Pitching it Right: Startup Investments

With the stars aligning themselves to cosmic proportions, I ended up evaluating over 1000+ pitch decks in the last 2 years. This might be a month's target for someone working with the Investment Team of a VC firm, but for someone like me who has an ON-OFF relationship with the start-up investment world, this was a learning opportunity.

Henceforth, the musings for this week are the learnings from the pitch decks, more so like the "TO DOs" and "NOT TO DOs". I might try to connect a few learnings to an investor's perspective to bring some clarity to the point in the discussion. Now, these are based on the pitch decks shared by startups who are looking at their first set of institutional or angel funds. So, if you have already closed a couple of fundraising rounds, you have already figured it out.

Insight 0: The Only Purpose

The pop-culture influence of the SharkTanks and the various other combinations of the Animal+Shelter reality shows have tried to paint an entirely different picture of what investment pitches are all about. It has led to a dysfunctional perspective of what "Startup Pitches" are and how it really happens.

I have not heard anywhere else, other than TV, where a check is given in less than 10 minutes of a pitch. I am sure the adrenaline rush, with the rising background music, is good for TRP (and business). However, that is not how investors invest in the real world.

There are stages like negotiations, due diligence, valuation, and a lot of back and forth. It's by far not a small decision, nor is it a quick one. So by all means, the primary purpose of an investment pitch (and by extension the pitch deck) is to get the next meeting.

So leave something for the imagination (not too much that they don't feel interested at all) and end the pitch on a high note. If you get the next meeting, it's a job well-done.

Insight 1: The First 15 Seconds

One of the most difficult things while evaluating a startup pitch is understanding "What exactly do you do". A lot of the pitch decks took too many slides and too many words to explain this. Trust me, no one has that time in the investment world.

Most of your pitch decks are going to be shared via email or other messaging platforms. It would make sense to clearly and in simple words state what you are solving, possibly in the first slide itself. If you are pitching in person, or via video conference, please make sure you bring clarity to the rest of the pitch in the first 15 seconds itself.

Preferably, I would also suggest having two versions of the pitch deck - the presentation version as well as the emailer version. Now, you can imagine the reason why and the relevance of the two versions.

Insight 2: Always PDF

We all know presentations on Microsoft PowerPoint or Google Slides (or the recent favorite Canva) are super cool with interesting animations and whatnot. The challenge here would be the consistency of the design and visuals across multiple devices and operating systems. And most times, it will get crappy.

So always build your pitch deck on the software of your liking, but export it as a PDF and share it. In most cases, the GPs or Senior Partners at a VC Firm are going to get print-outs of the same from their assistants during the weekly reviews. A PDF will help to also have the print version easily done.

Insight 3: Follow the Money

Investors are not always interested in the solution or the problem. Neither are they going to give you brownie points for using the most advanced technology available. The business goal of an Investment firm is to make money. And hence, they invest in startups.

So unless you are communicating how you make money and at what unit economics, you are not giving a convincing pitch. It's true VC Firms are not looking at profitability for early-stage startups, but revenues (or the possibility thereof) will be analyzed and that needs to be conveyed in your pitch decks in a simple, easy-to-understand manner.

Also, please don't copy-paste a spreadsheet from your CA. Even you wouldn't have read through that spreadsheet.

Insight 4: Properly Sizing Your Market

Most times, what I have seen across the pitch decks is the way TAM, SAM, and SOM are shown. Now, this is an entire article in itself. You might have heard about multiple methods of finding the right number viz. the top-down approach, the bottom-up approach, and a few others.

Most founders get stuck on the number rather than what the number represents. Irrespective of which method you use, the investor is looking to understand whether your startup has a big enough market that can support the desirable growth for investment.

Unless your market has the potential to grow in the future, the investor's money is not going to grow. Although this is based on a lot of assumptions, the market size should have some logical reasoning, if an investor asks for it. However, if you are raising your funds after a few rounds or have very specific data on your growth based on your traction for a considerable time frame, then the bottom-up approach will be a more accurate representation.

Also, ensure you are using the right survey data to show the market size. For instance, if you are building an app for byte-sized entertainment news in India, your TAM is not the market size of the Entertainment Industry in India, which would give you a large number but will be wrong.

And most times, as a startup, you might be creating new segments in the market. So a proper market survey will not be available. In this scenario, choose a very close market, or the market you will disrupt. For instance, if you are Uber in 2009, your TAM should have been based on the total radio-taxi market size, which is probably the market that you are going to disrupt and not the entire cab rental market. Similarly, if you were Netflix in 2007, the TAM is the DVD Rental Market Size and not the entire movie business.

Insight 5: Show off your Team

You might think, this is the least important slide in the pitch. However, you might have wondered how some startups raised such a big amount at a very early stage. The answer is simple. The investors believed in the team. In most cases, though you have all the fancy details in your pitch, with growth and traction and users and whatnot, the investor focuses more on the team.

Because on the date of the pitch, more than half the slides will be about the future. So trusting that THIS team can build THAT product is what investors need to be sold on. So make sure you have enough convincing data about each of your leadership teams (beyond shareholders and directors). Try to add any advisors or mentors you have onboarded that will convince your investor you have the right set of minds working with you.

Insight 6: Visual Clarity over Anything

You might want to show off your color skills with your pitch deck, or maybe you just love black backgrounds with red text. Or maybe going pastel on the background as well as text is your mojo. Although, you might be able to see this very clearly on your high-end Retina (or Iris) displays, most in-person pitches would be on a projector. Some of these colors might not get projected in the same depth as on a laptop screen.

Similarly, in the case of print-outs too, the wrong colors could prove difficult for readability. Always make sure the text and content are visible and the background of the text is not hindering the ability to read. Investments are not made solely on fancy designs. Content is the key factor here. And it needs to be readable.

-----------

While there are a lot more insights, these are a few thoughts that came across my mind going through most of these pitch decks. If you found value in these, let me know which insight was most helpful. If you have more pointers to share, comment here.

Also Published on www.mittutigi.com/blog