Despite sustained interest in AI startups and glimmers of optimism in early-stage valuations, seed funding has continued to drop off in 2023. Seed founders who have managed to secure funding in 2023 have focused on the timeliness of their idea, and investors have responded positively to pitch decks that show recipes for success in the uncertain market and current events. 

Our 2022-23 report shows that although staple deck sections like Product and Business Model remain important, investors have sharpened their focus on sections like Competition and Why now? that speak directly to the current market environment. In addition to these changes in VC scrutiny, fundraising success also varies by demographic and geographic factors.

As VC scrutiny increases and fundraising competition remains fierce, how can early-stage founders thrive in times of uncertainty and rapid change? Here are some key insights from our research to help founders capture VC attention and navigate a successful raise:

Keys to success for seed rounds in 2023

• Cut through the gloom: why are you a good investment today?
  • VCs spent 65% more time on Why now? sections in 2023
  • Successful seed companies foregrounded the Why now? section more prominently than companies that didn’t get funded
• Address your competition head-on
  • Discerning investors gave extra scrutiny to the Competition section in a crowded seed market
  • Traction in a crowded field matters: VCs spent 33% more time on Traction slides and 88% more time on Competition slides in 2023
• Build a tight process, but prepare for the long haul
  • Seed founders contacted more investors but had fewer meetings in 2023 vs. 2022

Download our 2022-23 seed report to get the full scoop into how today’s fundraising climate has changed, and how to adjust your fundraising strategy and pitch deck for maximum success.

The post The seed round in 2022-23: No time like the present? VCs, founders focus on “why now?” amid ongoing slowdown appeared first on DocSend.

Following 2021’s explosive year of fundraising, 2022 resembled a return to healthy and responsible investing practices, despite a somewhat “doom and gloom” portrayal. Increased investor due diligence, combined with economic uncertainties surrounding a potential recession, has ratcheted up the intensity for founders looking to raise capital. In 2023, while investors are sitting on  “dry powder” as they search for the right investments, founders are searching for ways to interpret fluid market dynamics.  

While data on the overall health and status of fundraising typically becomes available after the end of each business quarter, DocSend Fundraising Scores are a mid-quarter check-in to gauge activity relative to historical context to inform strategic startup fundraising efforts. Rather than a lagging indicator, like other post-quarter reports, these cohesive scores provide a real-time read on current fundraising activity between quarterly data.

Q1 2023 Scores:

Founders: +4 Investors: 0

At the mid-quarter mark of Q1 2023, founders scored a +4 and VCs scored a 0. VC activity is well aligned with average activity levels over the past 3 years, but founders are more active than their historical benchmarks. The discrepancy between these scores means VCs are likely to have their pick of pitch decks from eager founders, and founders may have to work harder to stand out from the crowd in the startup fundraising process.

How we get the score: Historical startup founder and investor activity, as well as quarterly data, contrasted year-over-year, quarter-over-quarter, and year-to-date is measured on a 21-point scale – with a “+10” representing the highest level of activity, a “-10” representing the lowest level of activity, and a “0” representing average activity over the last three years. The methodology of including multiple analyses of quarterly data gives each score factual depth, and together serves as a holistic view..

Startup Fundraising Score Methodology Cont. 

DocSend’s Fundraising Scores measure quarterly VC and startup founder activity according to five weighted factors from our historical data:

• 3-year trailing average
• Previous year’s quarterly activity
• Previous quarter’s activity
• Year-to-date average for founders and VCs
• Year-to-date founder/VC activity relative to year-to-date VC/founder activity

To arrive at our scale of +/- 10 scores, we begin at 0 and add/subtract 0, 1, or 2 points based on how much quarterly activity exceeds or falls short of our five historical benchmarks. Our model weighs recent benchmarks more heavily.

DocSend’s Pitch Deck Interest metrics factor into each score, which provide weekly access to founder links created, investor deck interactions, and investor time spent. These metrics are defined as:

• Founder links created – the average number of pitch deck links each founder is creating via DocSend. This serves as a proxy for the supply of startups seeking funding. A “link” refers to the unique URL a founder creates using DocSend to share their pitch deck with investors. When the average number of links increases it means that founders are sending their decks out to more investors.
• Investor deck interactions – the average number of investor interactions for each pitch deck link. This serves as a proxy of investment demands. The higher the interaction metric, the more often decks are viewed, shared, and revisited by potential investors. 
• Investor time spent – the average time spent per pitch deck by potential investors. This metric offers a look at how long VCs are spending reviewing deals. More time spent per deck could mean investors are more closely scrutinizing deals.

The DocSend Fundraising Scores will be updated every quarter at the mid-quarter mark, which will serve as a check-in on founder and investor activity. 

Dive into our fundraising research

Data-driven insights into the latest fundraising trends and how to succeed are tracked with our Startup Fundraising Playbook. To contribute to our research, fill out our startup fundraising survey

The post Introducing the DocSend Fundraising Scores: A Singular Indicator of Investor and Founder Activity appeared first on DocSend.

This year’s fundraising climate couldn’t be more different from last year’s. 2022 numbers indicate that VC funding has dropped, but that doesn’t mean investors aren’t still looking for early-stage deals.

So what does this mean for pre-seed founders? It means they can still see a successful seed round, even if the road to get there isn’t as smooth as it once was.

To help founders realize successful pre-seed rounds in 2022, DocSend surveyed 320 startups that identified themselves as pre-seed stage companies. Our goal? To analyze their pitch decks and see how they performed throughout 2021 compared to the first half of 2022.

The resulting report, “Adapting the pitch deck for a new market,” is a playbook full of insights, stats, and actionable advice for how to put together a successful pitch deck when fundraising overall is taking a hit.

Download the full report here, but keep reading for the highlights.

TL;DR: Succinct storytelling is how you win in 2022.

7 pre-seed stats you need to know

1. VC engagement with pitch decks has fallen 23% in 2022 compared to 2021. At the same time, founders are sending 30% more pitch decks in 2022.

