How to Sell Your Business Model to VCs in 2024

1 May 2024

A few weeks earlier, I received an email from a founder seeking help with his pitch deck. This deck wasn’t getting much traction, with one investor bluntly responding to it, “Your revenue model doesn’t make much sense.” And it really didn’t—at least, not on the slide: 7 different revenue streams, confusing pricing models, and zero information on the actual target persona. It was chaotic and unconvincing.

Just like with your go-to-market slide, when it comes to the business model, it’s not enough to simply describe your pricing. In order to convince investors, your slide must explain the following:

  • how you will make money
  • why that engine will be efficient
  • how it will turn into a competitive advantage in the long run

And that’s where things get tricky. Many believe the best course of action is stripping the business model slide to the bones and avoiding burdening it with unnecessary metrics and information. The problems begin when some of those metrics and information you leave out turn out to be pretty darn necessary for selling your model to investors.

To help you nail the business model in your investor story, I’ve gathered all the key mistakes we at Waveup see founders making - and how to fix them.

Mistake #1: Treating Your Business Model as a Pricing Slide

This is by far the most common issue with the business model slide I see. Every other revenue slide we receive from SaaS startups looks like this:

This is not a revenue model slide—it’s a pricing list. Investors don’t care how much you’re going to charge your customers without the actual context explaining your vision. Charging $25 per month might be great if you spend $1 on user acquisition, but it will be terrible in an industry where the average CAC per account is $1000.

Instead of listing your tiers, tell investors the general mechanics of your business model. Mention all your primary revenue streams: subscriptions, transaction fees, onboarding revenue, etc. Explain their logic and the key pricing drivers (number of seats, features, or any other relevant levers). And if you don’t have much to write about - that’s ok, just keep it simple. A good, super basic example is below from a deck that raised $7M in funding.

Mistake #2: Having 5+ Revenue Streams

Here is another extreme: founders often fall into throwing on the slide every single way they plan to earn money. The more, the merrier, right? Not exactly. While the benefits of the well-diversified revenue stream model are well understood in later stages, early on, investors don’t want to wade through revenue streams that aren’t core to your business model.

For many businesses, these can include advertising, affiliate marketing, or most commonly, the sale of data (and most often, founders have no clue what data they will sell and how; it just seems like a good idea to throw in a fancy extra money source).

A good example is from the deck we were reviewing recently that listed all of the most common business models under the sun:

The thing is, complexity can be timely and called-for strategy, especially in the later stages, where it reflects the mountains of accumulated data, tested ideas, and resources. For an early company, however, it indicates a lack of clear vision and certainty, leading to overheads and friction during implementation.

When you’re starting, you focus on testing and refining a single idea before you move on to the next one, and that’s what investors expect to see you do with your business model.

Keep in mind that an effective model for an early-stage company will most often have up to three leading revenue streams, with the biggest focus on one or two. For each revenue stream, give a succinct, one-sentence explanation on how exactly they work, and only then talk numbers: the price range for your tiers, the % you’ll earn, and so on.

If the vision includes more revenue sources, clearly label which are the focus today - and which are reserved for the future. A simple slide from the deck that raised over $3M in funding is below:

Mistake #3: Not Showing Your Business Model’s Competitive Advantage

Every business model that stands a chance on the market and resonates with investors has some sort of competitive leverage—a business moat, so to speak. It’s the “secret sauce” that de-risks your business model and explains why it’s going to work long-term.

Depending on your case, this leverage might be:

  • Low-cost model, due to low or zero CAPEX or R&D costs.

  • High margin/high-yield model due to some inherent advantage in how you structured your cost/revenue base.

  • Effective land and expanded motion.

  • Super scalable/high-velocity business model, etc.

If your revenue model has an edge over your competitors, don't shy away from highlighting this as a key selling point. We’ve seen founders do this a few times, and it works well with investors. You might mention the competitor’s name or leave it out; the point is to demonstrate your unique advantage in comparison.

Here’s an example of how one client did this:

Mistake #4: Not Talking About Business Model Economics

The strength of your business model, or its 'moat,' hinges on solid unit economics. You don’t have to go too deep in the weeds and start breaking down all your metrics from COGS to Payback time in detail—save this for your financial model.

What’s crucial is to generally illustrate the most attractive aspects of your model through unit economics to support the bold claims you make in the title. The following metrics work well for convincing investors:

  • Low CAC with the amount of $ spent per customer.

  • High LTV with the amount of $ generated per customer.

  • A favorable LTV to CAC ratio.

  • Short payback cycles against industry benchmarks.

  • High profit margin per customer/order

A good example from a hospitality deck that raised $1M in funding is here:

What metrics you mention here and how deep into the nitty-gritty you should delve into ultimately depends on your industry and stage. In case you’re just starting out and don’t have enough reliable data, focus on key assumptions underpinning your model. For example, you can say, 'Based on our tests, our CAC is projected to be $10; with a user price of $30, our model becomes instantly profitable.'

Bonus tip: The Ultimate Business Model Slide That Raises Money

There is one slide that all VCs love—the golden slide, so to speak—the “How-we’ll-get-to-$100M+revenue” slide. This is a good example:

Why is it so popular? It’s because, in a focused, succinct manner, it both presents key business model drivers, provides the path to $100M in revenue, and also verifies that revenue figure against the overall market size.

The best part about that slide - as with all good things in life, it’s elegant, simple, and easy to understand. Generally, when building a business model slide, the ultimate final piece of advice is - to skip the complexity.

Present investors with a clean slide that reflects your primary model, key revenue streams, and a few crucial unit economics metrics that justify your strategy. Leave more complex strategies for later stages.