The Real Reason Long Pitch Decks Are a Red Flag đ©
Think of the pitch deck as an exercise in relentless prioritization.
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đ Thought Bubble: The Real Reason Long Pitch Decks Are a Red Flag đ©
Over the past several months, weâve devoted a couple of these sections to discussing the type of content that investors look for in a pitch deck, including timing and specificity. In doing this, though, we have glossed over a key, unstated function of the pitch deckâcommunicating the most important parts of the business to investors.Â
Of course, when you stop and think about it, this purpose is quite obvious and intuitive. All of the ink that has been spilled on how to craft a winning pitch deck is in service of exactly this. The suggestions offered in countless blogs and other outlets are designed to help founders understand what investors, the target audience for any pitch deck, care about the most.Â
The pitch deck doesnât just convey information on a company, it is a reflection of how a founder prioritizes and thinks about the business. If a founder canât condense the story to a reasonable amount of time or slides, it sends a red flag about a founderâs ability to broadly focus on what matters. In other words, investors extrapolate about a founderâs potential to identify and pull the levers that matter most to the business from the deck and/or presentation.Â
Just like there isnât an infinite amount of time to explain all of the different parts of your business to investors (or any other stakeholder), ââthere isnât an unlimited amount of time to do everything you might want to do in a day. One of the big risks an investor takes with an early-stage team is their ability to execute and move the business forward. Itâs easy to get distracted by activities that donât drive outcomes and the pitch deck is a good litmus test to see if a founder can stay focused on what is critical to achieving success.Â
The best CEOs are relentlessly prioritizing (episode 54). If it isnât materially impacting long-term goals, it doesnât happen. Similarly, if a slide or piece of information isnât significantly adding value to the story about why your business is a great investment, it needs to go.Â
As Mark Twain said, âI would have written a shorter letter, but I did not have the time.â The same applies to pitch decks. Donât get bogged down in details for an intro deck or pitch. Spend the time to hone the message and communicate the most important pieces of your business.Â
đ± The State of Pre-seed Pitch Decks
I recently came across a Docsend report on Pre-seed funding that leverages Docsendâs unique data to report on the sections investors are prioritizing when evaluating pitch decks. The data were collected over the course of 2022 and the first half of 2023 and showcases how investor preferences and actions have evolved; e.g., the time VCs spent reviewing decks went down 19% between 2022 and the first half of 2023. Based on these insights, Docsend provides key takeaways to help founders better position their business for Pre-seed rounds.Â
STV Take: One of the more interesting sections for me was a breakdown of pitch deck components for companies that were and were not successful in their fundraising efforts. What to include in a pitch deck and in what order are questions that come up often, and while I donât believe there is one prescriptive way to design a pitch deck (see the âThought Bubbleâ section), there are some common core elements. Based on the report, two sections that stand out as worthy ones to include are âWhy now?â and a financial narrative.
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â When the VCs say âNoâ
This article by Marc Andreessen, first published in 2007, has advice for founders if theyâre consistently hearing ânoâ from investors. Marc proposes an âonion theory of riskâ in which he describes how the risk of a startup gets peeled away layer by layer. The challenge for an entrepreneur struggling to raise capital is to identify the risks of the business and begin trying to address these until investors get to a point of comfort.Â
STV Take: I stumbled across this article earlier this week and found it to be as relevant now as it was then. This article provides a robust list of the different early-stage startup risks and outlines actionable insights for thinking about how to address them. As Marc writes, people often think of venture capital as ârisk capitalâ, but because early-stage investing is so risky, venture capitalists can only tolerate so much of it in any given deal. Every business will have risks at the early stages, but the more there are, the more they compound, which is why itâs critical to identify these early and start chipping away at them.Â
Episode 41 is also relevant here. There is a difference between risk and uncertainty. Investors are comfortable with some risks because they can assess the likelihood of certain outcomes, but with uncertainty, the risks are unknown. This is why itâs helpful to approach investors that are familiar with investing in the space where youâre building. Theyâll have honed the related risks and wonât be facing a âwe donât know what we donât knowâ situation.Â
đïž Pitch Deck Tear Down
Haje Jan Kamps highlights the good and not so great components of Plantee Innovationâs Seed deck in this TechCrunch article. He runs the deck through an AI tool to predict the likelihood of the company raising money. While the score was high and despite Haje thinking that the story was compelling in the opening slides, he disagreed with the AI toolâs score, which indicated the company had a likelihood of successfully raising money. His concerns go beyond the deck and are related to the broader market context that the deck doesnât address.Â
STV Take: Hajeâs feedback is reflective of what we often see missing in decks, the depth of the problem for customers and differentiation from competitors. Plantee Innovationsâ deck does a great job explaining the general problem and solution but leaves out why the team believes people will pay for an expensive solution, especially when there are much cheaper alternatives. As we have discussed before, the explanation of the problem in a pitch deck needs to be tangible and specific to convey the urgency and willingness of a potential customer to buy the product.
đŽ Decompression Zone
On Monday, April 8th, a swath of the U.S. and Mexico will be in the path of a solar eclipse, with many folks in the path of totality. Itâs the last one for 20 years! Here is more information to make sure youâre ready.