2. VCs are spending 25% more time on pre-seed decks that go on to receive funding versus those that don’t.

3. Traction is a “make or break” factor for unsuccessful pitch decks.Among companies that didn’t receive funding, VCs spent 41% more time on this section in 2022 compared to 2021. This was the most-scrutinized section for unsuccessful companies

4. VCs care about your company’s purpose more than ever — this slide was the third-most scrutinized section in 2022, whereas it used to be much further down the priority list.

5. It’s taking longer to raise a pre-seed round. In 2021, startups raised their pre-seed round in 13.5 weeks, whereas in 2022 it’s taking them 15 weeks. Only 25% of successful startups are completing their fundraises in six weeks in 2022, compared to 36% in 2021.

6. In 2022, founders are having 33% more meetings for their pre-seed rounds compared to 2021.

7. More than 70% of successful decks had a competition section, whereas only 35% of unsuccessful decks had one.

For more detailed pitch deck stats, see our Startup Fundraising Pitch Deck Metrics.

What the stats mean: Pitch decks need Goldilocks storytelling

VCs may be spending less time on pitch decks overall, but they’re laser-focused on the following sections:

• Product
• Business model
• Company purpose

Overall, investors spend less time scrutinizing decks than ever before. Going forward, founders need to be as succinct as possible while communicating just enough detail to entice VCs to take a meeting.

It’s a question of balance: aim for maximum readability with minimal effort, but don’t include so little information that the slide has no impact. Each slide should have a maximum of 50 words, with eye-catching graphics, section headings, and page numbers. These small details will give investors easy reference points when they follow up with you.

Watch this tutorial on pitch deck construction for high-level tips on storytelling:

How to shape your product story (with an example)

Unnecessary text kills product slides. In your product section, let your images, wireframes, or mockups do the talking.

For a concise product section, aim for at-a-glance readability about:

• What your product does
• What’s already built
• Feature pipeline/roadmap

If you don’t have a launched product, don’t worry so much: A significant minority (30%) of successful pre-seed companies managed to raise in 2021–22 without one. If you don’t yet have a launched product to show, you can still impress investors by integrating thorough product overviews into compelling stories about your vision and business model.

Pre-seed product slide example: Uber

It may not look like much now that we take it for granted, but slide 8 of Uber’s 2008 pre-seed pitch deck contained some magic words: “1-click request from geo-aware devices”.

The product section of Uber’s pitch deck accomplished three things:

• Demonstrated innovation in their category without getting into the weeds of how their product worked
• Specified how their product worked with existing technology (Google Maps)
• Told compelling mini-stories through use cases

How to shape your business model story (with an example)

In a challenging fundraising climate, VCs are expecting companies to look like fully-fledged businesses from the beginning. Pre-seed companies need to communicate a business model that’s repeatable, easy to understand, and memorable.

Like the product section, VCs in 2022 are spending less time reading the business model section – 42% less time in 2022 compared to 2021. Knowing this, pre-seed founders should pare down their monetization plans into a model that any non-specialist can understand.

Use graphics to communicate at-a-glance numbers about:

• Total available market
• Serviceable available market
• Fees/pricing
• Expected revenue

Pre-seed product slide example: AirBnB

In 2008, AirBnB was a pre-seed startup — they were also known as “AirBed&Breakfast” and this pitch deck helped them raise a $600,000 pre-seed round.

On slides 5 and 7, AirBnB connects market size and business model with minimalist slides that communicate raw numbers. Using an estimate of 15% of available market share, AirBnB was able to entice investors with “concrete” revenue projections that added an air of certainty to their deck.

How to shape your company purpose story

Your company purpose is a one to two sentence slide at the beginning of your deck, and it now carries a lot of weight. Investors are spending more time on this slide to determine whether they want to read through the rest of the deck.

Your company purpose is where balance is most important: You want to avoid complicated, grandiose vision statements, but you also want to inspire excitement.

For more pitch deck tips for 2022, on top of metrics for pre-seed gender, age, ethnicity, and geography, download the full “Adapting the pitch deck for a new market” playbook.

If you’re a founder looking for immediate insight into the performance of your pitch deck, start a free trial and see exactly how investors are engaging with your content.

The post The pre-seed round in 2021–22: Succinct storytelling, please (with examples) appeared first on DocSend.

Luckily, you don’t have to rethink your tech stack or stress over adding complicated solutions to bridge these gaps. With the DocSend + Zapier integration, you can build automated, hassle-free workflows between DocSend and your most commonly used tools in just a few clicks. Here are three easy fixes for eliminating unnecessary work effort and gaining back time in your day.

Fix #1: Send automated emails every time someone new visits your virtual data room

Love it or hate it, email remains a popular tool choice for connecting with everyone from prospects and customers to partners, vendors, teammates, and more. Because DocSend lets you see who’s visiting your data room and interacting with the content you’ve shared, it’s one of the first stops to see what your contacts have been up to.

By connecting DocSend to your email and/or calendar via the Zapier integration, you can save extra steps floating between tools when new contact names appear in your data room. It’s a popular Zap used to streamline touchpoints with new visitors, as well as add them as attendees to calendar events automatically.

Discover similar time-saving shortcuts in these email and calendar tools:

• Gmail
• Google Calendar
• Calendly
• Microsoft Outlook

Fix #2: Seamlessly update team projects and documents with newly created links

Project management tools like Airtable, Asana, Monday.com, and others are huge for keeping track of your team’s tasks and managing cross-functional projects more efficiently. The trouble is, these tools can eat up a lot of time when you’re continuously porting over new information and links from your other tools.

The DocSend + Zapier integration delivers significant time savings when it comes to updating project tasks, progress, and statuses within these tools. For example, say your team tracks all of your DocSend links and content using Google Sheets. You can create a Zap to update the appropriate row in a Google Sheets spreadsheet whenever links are created in DocSend.

