

2. It forces you to think about the "what ifs".
One of the parts I dreaded most about putting together our pitch was the financial projections. (Fortunately, my cofounder Dan rocks at this kind of stuff, so I was off-the-hook for the worst part of it.)

Dan put together some rough financial projections early on, but as we got closer to talking to investors, we realized we’d need something that better explained all of our assumptions and let us easily change them. (We were sure that there would be many, many numbers that we’d want to update over the next couple of months.)

Dan then plunged into the depths of Excel and set up a multiple page spreadsheet where changing any assumption - from our monthly churn rate to the cost to a paid user to the number of engineers at any given point - updated all our projections over the next couple of years.

This proved to be an awesome tool for evaluating how different scenarios could play out. What would happen if we dumped a bunch of money into advertising? How would slightly increasing our viral coefficient affect our long-term numbers? What happens if more users churn than we predict?

I think this is actually the most insightful exercise we’ve done, and I doubt we would have done it without impending investor meetings.

3. It helps you figure out how to talk about your company.
In a year of running Cardinal Scholars, we had a lot of conversations with students, parents and tutors. We felt like we had a good grasp on their needs, but when it came to describing them to other people, we generally relied on specific scenarios because that was how we’d seen the needs manifest themselves. I’d say:

"Imagine you’re a student, it’s 11pm, you have a test the next morning and you’re stuck on a physics problem set that you don’t understand. InstaEDU provides relief by letting you quickly connect to a great tutor who can help you out."

Or in another conversation, “Great tutors tend to be limited to major cities and certain college towns. If you live somewhere like Napa Valley or Cedar Rapids, there aren’t a lot of AP Chemistry tutors nearby. InstaEDU gives everyone access to top-notch tutors."

In putting together our deck, I had to show what we were doing and why we were doing it. Let’s start with the why. In the end, I was able to narrow down our findings to four main issues:

1. In-home tutoring is cost-prohibitive for most families
2. Most students don’t plan ahead to know when they’ll need help
3. Geography limits the availability of great tutors
4. Busy schedules make regular lessons difficult

The next step was evaluating how our platform fit these needs. (Again, this was something I knew in my head, but had difficulty articulating quickly.) With the help of a more experienced entrepreneur, I was able to take our four problems and break them into two real solutions: online and on-demand.

1. Solved with *online* tutoring >> In-home tutoring is cost-prohibitive for most families
2. Solved with *on-demand* tutoring >> Most students don’t plan ahead to know when they’ll need help
3. Solved with *online* tutoring >> Geography limits the availability of great tutors
4. Solved with *on-demand* tutoring >> Busy schedules make regular lessons difficult

Suddenly, I was able to go from a jumble of student issues to problems that could solved with online, on-demand solutions:

InstaEDU is an online marketplace where students can connect with great tutors on-demand.

4. You get much better feedback.
Our first pitch deck sucked. It was full of things that had been in our heads so long that I didn’t know how to put them down on slides effectively. (I’m also no visual designer.)

The best thing we did with that first version was show it off. First, I had my boyfriend suggest some improvements. Then our advisor. Then a few friends in the space. Then some other entrepreneurs. Then some investors. Oh, then my boyfriend again. And our advisor again... You get the point.

Our whole deck is now a collection of a couple tweaks here and a few clarifications there. Looking back, I initially wondered why the first batch of viewers didn’t point out more issues. Later I realized why: No one wants to be too critical. It’s awkward.

By going through dozens of feedback sessions over a couple months, we were able to make a large number of improvements without anyone having to give us more than a few pieces of constructive criticism at any given time. Yes, it means asking for help a lot of times, but it also means asking for it in small doses.

Follow me on Twitter at @ajalison and check out InstaEDU on AngelList

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