I had the pleasure of attending a virtual pitch deconstruction for startups this evening hosted by the Seattle Angel Conference in preparation for SAC XVIII, so I’m going to get the information out while it’s fresh. The deconstruction consisted of a few parts: a meet and greet, a brief 1 minute pitch, another meet and greet, and then a 3 minute pitch with an investor critique.
As a sponsor for the Seattle Angel Conference, I am not only responsible for ensuring successful marketing campaigns bringing in new companies, but also to provide SAC with ways in which they can help demystify the process of competing in The Seattle Angel Conference.
I was able to compile some common mistakes that startups make when constructing a pitch deck, and I hope to offer some insight into what they are and how to prevent making them yourself.
Now that I’m home after a long night (our meeting ran over by an hour), I’m ready to sit down and get started. Seeing as how John over at SAC will likely deconstruct this article like the startups tonight, I have to add a disclaimer - this article is not to give you a template on the format you should write your pitch in, but rather things that the investors mentioned while critiquing the pitch decks.
A pitch deck or business pitch is a document that covers information an investor would want to see to help guide their decision on whether or not they’re interested in investing. A pitch deck is typically presented by a member of the company or startup to an individual or group of investors. Whether you’re going to a friend, a relative, an angel investor, or a venture capital firm, a pitch deck will save you the frustration and confusion of being underprepared.
This might seem obvious, but it's paramount that you define what problem your startup solves. This is something called Problem-Solution Fit. If your product doesn’t solve a problem for a group of people, then your product may not be viable.
Make sure to do your research, as many investors want to see that you have customers before you even have an MVP (minimum viable product). I know it seems crazy to try and get customers for something that hasn’t been developed yet, but this is something you have to get over. If your product resonates with people, they will be your early-early adopters, which is exactly what you need to prove that people want your solution to their problem.
So now that you’ve validated your solution to a common problem, it’s time to validate your team. Yes, your team - the people whose faces are always on your conference calls, the names on your most called list. Another primary issue I heard from investors tonight is that these startups weren’t validating the solution by showcasing the team that was going to provide it.
You can’t expect a dog groomer to build a rocket ship (apologies to the rocket enthusiast dog groomers, it’s just an example). That said, if you are a dog groomer attempting to build a rocket ship, talk about what qualifies you to build that rocket ship. Discuss your credentials, even if they’re self-taught.
Your team is what most investors are investing in. I’ve talked to investors who invested in a company just because they liked the team, despite knowing the idea would likely fail.
This may seem harsh, but keep in mind how many startups fail. You must have a monetization strategy & structure in mind before you approach an investor. If you don’t know how you’re going to make money, then an investor will likely have nothing to offer outside of advice.
If you don’t have a method for monetizing, I highly recommend you do as much research as possible on how different industries make money. Once you have a good idea of how you’re going to monetize, it’s time to map it out and compare it to your market - because you have a target market, right?
Your research should include the cost of operations for your industry and structure, your audience size, and user adoption rates for your industry. After you’ve done your research, you should be able to cobble together some realistic numbers that look good to an investor. If you can’t, it might be time to go back to the drawing board.
Your idea may well be the next Uber or Facebook, but if you try telling that to an investor, they may roll their eyes. Investors are tired of hearing people talk about being the next tech giant. They want to make a safe investment in a realistic market structure.
If you come into an investor pitch and talk about being the next Bezos, it’s really hard to take you seriously. We saw you pull up in your 80’s Volvo (in 2014 I met with a Venture Capitalist worth $1.6b who had just traded in his 80’s Volvo for a Tesla Model S, so you might be in the right place). Your startup needs to be realistic. Don’t go for the pie in the sky.
Make sure you respect the fact that you’re a small fish in a big pond, and that you’re interested in building a solution that people are going to pay for. The pitch deck should focus on how you’re going to get from point A to point B of your first phase. After you’ve realistically broken down to an investor that you can make that journey and that you aren’t skipping steps, you will have the chance to discuss your phase plan with that investor. You can reach the moon, but there is no pie.
Keep it short, and be sure to mention your name and the name of your company at the beginning and the end, and don't try to cover too much content. Here are a few things that were mentioned earlier tonight:
Tonight's 3-minute pitch deck included a slideshow, and this is the core of what this article is about. Your pitch deck is the document (in this case a slideshow) that helps guide the information you need to cover. Make eye contact with the investors, memorize your slide deck, and most importantly, bring your passion!
The sections above cover the major concerns I heard investors talk about tonight. Some additional tips include:
These aren’t going to apply to every investor you meet. These are just some of the things that came up in a live investor pitch I attended, and are admittedly subjective. I hope you enjoyed this article regarding my experience with the pitch deconstruction I attended tonight. If you have any questions or want to add additional information, feel free to comment below and one of our consultants will respond accordingly.