Explore even more productivity boosters with these project management tools:

• Airtable
• Asana
• Google Sheets
• Monday
• Notion

Fix #3: Automatically add new visitors to campaign mailing lists

Increasing efficiency is the heartbeat of every sales, marketing, and project management automation tool. Yet anyone who uses these tools will tell you that maintaining updated audience lists for email campaigns and marketing newsletters isn’t always the easiest thing to stay on top of.

You can save a serious amount of time (and headache!) by building a Zap between DocSend and marketing automation tools such as Mailchimp or HubSpot. New visitors can be automatically added to your audience lists in these tools, ensuring that no contacts are ever left behind. In a similar vein, you can also set up Zaps to update form questions and sequences in Typeform any time someone downloads content from your data room.

Dig even deeper into these sales, marketing, and eCommerce Zaps:

• Mailchimp
• HubSpot
• Typeform
• Facebook Ads
• Shopify

What would you do with more time back in your workday? Sign up for a free trial to see how DocSend can help you save time and understand how viewers engage with your most important documents.

The post Three DocSend + Zapier integrations to help you save time and boost productivity appeared first on DocSend.

In this blog, we explain what a successful seed pitch deck looks like, how long VCs spend on each section, and the specific information investors want to see inside.

What is the purpose of a seed pitch deck?

Founders use seed decks to educate and excite potential investors about their product and market potential—ultimately using it as a tool to raise money. Structurally, seed founders organize their decks in a way that tells a compelling narrative VCs can quickly understand.

How much time do investors spend reviewing seed decks?

We see VCs spend an average of three minutes and 20 seconds reviewing seed pitch decks. With less than four minutes to hook their interest, this means that seed founders need to get their attention at the very beginning of the deck to get them to continue all the way through.

What does a successful seed pitch deck look like?

While all successful pitch decks are unique in their own way, each follows a uniform structure that’s designed to capture VC attention quickly. Following these clear formatting, content, and slide order guidelines lets founders tell a compelling story that captures VC interest and helps them raise money.

What sections need to be included in a seed pitch deck?

We’ve found that building a 19-20 page deck with the following sections is the best way to catch the attention of busy investors:

Keep in mind that your slide order matters. While most of the seed decks we see tend to follow a similar structure, founders who open their decks with the first four sections above are more likely to raise funding than those who opt for other approaches.

Below, we break down each of these sections, explain their purposes, and share do’s and don’ts for including the make-or-break details VCs want to see.

Section 1: Company purpose

This is the first slide in your seed deck and should clearly outline your company’s purpose in a single sentence.

Do: Pitch it to other people. What words capture their interest the most? Equally important, does it make sense? Your purpose statement should not only be enticing, but straightforward. If it’s not, go back to the drawing board until it’s just right.

Don’t: Overcomplicate it. Busy VCs have neither the time nor interest to decipher complicated or vague vision statements. Keep your company purpose simple, succinct, and memorable.

• Target section length: 1 page
• Industry averages:
  • Average length: 1.3 pages
  • Time VCs spend here: 26 seconds

Section 2: Problem

The problem section immediately follows your company’s purpose. This slide broadly addresses the one problem your company is solving.

Do: Make it relatable to folks in and outside of your industry. As a rule of thumb: If your friends or family can’t understand the problem you’re solving, chances are good an investor won’t either.

Don’t: Overcomplicate it (again!). Broadly define the problem using simple, easy-to-understand words that anyone can follow along with. If an investor can’t understand the problem, they won’t see the value of investing in your solution.

• Target section length: 1-2 pages
• Industry averages:
  • Average length: 2.15 pages
  • Time VCs spend here: 34 seconds

Section 3: Solution

Think of the solution section as the companion slide for your problem statement. Clearly and broadly outline how you’re solving the previously defined problem.

Do: Articulate why your solution is unlike any other on the market. Explain why your strategy is both creative and better at solving the problem. Investors want to know why your product or service is different than any others.

Don’t: Dive into technical specifics here—you’ll go deeper into your product later on. Here, you want to stay aligned to the problem with a clear, easy-to-understand solution statement.

• Target section length: 1-2 pages
• Industry averages:
  • Average length: 1.5 pages
  • Time VCs spend here: 34 seconds

Section 4: Market size

As the fourth section in a seed deck, your market size slides should define your target customer with a comprehensive market analysis.

Do: Make this section robust by sharing TAM SAM SOM market research. VCs care about both the short and long term. Show them where they can get a return on their investment within the first couple of years, as well as a sense of their long-term opportunities.

Don’t: Forget to connect this section back to your first three sections. Your purpose, problem, solution, and market size sections should tell a cohesive, compelling story that entices investors to keep reading.

• Target section length: 1-3 pages
• Industry averages:
  • Average length: 1.7 pages
  • Time VCs spend here: 29 seconds

Section 5: Why now?

An optional slide for both the pre-seed and seed stages, this section gives you an opportunity to highlight any market urgency for the problem and your solution.

Do: Consider what, if any, market conditions make your company a reality. Is the problem or opportunity for your solution unique in any way? Some of the common examples we see here include things like social justice, Covid-19, and climate change.

Don’t: Stress about including this slide if your problem isn’t connected to any particular timeliness. While this section can give useful insight into urgent market conditions, it isn’t used (or needed!) by every seed founder.

• Target section length: 1 page
• Industry averages:
  • Average length: 1.5 pages
  • Time VCs spend here: 23 seconds

Section 6: Product

The product section highlights the unique features you’ve built to solve the business problem.

Do: Deep dive into product readiness here. In three to five slides, explain your most important product features using wireframes, screenshots, embedded videos, and/or Figma mockups.

Don’t: Underscore how important this section is to potential investors. The product section will be one of the most scrutinized sections in your deck, so use this opportunity to show VCs exactly what the product experience will look like.

• Target section length: 3-5 pages
• Industry averages:
  • Average length: 3.3 pages
  • Time VCs spend here: 59 seconds

Section 7: Competition

The competition section should clearly outline who you’re competing against within the space and why your product is different than theirs.

