By Richard D. Harroch and Don Keller
Startup companies often prepare an “investor pitch deck,” which is a slide presentation summary of the company, its team members, the company’s products and technology, and other key information. The investor pitch deck is often used by the startup when trying to raise seed, angel, or venture capital financing.
Raising capital for your startup can be challenging, so it’s key to nail your pitch deck and avoid the common mistakes startups often make when preparing them. In this article, we review the most common mistakes as well as provide links to relevant articles and sample pitch decks to help you prepare the strongest investor pitch deck possible.
Mistake #1: Not Preparing the Investor Deck with the Format and Content That Investors Expect
Investors expect the investor pitch deck to cover the following topics, roughly in this order:
Company Overview
Mission/Vision of the Company
The Team
The Problem
The Solution
The Market Opportunity
The Product
The Customers
The Technology
The Competition
Traction
Business Model
The Marketing Plan
Financials
The Ask
For an in-depth discussion of what an investor pitch deck should contain, see How to Create a Great Investor Pitch Deck for Startups Seeking Financing.
Mistake #2: Not Having a “Company Overview” Slide Right at the Beginning
It’s very helpful if the page after the cover page of the investor pitch deck is a “Company Overview,” in which in you summarize in bullet points your business, the problem it solves, where you are located, the experience of the management team, and any key traction you have already established. It gives investors the big picture right away, so they know what to expect.
Here is an example of an effective “Company Overview” slide:
Mistake #3: Not Articulating How Big the Market Opportunity Is for the Company
Investors want to invest in big opportunities with large addressable markets. The pitch deck has to convince investors that there is a real and significant market where the company can capture a meaningful stake. Make sure to show that the addressable market is really the company’s total addressable market.
Mistake #4: Not Showing What Traction the Company Has Already Obtained
It’s helpful for investors to see a slide called “Traction” showing the progress the company has made so far. The “Traction” slide can include information about any of the following:
Early customers or pilot programs
Revenues or other key financial metrics
Strategic partnerships
Press and PR
Testimonials
Progress on product development
Investors want to see that there is already some existing traction and usually avoid investing in just an “idea.”
Mistake #5: Making the Pitch Deck More Than 15 or 20 Slides Long
Investors have short attention spans, so don’t present them with a pitch deck longer than 15 or 20 slides. If you can’t fit everything into that, consider producing an appendix or a separate document. For example, if you want to show detailed financial forecasts, that can be included in a separate document (and present only high-level financials in the pitch deck itself).
Mistake #6: Having an Unprofessional Look and Feel
Here are some common mistakes that can make your deck look unprofessional or outdated:
Poor layout
Low-quality graphics
Inconsistent font sizes throughout the pages
Poor titles for each slide (stick with the conventional titles listed under Mistake #1 above)
Inconsistent header title style throughout the slides
An outdated date on the cover of the pitch deck
Messy or confusing charts
Avoid cramming too much detail or text into each slide, as you can always supplement the information in your live presentation. A slide should ideally have no more than 3 to 5 bullet points. Venture capitalists receive thousands of pitch decks/pitches a year, so they can’t afford the time involved in reviewing overly long or wordy pitch decks.
Always send the deck in PDF format to avoid problems with layout, fonts, and alignment of slides that can sometimes happen in PowerPoint or other presentation software.
Mistake #7: Not Reviewing Other Pitch Decks
When creating your pitch deck, it’s always helpful to review other pitch decks to get ideas for your presentation.
Here are some pitch decks online to review:
Recuperate.com pitch deck for its seed round (mobile app company)
LinkedIn pitch deck for its Series B venture round (professional business network)
Facebook’s original pitch deck (social network)
Airbnb’s pitch deck for its angel round (platform for renting spare rooms, houses, or apartments)
Mistake #8: Not Clearly Articulating the Big Problem the Company Is Planning to Solve
You need to set forth the problem your startup is trying to solve, and convince investors that it’s a big problem that can lead to substantial revenues if solved. Why is it important to solve this problem?
Mistake #9: Not Clearly Articulating Why Your Solution to the Problem Is Compelling
Your proposed solution to the problem must show why it’s better than other existing solutions in the market. How is it better with respect to features, functionality, ease of use, cost, or otherwise?
Mistake #10: Not Showing Why Your Technology and Intellectual Property Rights Are Valuable
Investors will be particularly interested in your underlying technology (both existing and that in development). This slide of the investor pitch deck should address:
The important elements of your technology
Key intellectual property rights the company has (patents, patents pending, copyrights, trademarks, domain names)
Why the technology is or will be superior
Why it will be difficult for a competitor to replicate the technology
Mistake #11: Showing Uninteresting or Unrealistic Financial Projections
If your pitch deck shows projections for the company to become only $5 million in revenue in five years, investors will show little interest. Most investors want to invest in a company that can grow significantly and become an exciting business.
On the other hand, if you show investors projections of $500 million in revenue in just three years, they will just think you are unrealistic—especially if you are at zero in revenues today. Avoid assumptions in your projections that will be difficult to justify, such as how you will get to a 10x growth in revenue with only a 2x growth in operating and marketing costs.
