The Perfect Pitch Deck, Part 2

SaaS, PaaS, Big Data, Social, Mobile, Artificial Intelligence, Share Economy and my newest favorite…Blockchain. Mention “Blockchain” and surely investors should pay attention!

At SenaHill, a key part of my job is filtering through scores of investment opportunities. In a previous commentary, “KYI-Know Your Investor,” I opined on the importance of understanding the types of investors you may face along your financing journey, and how to identify which are appropriate for your type of business and stage of funding.

Now let’s turn to your pitch deck, which may be your first (and only) opportunity to get an investor’s attention. To be clear, your deck alone will not be the reason you get funded. However, a crappy deck may prevent you from getting to that critical next step: a call or meeting. Professional investors are human. We all strive to process information overload efficiently, because none of us are long on time. You may have a compelling business, but a poorly constructed, confusing, or overly stuffed deck may blow your shot.

A modern investor pitch deck is not the same as an old-school business plan. A straightforward PowerPoint doesn’t mean you have a simple business—it means you were able to distill your particular opportunity in a manner that is easy to digest.  If it takes 30 slides to get your value across, you haven’t done a great job. A solid deck weaves a concise story and typically includes the following:

Vision (brief overview)

The problem/pain (What does your company solve for, and for whom?)

Product/Service (How do you solve problem/create value for your customer?)

Market Opportunity (How big a business can this be?)

Revenue Model (How does your firm monetize the business?)

Marketing/Distribution Strategy (How do you get the clients?)

Competitive Analysis (How you differentiate?)

Validation roadmap/traction (e.g., 6 anchor clients)

Team (includes BOD, advisors, key management)

Financials (Historical and Forecast)

Amount of the raise and use of funds (Always have a call to action)

Rather than dictate standard advice for your deck, I’m going to share my personal pet peeves on what to avoid. This way is more fun—a type of pitch-pile gallows humor from the trenches.

Hockey Stick Revenue Projections. This is so common, and every time an entrepreneur puts together an absurd forecast I roll my eyes. Don’t tell me you are going from zero revenue to $7M in year one, $22M in year two, and $98M in year three. It’s just not plausible. I’d rather see grounded and realistic forecasting about the time it will take to commercialize your offering. Every sophisticated investor knows forecasting is difficult, particularly for young companies, and we will bring our own sensible haircuts to your numbers (actually, a crew cut). Projections aren’t about numbers thrown up on a spreadsheet—we’re using this section to evaluate how you think. Is this founder in la-la land, or is she grounded in reality?

Expenses. The dirty cousin to Hockey Stick Harry is the Under-Count Expenses Eric. Unlike revenue forecasts, expense projections need to be much more precise. If an investor is trying to map out a path to “break-even,” pretending you can get there by not hiring the necessary people or grossly understating costs can only hurt you. This all ties together so you can raise the right amount of funding, not some artificially low amount. Remember, we are evaluating your ability to think clearly, not manipulate numbers.

Crazy Diagrams. A picture is worth a thousand words, right? Its purpose is to crystalize something important more clearly than you can with words. But if your chart or diagram isn’t intuitive, don’t use it. Scrap that system architecture flow-chart that shows five different databases attached to feed handlers, with squiggly-lined arrows cutting through some algorithmic optimizer and a dotted line to a photo of Mr. Monopoly holding a bag of cash. You will have plenty of time to show how the sausage is made at a later point of diligence.

China Syndrome. “There are one billion people in China—if we just reach one percent of them, we will be filthy rich!” I’m speaking here to the “Market Opportunity Fallacy (MOF).” It’s a term I just made up! Entrepreneurs get carried away with or grossly miscount the size of their market rather than articulating how they are going to capture it. “Americans spend $50B on eating out each month, therefore my restaurant will be a success.” I assure you that your restaurant will fail or succeed based on ten other factors that are unrelated to how much Americans spend eating out. In fintech, where we invest, I frequently hear “banks spend $100B a year on regulatory/compliance, so if we capture one percent of that spend, our business will be huge.” That isn’t a seductive pitch…it’s pointing to a pile of money that has little to do with you.

Name dropping. We invest in people. Your team, Board of Directors and network do count. However, don’t name drop someone in your pitch deck if he isn’t directly engaged with your business. While I get the value of credible and successful folk in your corner willing to lend their name or a light helping hand, it’s a double edge sword when seeking capital. So, Mark Cuban is on your advisory board? Oh, but he didn’t invest?

Non-Disclosure Agreement. Don’t ask an institutional investor to sign an NDA to see your initial deck. It creates friction. We will treat your information with care, and certainly aren’t here to steal your ideas. We won’t even contemplate an NDA until we have a high level overview of your business and feel strongly about taking a deeper look. For the more paranoid of you, keep the ultra-sensitive info out of the deck, and let the investor know they can have access to detailed material at a later date, post-NDA.

Valuation Expectations. I just shake my head in disbelief every time I see a deck from a start-up that thinks it can raise $5M at a $40M pre-money with nominal revenue and a product that isn’t yet built. It’s perfectly fine to be proud, ambitious and optimistic about your potential, but if you show zero signs of realism about your valuation, then it becomes difficult to take you seriously.

No Competitors. That quadrant chart that shows your company up in the far right, all alone?  That graph with check marks next to every feature and function, while your competitors have few checks? Claiming that there are few or no competitors who do what you do, directly or indirectly? All these are usually red flags, and mean you haven’t done the research on your market.

Buzzwords. Maybe I’m a bit jaded after screening more than 1,500 companies—but fancy buzzwords do not mean you have a great business. I’m a huge believer in distributed ledger technology (blockchain), but it’s amusing how many start-ups are throwing the term around, seemingly inserting them ad-hoc in the middle of a deck. You won’t be fundable just because you are “in the cloud,” or because incumbents have “legacy systems,” or because you are “social” or “mobile.” These words can indeed frame your model in a relevant way for an investor. Be cognizant, though, that without substance behind your buzzwords, they become empty phrases, transparent to the savvy investor.

If I had to identify one major takeaway, particularly for early stage businesses, it is this: Today’s investors evaluate a company’s leadership just as much as its actual business. Young companies must evolve, pivot and adapt to survive and thrive. Your deck is often the first window into your ability to think strategically and communicate, two key aspects of leadership that impact your fundability.

Share any thoughts/disagreements/experiences…I love a debate!
Kyle Zasky is a founding partner at SenaHill Partners. He serves on the Board of Directors of Airex Inc, Tradelegs, untapt and WealthForge Holdings, and was Co-Founder & Chairman of EdgeTrade.  www.senahill.com