Do: Focus on companies and products that compete closely with yours. Include companies at similar stages as yours or those who’ve successfully raised money recently. Comparison matrices with accompanying descriptions tend to work well for these sections.

Don’t: Go after the big players in your space. Show VCs who your true market competitors are while articulating how you solve the problem in a way your competitors can’t.

• Targeted section length: 1 page
• Industry averages:
  • Average length: 1.3 pages
  • Time VCs spend here: 34 seconds

Section 8: Traction

This section should detail notable traction based on the stage of your product. Traction can include things like current customers, quotes, and testimonials.

Do: Indicate more than one type of notable market traction. We found that VCs spend 80 percent more time evaluating the traction of companies that didn’t raise money successfully. If your market traction isn’t immediate to investors, it may raise skepticism and prompt more inspection that may not work out in your favor.

Don’t: Fret about not having enough to show. Investors will take into account the stage your product is in. You can include letters of intent, testimonials, customer pipeline, and beta feedback as appropriate to your product’s stage.

• Targeted section length: 1-4 pages
• Industry averages:
  • Average length: 2.3 pages
  • Time VCs spend here: 40 seconds

Section 9: Team

The team section introduces your founding team members and describes why they’re the right folks to help you solve the problem.

Do: Explain why these are the right people to solve the problem. Showcase backgrounds and skillsets using LinkedIn profiles pictures, bios, and relevant work experience. Remember: VCs are as interested in individuals as they are big ideas.

Don’t: Make this section more than two pages. It’ll naturally be one of your most detailed, wordiest sections, so avoid adding more details than you actually need here.

• Target section length: 1-2 pages
• Industry averages:
  • Average length: 1.5 pages
  • Time VCs spend here: 38 seconds

Section 10: Business model

The business model section outlines a clear, understandable monetization strategy that’s repeatable over time.

Do: Show investors you’re building a fully-fledged business. This section gets the longest look from VCs, so explain how you’re going to make money and what your business model looks like.

Don’t: Leave this as an afterthought. Develop your business model and monetization plans in tandem with your product strategy to keep them tightly aligned from the very beginning.

• Target section length: 2-3 pages
• Industry averages:
  • Average length: 2.8 pages
  • Time VCs spend here: 64 seconds

Section 11: Financials

As an optional section, the financial section explains your strategic spending history or burn rate.

Do: Include this slide if you can show how your spending has fueled positive returns. This section had the sixth-longest viewing time among decks that included one. If you have positive spending history to show, VCs want to see it.

Don’t: Skip this section without first asking the following questions. How have you deployed previous funding? What resources did you spend the money on? How did those investments contribute to your targeted business outcomes?

• Targeted section length: 1-2 pages
• Industry averages:
  • Average length: 1.4 pages
  • Time VCs spend here: 37 seconds

Section 12: Fundraising ask

The fundraising ask is the final section in your deck and tells investors how much you want to raise and how you plan to spend it.

Do: Thoughtfully consider how you’ll spend the money. For example, will you hire more people or invest in more research and development? You’re defining the next chapter for your company and you’re fundraising ask will directly support its growth.

Don’t: Pick an arbitrary number. State exactly how much you need and be ready to defend why and how you plan to spend it.

• Target section length: 1 page
• Industry averages:
  • Average length: 1.2 pages
  • Time VCs spend here: 32 seconds

Leave a lasting impression with a well-thought-out pitch deck

Getting attention from potential investors has never been harder than it is today, which is why creating a winning pitch deck is tables stakes for seed founders. By building a thoughtful, well-structured pitch deck, you can show investors how much time, research, and commitment you’ve put into building a successful company—and why your idea and business is one they’ll want to invest in.

The post Sealing the deal in 12 slides: What VCs really want to see inside your seed deck appeared first on DocSend.

At face value, these gains in fundraising appear promising for early-stage founders; however, research suggests not all teams are benefiting equally. When looking at 2021 fundraising data, we shouldn’t let absolute gains mask relative disparities among founding teams. The record-setting cash flows in 2021 translated into more money for founders across the board; however, relative fundraising outcomes remain unbalanced for diverse teams.

Though VCs spent similar time on all-female and all-male decks, all-male teams raised an average of 33% more money than females.
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The gains don’t erase the losses for underrepresented founders

The good news is that VC engagement with all-female and minority founding teams is up—a lot!—when compared to 2020. Investors met with more all-female and diverse teams in 2021 than the year prior, with all-female teams clinching the most VC meetings out of any other group. All-female teams with no minorities increased from an average of 35 meetings in 2020 to 42 meetings in 2021. All-female teams with minority members saw the biggest gains, jumping from 26 meetings in 2020 to 67 meetings in 2021, marking a year-over-year (YOY) funding increase of over 1000%. (Note: This was the biggest increase in engagement seen across all demographics.)

But does “engagement” actually equal strong fundraising outcomes for underrepresented founders? The disappointing news is that this increased VC attention at the earlier stages of the fundraising process didn’t always translate into more funding. While all-female teams raised more money in 2021 than in 2020, they still raised 25% less than their all-male peers. Adding race into the mix reveals larger disparities. All-white teams raised 36% more money than diverse teams in 2021, which is a stark reversal from 2020 when diverse teams raised nearly 40% more money than their non-diverse peers.

Data for all-female teams with minorities is even bleaker: All-female minority teams raised the least money out of all demographics, despite averaging 57% more meetings with VCs. They were the only demographic to average less than $1M per raise. When thinking about this ratio of meetings to the amount raised, I’m reminded of how Brooke Sinclair, CEO of Velourit, reacted to our data: these founders were simply stuck doing more work for less money.

The money raised doesn’t add up to the time spent

More gender and racial inequalities linger beneath the surface. For example, despite spending the least amount of time fundraising, all-male teams still raised the most money of all groups in 2021. When compared to all-female minority teams, who spent nearly the same amount of time fundraising, all-male teams raised twice the amount.