Mistake #12: Stating That You Don’t Have Any Competition
Telling investors that you have no competition will likely result in the investors believing you are unrealistic or naive. Of course you have competition, whether direct or indirect (such as someone who provides a substitute solution). Investors can almost always find some credible competitors by doing a simple Google search.
Investors will expect you to know the competitive landscape, and how your product, technology, and marketing measures up to the competition. Never belittle or underestimate the competition.
Mistake# 13: Not Being Able to Articulate a Coherent Marketing Strategy
Just because you build something great doesn’t mean it’s going to automatically sell to customers. So investors will want to hear about your plans to market your product or service. What outlets are you going to use? How can you cost-effectively reach prospective customers with your offering? How will you market via social media channels, such as Facebook, Twitter, LinkedIn, Pinterest, etc.? Will you do content marketing and put sponsored posts on sites like BusinessInsider.com, Forbes.com, and AllBusiness.com? Will you do search engine marketing and can you show it will be cost effective? What additional steps will you take to get sales of your product?
Mistake #14: Not Understanding Customer Acquisition Costs and Long-Term Value of the Customer
Investors will want to dive into your understanding of customer or user-acquisition issues. What costs will you incur to acquire a customer? What will be the likely lifetime value of the customer? What channels will you use to acquire that user or customer? What is the typical sales cycle between initial customer contact and closing of a sale? Not being prepared for those types of questions will influence investors’ perception of how well you have thought out your business plan.
Mistake #15: Being Unable to Show How the Investors’ Capital Will Be Used and How Long It Will Last
Investors want to know how their capital will be invested and the company’s anticipated burn rate so that they can understand when you may need the next round of financing. It will also allow investors to test whether your fund-raising plans are reasonable given the capital requirements you will have. And it will also allow investors to see whether your estimate of costs (e.g., for engineering talent, marketing costs, or office space) is reasonable given experiences with other companies. Investors also want to see the milestones that are expected to be met with their investment capital, and whether or not that progress will be sufficient to raise the next round of financing.
Mistake #16: Presenting Unrealistic Valuation Expectations for Your Company
If your pitch deck shows you want a $100 million valuation when you started the business three weeks ago or don’t have much traction yet, the conversation will likely end very quickly. Often, it’s best not to discuss valuation in a pitch deck or a first meeting other than to say you expect to be reasonable on valuation or that “the market will determine the appropriate valuation.”
Mistake #17: Making It Difficult for the Investor to Get the Pitch Deck
Make sure to send the pitch deck in a PDF format to prospective investors in advance of your meeting. Don’t force the investor to get it from Google Drive, Dropbox, or some other online service, as you are just putting up a barrier to the investor actually reading it. And make sure not to insist on an NDA (non-disclosure agreement) being signed in advance. Most investors will refuse to agree to an NDA just to hear a pitch or get an overview of the company.
Conclusion
Avoiding these common mistakes with your investor pitch deck will greatly enhance the likelihood of obtaining financing for your startup. And don’t forget to make sure the story is compelling and interesting. You must address the topics that investors expect to see.
For related information, see:
28 Mistakes Entrepreneurs Make When Pitching to Investors
How to Create a Great Investor Pitch Deck for Startup Seeking Financing
65 Questions Venture Capitalists Will Ask Startups
Sample Investor Pitch Deck for a Mobile App Company [downloadable template]
Richard D. Harroch is a Managing Director and Global Head of M&A at VantagePoint Capital Partners, a large venture capital fund in the San Francisco area. His focus is on Internet, digital media, and software companies, and he was the founder of several Internet companies. His articles have appeared online in Forbes, Fortune, MSN, Yahoo, FoxBusiness, and AllBusiness.com. Richard is the author of several books on startups and entrepreneurship as well as the co-author of Poker for Dummies and a Wall Street Journal-bestselling book on small business. He is the co-author of the 1,500-page book by Bloomberg, Mergers and Acquisitions of Privately Held Companies: Analysis, Forms and Agreements. He was also a corporate and M&A partner at the law firm of Orrick, Herrington & Sutcliffe, with experience in startups, mergers and acquisitions, and venture capital. He has been involved in over 200 M&A transactions and 250 startup financings. He can be reached through LinkedIn.
Don Keller is a corporate partner of Orrick in Silicon Valley, where he advises high-growth technology companies. He has advised clients on more than 60 public offerings, 75 acquisition transactions, and several hundred venture financings. Don currently leads Orrick’s Technology and Life Sciences Sector, which is one of the three focus areas (along with energy and finance) for the firm. Don is a former member of Orrick’s Board of Directors, served as head of the firm’s global corporate practice, served as head of the firm’s Silicon Valley Office, and served as co-head of the firm’s diversity efforts. He also previously served for many years on the Executive Committee of Venture Law Group. Don is currently focused on using technologies in the legal process to create for clients greater efficiency, control, transparency, and records management.
Copyright © by Richard D. Harroch and Don Keller. All Rights Reserved.
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