Decoding Investor Questions
This week we are unpacking investor questions, providing an analysis on the digital health SPAC boom and bust, and suggesting one improvement that makes a pitch deck more digestible.
Greetings! We are somehow only halfway through the week… 😥
🪄Decoding Investor Questions
Amanda Zhu, Co-founder at Recall.ai, shared a doc on LinkedIn that she developed to help her team decode investor questions during Recall.ai’s fundraise. In it, she outlines the question an investor will ask, the intent behind each, and an example answer. Her major takeaway during the development of this doc is that most questions are designed to uncover a few specific concerns around the market size, timing, traction, and team.
STV Take: Amanda’s analysis on what investors are really looking for when they ask their questions is spot on. The two questions that resonated most with me were “Why now?” and “How will this be a $100M+ business?”. As a Seed-stage investor, aside from team, timing and being able to see the path to a company getting to venture scale before a company has much traction are crucial elements to understand in the first meeting. If an investor doesn’t believe in either of those, they won’t move it forward in their process.
😵The Great SPAC Experiment
Halle Tecco wrote an article dissecting the outcome of the great digital health special purpose acquisition company (SPAC) boom of 2020-2022. As Halle explains, SPACs are shell companies that raise money via an IPO before acquiring an existing private company. The advantages of going public via a SPAC include lower fees and looser financial requirements. Unsurprising then that the digital health companies that went public via SPACs have failed at a rate 4X that of those companies that went public via a traditional IPO.
STV Take: SPACs, which have existed since the 1990s, experienced a resurgence in popularity in the early 2020s, attracting many (often younger) investors unfamiliar with their potential downsides. The hype surrounding SPACs stemmed from the perception that they offered a faster and easier route to the public market for high-growth companies. Unfortunately, this led to numerous companies going public before they were prepared for the scrutiny and demands. This misuse of SPACs ultimately tarnished many companies’ reputations, raising doubts about the actual value of digital health companies and transforming "SPAC" into a four-letter word.
👀 Make Your Deck Skimmable
This five-minute Deck Doctors’ video discusses how incorporating narrative headlines into a pitch deck can increase the odds an investor will take an intro call. As the video articulates, when an investor receives a pitch deck, they skim it, meaning they spend 20, maybe 30 seconds, evaluating it. If key points are buried in text that an investor has to sift through, they are likely to just pass. The Deck Doctors then walk through how founders can create compelling narrative headlines that pull out the major point in each slide, avoiding making investors think (VC Minute episode 27).
“A narrative headline is the title of your slide that clearly and efficiently explains the point of that slide. Done right, the audience doesn’t have to guess or dig deep into your content to understand what you’re trying to say. Done wrong, the information flies right over people’s heads.”
STV Take: The point about investors skimming a deck is very real. Investors see far too many decks to be able to spend an extensive amount of time on each. Usually, they’ll skim it first to see if it even aligns with their investment focus. A lot of decks can be eliminated on that factor alone. While skimming, they are also looking for standout elements that warrant a deeper dive. The best decks provide easily digestible content that piques investor interest, leading to an introductory call.