The relationship between time spent on pitch decks and total money raised also remained uneven among demographics. Though VCs spent about the same amount of time on all-female and all-male decks, all-male teams raised an average of 33% more money than females. The disparity for all-female teams widens further when comparing their pitch decks to those from mixed-gender teams. Despite both groups raising $1.5M in funding, investors spent 32% more time scrutinizing all-female decks. As outlined below, the time spent on the Team section may go a long way toward explaining these discrepancies.

Inconsistencies between the time investors spent on decks and total money raised remain between all-white and diverse teams as well. Investors spent 17% more time evaluating decks from all-white teams than those from diverse teams. VCs spent nearly four minutes reviewing decks from all-white teams and just over three minutes on those from diverse teams. All-white teams raised over 40% more money than teams with minorities, averaging $2.4M compared while minority teams raised $1.7M.

Different teams ≠ the same levels of VC scrutiny

The level of scrutiny VCs gave pitch decks also varied across demographics. In 2021, VCs spent 130% more time on the team sections for all-female decks than they did for all-male decks. In fact, the team slide was one of the least important slides in all-male pitch decks. They also spent significantly more time reviewing traction sections for all-female teams, averaging 76% more time than in all-male decks and 56% more time than in those from mixed-gender teams.

On the flip side, VCs spent 105% more time on the product sections in all-male decks than they did in all-female decks. The product section was one of the least scrutinized slides for all-female teams. And while VCs spent roughly the same time on the business model sections of all-male and mixed-gender teams, they spent 43% more time scrutinizing this section for all-female teams.

Bringing race into the equation reveals similar trends. Investors spent 20% more time on product sections in decks from minority teams and 67% more time on their market size sections. In contrast, VCs spent nearly 50% more time on the business model sections of all-white teams than they did on decks from diverse teams.

The largest discrepancy between all-white and diverse teams? The competition section. Here, VCs spent 78% more time scrutinizing the competition section for teams with minority members than those from all-white teams. For all-white teams, the only section to garner less attention than the competition slide was the company purpose.

Creating equitable outcomes for underrepresented founders

Even in a year with more available funding than ever, discrepancies like these reveal that diverse founders still face unique hurdles when raising capital. My hope for this research is that it adds to ongoing conversations about turning investor engagement into funding commitments and creating equitable outcomes for underrepresented founders.

The post Gains in fundraising can’t shake off the losses for female and minority founders in 2021 appeared first on DocSend.

Research shows that raising money is harder for women and people of color than it is for white male founders. In 2021, investors spent nearly 17% more time on pitch decks from all-white teams who then went on to raise over 40% more money than diverse teams. Time spent on individual slides remained equally unbalanced. For example, VCs spent 78% more time on the competition section for minority founders even though it ranked near the bottom for all-white teams.

While data points like these shine a spotlight on disparities across the industry, they don’t explain why these biases exist and what the root causes are. From my standpoint as a pre-seed venture capitalist and a Black founder, the pre-seed stage is where we’re seeing underrepresented founders get overlooked the most. The “why” stems down from two things: Investor bias mixed with the fallacy of vanity metrics.

Without a relationship, traction is the only validator

Earlier this year, I sent a cold pitch to a VC for my startup, TheClub. His dismissal was as swift as it was concise. After a 25 second scan of my deck, he quickly responded: “…we wanted to see a bit more traction…”. As a VC, I can’t invest in every founder who sends me a deck so I completely understand. What was alarming in this case was the fact that by using DocSend to share my deck I was able to see that he stopped reading my deck before he even got to the traction slide.

Why did he say he wanted to see more traction when he didn’t even bother to look at the metrics right in front of his face? Did he stop viewing because he realized I was Black? Was it because he just didn’t know me?

Establishing trust with investors can be hard: without a warm introduction, VCs tend to be more skeptical about whether your idea has the potential to become The Next Big Thing. One reason why a lot of investors find it harder to believe in and invest in Black, Brown, and other underrepresented founders is that they simply aren’t in the same networks. They don’t know these people because of the school they went to or where they grew up. Without these common connections, investors spend less time reading decks because they’re only looking for one thing: company traction. If the company has meaningful traction, there’s no need for them to rely on their trust in the founder. The traction speaks for itself.

The problem with this approach, and why it’s inherently flawed, is that at the pre-seed stage there rarely is any traction available to make meaningful judgment of. So if your metrics don’t match up with what the VCs are used to seeing, they use that as reasoning to not fund you or even take a meeting to learn more. Without these common connections or traction metrics, minority and underrepresented founders are far less likely to get the funding they need that will give them the opportunity to get initial traction. Hence, creating a cycle of underrepresented founders being left out of the funding ecosystem.

All traction is not created equal

At later funding rounds, it’s much easier for companies to stand on their own merit. Investors can look at all sorts of growth and revenue metrics to find the validation they need. But for pre-seed stages, the only qualifier that exists is company traction, which can look drastically different based on the founder’s background and/or their available resources.

For example, take a founder who doesn’t have any financial backing and funds their company on personal credit cards versus one whose rich family member invests $200,000 in their startup. Founders with capital early on can quickly rack up a 50,000-person waitlist by running a subpar ad campaign on Facebook. On the flip side, founders who don’t have early capital will talk to hundreds of people to build a 2,000-person waitlist.

On paper, this ends up looking like a no-brainer. A startup showing 50,000-person waitlist clearly outshines one with 2,000 people. Or does it? In reality, the quality of those 2,000 people tends to be far stronger than the 50,000 strangers who clicked on a targeted ad. But investors take these numbers at face value because they overlook the work necessary to effectively evaluate founders at this stage. Funding decisions are then anchored on these vanity metrics and they miss out on the stronger business opportunity due to their inability to assess business fundamentals.

