We previously had a client with a very powerful accounting software comparable needing to raise $3.0 M in financing from an investor. The company was consistently receiving negative responses by investors and could not understand why. They failed to acquire investor appointments and did not even pass the initial pitch deck screening round. We later helped the to realize that their pitch was too holistic and uninformative, they needed to clearly communicate their unique positioning points in advance.
A powerful investment presentation can help your company to get greater exposure from investors by their ability to more effectively follow your story. Having reviewed thousands of investment presentations on behalf of investors, we started to notice consistent problems that each one experienced. The most consistent problems, were also the ones that negatively impacted the investor’s impression. Therefore, we sought to create the top seven pitch deck mistakes that may negatively impact your campaign.
- Not being clear about what you do
A lot of people are motivated by things other than money, but a pitch deck that lacks a verbal story and is sent alone, leaves holistic pitch decks confusing and ignored. The biggest mistake that we have experienced are decks that leave the company’s value proposition vague. By value proposition, we mean the fundamental void it is filling in the market. Being unclear about what the company does and immediately going into how it works or why it’s different is often problematic.
In the example above, Tealet clearly defines itself as ‘The World’s Marketplace for Exclusive Teas’. This helps the reader to immediately understand that the start-up is an Internet platform for premium tea exchange. This is important because if you send the slide to one investor, they may have head you explain what the company does in person.
- Not focusing on your strengths
There is a good chance that any product or service is replicate, unless the company has powerful political ties that can make laws against other market entry. Therefore, your company should have some good reason why it is better than the competition. Failing to focus on your strengths will suggest that you are just another competitor trying to enter the industry. Strengths may be anywhere from special relationships in the industry, a robust management team, or apply to the business model and company positioning.
The example below is provided as part of the Airbnb pitch deck, which focused on the solution that Airbnb delivered to the market. The company identified the primary pain points for both sides of the market and how its strength was being the best option for boarding to solve these needs. The company made the solution the third slide in the full deck, communicating the importance of stating it right away to maintain the investors’’ attention.
- Not listing performance metrics
The performance metrics are used by investors to determine what your company has been able to achieve so far. It uses this information to understand how your company will reach future milestones given what the team has already accomplished. Essentially, they are looking to extrapolate your historical performance given the requested investment amount. It is important to list all positive performance metrics that are most important and key activities leading up to the financing.
For some of our investment banking clients, we have found that many of them ignore important metrics because they are unable to calculate them, or feel that they are unimportant. For instance, if the customer acquisition cost has been 20% lower than the industry average for the first two years, it is important to communicate this and the reasons why it has been occurring.
- Not having an impressive team
There is a cliché about the importance of a good team in helping a start-up company get funded. We are all about novel information and to provide something classic and well known, you can rest assured it is designed to be reinforced. Failing to have an impressive team is among the top three reasons why ventures do not receive financing. They lack any relevant work history, do not have prior experience working together, and generally lack any kind of special talent.
Investors realize that a good team is most likely to result in an IPO or successful acquisition. Therefore, they are on the lookout for companies that have a strong management team that have prior experience managing successful start-ups into exits. Even with big objectives and individual cases cited like Jack Ma alone in his apartment, investors want a well-rounded and impressive team that communicates success.
- Nonsensical financial projections
Investors are often used to seeing grossly optimistic financial projections that are based on little actual assumptions. What this displays is a management team that is incapable of forming reasonable financial assumptions or is being overly optimistic with the intention to provide more optimism than actual expectations. Either interpretation will likely result in the same distaste towards the investment.
The solution to this is to provide financial projections that are based on historical operating performance, the expected use of funds, and reasonable industry assumptions. If you make your financial projections on the premise that you will acquire 1,000,000 users in the first year, but your marketing budget is only $100,000, your customer acquisition cost must be justified by looking at similar companies, or having a reasonable excuse for the deviation.
- Providing too much or not enough information
Many of the presentations that our pitch deck consultants have seen either contain too much or too little information. Communication should be clear and concise, but understand what is capable of being omitted from the pitch deck. For instance, if your company is overly conscious about what to put in, investors will fail to understand what the message is. A management team page that provides only the images and titles of the team is highly unlikely to communicate their actual history and value.
In contrast, slides that contain too much information force the investor to only read a small portion of the text, or skip the slide entirely. Start-up companies would like to think that everyone has the same vision of their company, or that investor rejection should be much more personal. However, venture capitalists do not care about you or your investment emotionally, but rather the returns they are obligated to bring their returns. The example below is a slide that may contain slightly too much information. Points such the first should be emphasized, while general statements like fun & easy to play may be expensive real estate that the phrase cannot pay.
- Failing to have a call to action
The call to action is present in any presentation; it concisely outlines what your company is seeking. Without a clear call to action, investors may misinterpret what your actual request its. In the example below Kickfolio stated that it has already committed $275,000, just over 50.0% of its fundraising efforts. This communicates to investors that others are interested, so the company is not looking for an exclusive investor relationship.
Being open and honest about your call to action and describing exactly what your company wants will help you to achieve better results. A clearer call to action will help investors that have the same goals to be more aligned with your needs and weed out the ones that are only partially interested. It is more important to retain the attention from those that actually are interested, rather than those who may only be partially engaged.