Pre-Seed founders face more competition for VC
attention as sense of urgency wanes, time spent on pitch
decks nears all-time low
SAN
FRANCISCO, Aug. 2, 2022 /PRNewswire/ -- DocSend, a
secure document sharing platform and Dropbox (NASDAQ: DBX) company,
today released a report showing the importance of company purpose
and traction as pre-seed startups find themselves more actively
competing for investors' attention. Compounding the pressure for
clear and succinct pre-seed pitch decks is that VCs are spending
42% less time reviewing these decks, clocking in at an average of
two minutes and 42 seconds per deck.
New data suggests that after a fever-pitch year of investing in
startups, VCs are exercising more due diligence and focusing on
startups that have substantial elements of their business in place
– even as early as the pre-seed stage.
The new report, The Pre-Seed Round in 2021-22: Adapting the
Pitch Deck for a New Market, analyzed 300 pre-seed round
fundraising startups to see what goes into successful and
unsuccessful pitch decks, and how investors interact with them
during a critical shift in investing power from 2021 and the first
half of 2022. The report is part of the DocSend Startup Index which
provides data-driven insights about founder actions and investor
reactions throughout the pitching process.
Dynamics have shifted since the beginning of 2022: global
startup valuations have fallen by 23% since Q1, investor
activity has cooled, and yet founders are still busy seeking
funding.
Investor Scrutiny is Fluid and
Contextual
With less time to waste, investors are interacting with pitch
decks with reallocated priorities, and are focused on a strong
narrative.
The company purpose section – the section of the deck
articulating the clear reasons for its product or service – is
garnering more and more of investors' mindshare. In the last two
years it has risen from the 13th most scrutinized section to the
third, even though it contains as little as one or two
sentences.
As average time spent on deck decreases, the amount of time
spent on critical sections of a pre-seed pitch deck goes down, too,
increasing the pressure for founders to communicate clearly and
with impact:
- The Product section has taken up significantly less of
investors' time than the previous year (down 52% from 2021). Still,
70% of pitch decks have a complete product at this early
stage.
- The Business Model section has also dropped in investor
time spent (down 42%), but was still the second-longest viewed for
successful decks, demonstrating its importance but also a need for
brevity.
- The Traction section, a key deciding factor for
successful decks, actually received 41% more investor time in 2022
than 2021. It was also the most scrutinized section for
unsuccessful decks.
"With virtual fundraising still prominent, investor interaction
with slides can compensate for what we have lost with in-person
meetings – it can serve as digital body language that gives
founders those missing cues," explained Russ Heddleston, DocSend Co-Founder and Head of
Commercial, DocSend at Dropbox. "What we're seeing from these cues
is that investors are shifting gears as the seemingly endless race
to fund startups is slowing down. VCs are exercising more due
diligence and holding startups to higher standards, expecting
founders to communicate a clear purpose in their business."
Founder Perseverance
As the pace of startup funding becomes less urgent, founders
need more time overall to get funded. The average total fundraising
time increased from 13.5 weeks in 2021 to 15 weeks in 2022 and the
success rate within six weeks dropped from 36% to 25%.
Pitch efforts also saw a change in 2022, with an average of 52
meetings set as a result of 60 investors contacted as opposed to 39
meetings set out of 69 contacts.
Additional Insights
The report includes additional findings and data cuts such as
founding team makeup, exploring gender and race from a fundraising
perspective, and geographical considerations.
DocSend will continue to analyze the startup fundraising market
and release weekly metrics and analysis to the DocSend Startup
Index.
About DocSend
DocSend enables companies to share business-critical documents
with ease and get real-time actionable feedback. With DocSend's
security and control, startup founders, investors, executives, and
business development professionals can build business partnerships
that have a lasting impact. Over 21,000 customers of all sizes use
DocSend today. Learn more at docsend.com.
About Dropbox
Dropbox is the one place to keep life organized and keep work
moving. With more than 700 million registered users across 180
countries, we're on a mission to design a more enlightened way of
working. Dropbox is headquartered in San
Francisco, CA, and has offices around the world. For more
information on our mission and products, visit
http://dropbox.com.
Media Contact:
Carol
Boyko
104 West for DocSend
carol.boyko@104west.com
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SOURCE DocSend