Finding Alpha: Solving problems other folks simply can’t see

Fixing the funding divide is far bigger than solving one or two problems. We’re looking at an interconnected web of different complex problems with individual focuses and solutions. One thing, however, is certain: The work needs to start at the very earliest moments in companies’ lifecycles.

To get more underrepresented founders to series A, B, C, D, and beyond we need investors to back them at the earliest stages. This can’t happen if VCs continue to pattern-match based on who they know or what they’ve seen in the past.

Adding diversity to the problems we’re solving unlocks a new level of value. Black, Brown, and other underrepresented founders are solving problems in the market other founders aren’t able to see. These are net-new problems other investors and founders aren’t exposed to and VCs and their LPs can get greater returns because of it.

Visible Hands is a venture capital firm founded on the belief that investing in women, people of color, and other minority groups is key to a more prosperous and equitable future for everyone. That the best solutions come from those closest to the problems. And as our world and problems evolve, so should our problem-solvers. Finding these blind spots and, more importantly, the right people to solve them, is where the greatest opportunities lie.

To put it into perspective, picture the popular iceberg meme. The tip of the iceberg sticking out of the water represents problems that most folks see today. Underneath the water are all of the problems that actually exist. These problems aren’t easy for everyone to see, yet they make up a much bigger picture of the total market opportunity.

Tapping into all this underlying knowledge, innovation, and market potential only remains that much harder and slower if minority founders and their ideas are overlooked from the very beginning.

Applications for the next cohort of the Visible Hands accelerator opens on April 5th. We invest up to $175K into ~40 underrepresented founders at the pre-seed (Idea, Pre-Product, Pre-Revenue, Early Traction) stage each year. If you are or know an underrepresented founder that deserves a fair opportunity to build their world changing business, we would love to meet them. You can learn more about Visible Hands at our website.

The post The fallacy of vanity metrics: Why they do more harm than good for underrepresented founders appeared first on DocSend.

And while most VC firms have verbally committed to funding diverse teams, we’ve barely seen any changes in the fundraising gap. In fact, our research found that all-female teams raised 70% less than all-male teams and averaged fewer investor meetings.

We started the DocSend Fundraising Network to course correct these biases by helping founders across the globe get connected to qualified investors. Our process is simple. You send us your pitch deck as a DocSend link, our pitch deck analysis team reviews it (based on years of fundraising research) and if your deck meets our quality bar, we’ll feature it in our VC newsletter where vetted investors can request immediate intros. 

Our Investor Community

We currently have 270+ investors that are actively investing on our distribution list. Our VCs span across the globe from both legacy and emerging funds including Lerer Hippeau, Hustle Fund, and Uncork Capital. 

“Seriously, DocSend puts together some great deals, and I get probably a dozen deal newsletters. Yours is by far the best.” – Will Bricker, Hustle Fund

“Love the DocSend Fundraising Network concept – win-win for founders and VCs alike.” – Zach Coelius, Coelius Capital

“The DocSend Deal Flow is becoming my go to source of deal flow.” – Greg Maiatico, Dyrdek Machine

Success Stories

While we know a successful meeting doesn’t necessarily result in an investment, we’re proud to have helped many founders successfully raise through our Fundraising Network.

Tina Seong, Co-founder and CEO, Vista

Vista helps developers easily grant/restrict user access on their applications

 “For first-time founders navigating fundraising, information is power, and unbiased information is hard to come by. Within a day of our deck being sent out via DFN’s newsletter, over a dozen interested VC’s reached out for an intro meeting. DocSend was instrumental in helping us get our foot in the door for our pre-seed raise, and I’d recommend it to any founder.”

Nyasha Gutsa, Co-founder and CEO, billy

Insurance and risk management platform built for construction and real estate

Nyasha met one of his lead investors, Zach Coelius, through the DFN back in March 2021 and also connected with the Hustle Fund who ended up participating in his $3.5M seed round.

Christian Kletzl, Co-founder and CEO, UserGems

UserGems helps companies generate more revenue by combining relationship data with trigger events to surface the most likely buyers for each company

“The DocSend Fundraising Network was hugely valuable for us in raising our seed and I can 100% recommend everyone to apply!” 

We introduced Christian to Jeff Clavier, Founder and Managing Partner at Uncork Capital, in November 2020. Uncork led UserGems’ $2.4M seed round. Since participating in the DFN, UserGems has gone on to raise a $20M Series A led by Craft Ventures with participation from Uncork Capital. Read their DFN story.

Jonathan Newar, Co-founder and CEO, Captain Experiences

Captain Experiences makes booking outdoor sports guides quick and easy

“DFN is a fundraising cheat code. Acceptance led to our deck being featured in front of industry-leading, brand-name VCs that we otherwise would’ve had to reach out to cold or network tirelessly to connect with. Thanks to the DFN, we met with a handful of funds and ended up signing with our lead investor.  Regardless of being accepted into their newsletter, the DFN provides you with detailed feedback on your deck that will help you fundraise successfully.”Read their full DocSend story. 

Ronen Bitan, Co-founder and CEO, Trailze

Navigation SDK for micro-mobility

“Since we’re based in Israel, Covid made it more challenging to travel and meet investors face-to-face. DFN made it possible for us to raise our pre-seed round from global investors without ever leaving Israel. It also made the iterations on our deck much more effective because we had real data about which slides needed more work. “

Winston Reid, Co-founder and CEO, Alvin

B2B2C smart money manager app that helps traditional asset managers retain their retail clients more effectively

“Lindsay and the wider DocSend Fundraising Network team were super helpful in first giving us concrete and comprehensive feedback on our pitch deck, then connecting us with quality institutional investors. One of these was a firm we weren’t previously familiar with, but turned out to be the premier seed fund and accelerator in the US for our business model niche. They ended up selecting us for their W22 accelerator batch and investing in us as part of our pre-seed round!”

The DocSend Fundraising Network was built to expand access to venture capital for founders with less-established networks and create a new source of deal flow for VCs. Since launching the DFN in June of 2020, we have received over 4,000 pitch decks and have connected founders and VCs that otherwise might have never met. We’re excited to continue leveraging our fundraising data to help founders with quality ideas across the globe secure funding, while providing insights to help founders raise venture capital.

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Once a purely financial and strategic planning role, the responsibilities of CFOs have expanded to include anything from operations and IT to human resources. Notably in startups, the first CFO hire often takes on lots of operational responsibilities alongside managing cash flows, modeling revenues, processes expenses, and helping fundraise.

As their responsibilities increase, so does their exposure to risk, with compliance laws holding CFOs personally liable if those duties aren’t executed to perfection. Here are five operational risks facing today’s CFOs and ways to protect themselves against them.

Operational risk #1: Personal legal liability

While actions taken on behalf of the corporation are usually protected by limited-liability designations, an officer of the company who breaches their fiduciary duties and puts their interests ahead of the corporation can be held legally liable. This includes things like fund misappropriation, creative bookkeeping, and embezzlement.

All of that is common sense, but the U.S. Securities and Exchange Commission (SEC) is not just targeting CFOs for their own white-collar crimes but for crimes committed by others under their watch as well. CFOs can be held personally liable for incorrect financial statements they signed off on, even if they weren’t knowingly a party to any wrongdoing. This means that if one of your employees misappropriates funds without your knowledge, you could face heavy fines or even jail time.

How to mitigate your likelihood of becoming an SEC target:

• Maintain strict oversight and documentation. If the SEC comes after a CFO with a control-person claim, the burden falls on the defendant to show they acted in good faith by maintaining and enforcing a proper system of supervision or control. You’ll need to show you did everything within reason to keep tabs on your employees.
• Create a culture of compliance among your employees. Make expectations clear and establish an easy way for employees to report suspected wrongdoings to internal auditors or to the board. Establish and diligently maintain a system of control by creating a paper or electronic trail of communication as you go about your supervisory activities. Make sure important conversations and sign-offs are recorded in writing and that protocols are followed to the letter. That way, if regulatory action occurs, you can demonstrate that you took all the proper steps to curtail fraud.

Operational risk #2: Tax noncompliance

While failing to properly file or pay taxes is bad news for a corporation, it can also create personal liability issues for the CFO and others. Designed to keep businesses from shirking their tax obligations, “responsible person laws” pass the responsibility onto private individuals within the company.

This risk doesn’t fall solely on the CFO’s shoulders, however. The responsible person or people could also include superiors or direct reports, but it’s the officer’s responsibility to make sure the company stays tax compliant. If they don’t, and the company cannot pay its taxes, they could be held personally responsible for paying some of that tax burden out of their own pocket. This is true even if the company declares bankruptcy.

If a company is unable to pay up, CFOs may also find themselves personally liable for 401(k) or other employee benefit withholding, and even unpaid payroll. This is a powerful incentive to make sure the books stay balanced.

How to deliver detailed documentation to internal and external auditors:

• Invest in the right accounting software. To protect themselves and their employees, CFOs should require strict internal reporting and accountability to ensure that taxes are properly paid. Move away from old-fashioned spreadsheets and invest in powerful cloud-based accounting software so that you can manage the books from anywhere while minimizing data-entry mistakes.
• Then, centralize it within a system of truth. As you grow, consider an enterprise resource planning (ERP) system to help organize payroll, sales, accounting, and more, all in one place.

Operational risk #3: Contract mismanagement

Many small organizations don’t have in-house legal departments, so the responsibility of creating and managing contracts can fall on the CFO. Even if a lawyer helps draft the official contract, it’s still the CFO’s responsibility to manage some of the inherent risks that go along with contracting to an outside source.

Contractors and vendors pose some of the greatest risks to a company because they are not as invested in the company’s success as employees are. In a worst-case scenario, contractors and vendors could expose the company to legal liability. Their actions could hurt the company financially or cause a major public relations issue.

Mitigate some of this risk through smarter contract management:

• Clearly defined documentation and verifications. Well-written contracts should clearly assign responsibilities, include indemnification clauses, and specify insurance and liability requirements. In addition to writing the contract, CFOs should verify contractors’ insurance documents and licenses.
• Transparency and tracking with contract software. It’s best to have contract software that allows you to track when they’ve been opened and signed. You’ll also need to ensure you receive a copy of the contract along with the audit trail of actions leading up to the signature. And of course, you’ll then need to store that contract in a safe place where it can no longer be altered. Using a lot of contractors? Consider starting a designated risk management department to oversee the risks involved.

Operational risk #4: Fundraising fails

In the past, potential investors were primarily concerned with the return they could expect to get on their money, to the exclusion of almost everything else. Now, investors want to know everything they can about a business, from accounting procedures to cybersecurity protocols, before entering into a relationship.

CFOs not only prepare a lot of the documents throughout the due diligence process, but they also provide the data being used to convince investors that their money will be secure. The stakes are high—their ability to verify the company’s viability with reassuring answers can make or break a fundraising deal.

Due diligence reporting for investors is also a lot more work than it used to be. Questionnaires that used to be two or three pages can now stretch to 30 or more in addition to supporting documentation. Compiling and delivering so much information can consume a CFO’s time and a company’s resources. Pulling together this information requires up-to-date, in-depth knowledge about a number of operations within the company.

How to manage a faster, more efficient due diligence process:

• Consider outsourcing to consultants or reporting services. It’s no longer possible for CFOs in even small companies to operate as the sole source of knowledge behind the data. Instead, they will need to outsource the information-gathering and other operational functions to third parties.
• By outsourcing some of this reporting burden to consultants or reporting services, CFOs can hand over more insightful and detailed information than what they might create on their own. They can complete due diligence forms faster and more comprehensively, thereby ensuring that potential investors feel confident moving forward.

Operational risk #5: Board material miscommunications

Boards increasingly rely on CFOs for expert guidance on how to best navigate complex financial landscapes. Yet, many CFOs, coming from accounting or finance backgrounds, often have less experience translating financial information in a way that’s both informational and persuasive.

Effective board management is more than sharing a list of monthly performance metrics—CFOs need to explain what the operating figures actually mean for the business and why. How is the company doing? Is it better or worse than expected? What conditions are affecting the numbers, and how might they change?

If the CFO can’t communicate the company’s progress well enough, they and the company risk greater scrutiny from the board. There’s also the chance of antagonizing venture-capitalist board members who are looking to exit. If a lack of confidence causes investors to pull their funding too early, the results could be catastrophic for the company.

How to eliminate some of the most common friction points:

• Create a relationship built on communication and trust. To do this, CFOs need to translate complicated financials into easy-to-understand, actionable insights. Don’t assume that board members understand financial acronyms or jargon that may be second nature to you. Make CFO reports clear and narrative-driven so board members without finance backgrounds can understand the company’s position. Write effective and thoughtful board meeting minutes to build trust with your board. Get a jumpstart by using our complimentary board meeting minutes template.
• Keep security and organization top of mind at all times. Communicating with the board means sending out sensitive materials, such as financial statements and waterfall tables. If these board pack materials fall into the wrong hands, it could cause a major security breach or PR issue for the company. Always send materials using secure document sharing with password protection.

Eliminating unnecessary risks with the right moves

When it comes to security, information-sharing, and compliance, even small compromises can lead to devastating outcomes for CFOs and businesses alike. By combining the right tools, resources, documentation, and oversight within a culture of compliance and trust, CFOs can protect themselves and their companies against these avoidable risks.

From board meetings to investor relations, raising capital, and more, CFOs use DocSend to securely share highly sensitive financial and company documents. Learn more about how you can use the DocSend platform to better protect you and your company from risk.

The post Stakes high for startup CFOs as exposure to risk continues to rise appeared first on DocSend.

Luckily, any concerns foreshadowing permanent declines in fundraising were short-lived. Not only did pitch-deck supply and investor demand rebound to pre-pandemic levels by late April 2020, they actually flourished throughout the pandemic.

The latest market analysis from DocSend indicates this trajectory shows little signs of stopping. Here, we look at market influences over the past year, how recent trends compare to previous years, and what the data means for the industry.

As disruption and uncertainty hit, Silicon Valley leaned in

A blink-and-you-miss-it dip on the radar, fundraising didn’t simply weather the worst of the pandemic—it charted the course to all-time fundraising highs. Efficiency gains and time savings gleaned from virtual-first fundraising were one reason why. If the pandemic gave Silicon Valley any kind of silver lining, virtual fundraising was it.

Founders and investors rallied around tools such as Zoom, quickly resolving friction points people didn’t know previously existed. For example, while founders had tools like DocSend to send out pitch decks before the pandemic, investors didn’t have such time-saving luxuries for scheduling in-person meetings with founders.

Fundraising, compressed into 30-minute chunks of virtual Zoom meetings, showed investors just how much easier, faster, and productive it can be, simultaneously letting them raise their demand levels to where they wanted them to be. As a result, investor demand and activities increased unremittingly throughout 2020 and 2021.

Similar behaviors in supply and demand point to healthy market conditions

As founders and VCs adapted to the industry’s new normal with ease, investor dollars and market health grew steadily. After rebounding in late April, 2020, investor demand increased throughout the year, outpacing 2018-2019 levels and up 22% by the second half of 2020. By the end of H1 2021, investor demand was up 65% over the previous year’s baseline.

Trends in founder supply also point to improved, growing market health. Aggregate pitch deck averages outpaced investor demand by 3% during H1 2021, with current trends further indicating net-positive health. While supply waned slightly during the peak of the summer, it’s since ramped back up to robust levels, despite historical declines heading into the fall and holiday season.

Bottom line: Similar behaviors observed across supply and demand in the fundraising marketplace indicate that both founders and investors adapted easily to the new normal: both groups have been looking eagerly to make deals. They’ve acclimated so well, in fact, that record VC funding continues to flow into the startup ecosystem.

Fluctuating market trends point to a return to normalcy

Founder supply climbed higher in 2021 than any of the summer spikes in 2020. Additionally, these high levels were sustained throughout the year, with the exception of a dip in founder supply in August—a decrease that could represent the return to normal behavior in the marketplace, albeit at a significantly higher activity level.

Market data historically show slowdowns in fundraising activities in late August as folks go on vacations and take fundraising breaks. (The exception to this being in 2020.) The 2021 market, while at a higher activity baseline, is behaving similarly to market fluctuations in 2018 and 2019, underlining that market behavior in 2020 remains the exception and not the norm.

Mirroring previous years’ trends, investor demand also signals upcoming end-of-quarter slowdowns in 2021. These swings in demand, aligned with the time periods in which they occur, also reinforce a return to normal market behavior at more active baselines than years past.

Although demand has slowed at normal quarterly rhythms heading into Q4, high overall activity levels herald strong investor activity in the weeks ahead. Relatedly, we’ve observed an uptick in supply toward the end of Q3 2021. This suggests that the supply of pitch decks will remain high throughout most of Q4, save for the typical holiday slowdowns. Despite some noise in the system, the outlook for Q4 remains positive.

What recent market trends mean for fundraising

What do the recent supply and demand trends tell us about where fundraising is headed? These findings reveal two key takeaways for founders and VCs.

As trends come and go, it’s safe to say virtual-first fundraising is here to stay. In-person meetings are certainly not dead—situations where in-person meetings make the most sense will always exist. But investors and founders agree: Virtual fundraising isn’t going anywhere—it makes doing business easier for everyone.

There’s also no better time than now to raise funding. Or to invest dollars, for that matter. Our data indicates that founder supply and investor demand are likely to remain constant for the foreseeable future, so now is the time to be raising or deploying capital.

Interested in more fundraising insights? These data points are just the tip of the iceberg. Dig deeper into fundraising trends across pre-seed, seed and Series A.

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