What makes a successful investor pitch deck?
I tseems to be the season for raising money for tech companies. After almost three years of global pandemic and having had a lot of virtual chaff being separated from digital wheat there’s a fair amount of capital raising going on now for new local web companies.
And capital isn’t as forthcoming as it has been. I’ve been approached by three companies in the last two weeks, and I’m not even a bit player in the market.
In each case it’s been what the market categorises as series A funding. Classically that follows the first seed funding (often by friends, family or angels), and later on is followed by expansion funding for series B or C raisings.
But the reality is they all tend to get a bit blurred, and all of them aim to build the company so that instead of eating dollars, it’s actually making money and delivering returns to investors.
The key instrument for getting funding is a pitch deck of slides – be they PowerPoint, Prezi or bespoke – that paints a strong enough picture of the opportunity and the fledgling company, that investors decide to put their money down.
There are great pitch decks, average pitch decks and dreadful ones. And I had the misfortune of suffering my way through a dreadful one this week.
It looked bad from the outset purely based on size.
It was a 52-page deck. If it takes you 52 pages to explain the secret sauce that’s going to make investors rich, then there’s something wrong.
The original Facebook pitch deck that Eduardo Saverin put together was 26 pages long. Uber cut it down to 22.
But Tinder really got down to it with a breathtaking 10-page pitch deck, with half of them iPhone screenshots. It worked, bringing in US$50 million.
The next thing I noticed about the 52-page deck was the structure. The first 10 slides just spoke about how great the product was and how it would transform the market.
There was nothing about the problem they were trying to solve. No insights about the market itself. And nothing about the customer pain they were trying to relieve.
Next was the team of directors and advisers. They were positioned as ‘‘leading players’’ in the local software as a service marketplace. I didn’t recognise a single one.
Me not knowing their players is neither here nor there. But I know a few people in this sort of business, and when I jumped on LinkedIn, it appears virtually none of my people knew their people.
The next thing that felt odd was the valuation. It was like they had simply plucked a number out of their nether regions. There was no total addressable market, nothing relating to valuation methodologies and no earnings multiples.
Then the cruncher for me. They described their service as being ‘‘the new Uber’’ of their sector. To me, this is the dead canary indicating a toxic digital mine.
Does it harness unused capacity? Is it on demand? Does it organise logistics and multi-stage processes for consumers? Does it slip between existing regulation, giving it competitive advantage?
Does it have radically different pricing structures that are big enough to collapse years of trust in legacy brands?
If the answer to these is no, then it’s not the Uber of anything.
So what makes a good pitch deck?
The 2009 Airbnb pitch deck used by the three founders to raise US$600,000 (NZ$980,000) from Sequoia/Y Ventures reset the standard of pitch decks a decade ago.
It started with a consumer problem, followed by the solution, market validation, the product and the business model.
The two killer punches here were starting with a problem that everyone could relate to, and finishing with a business model that showed if it got half of one tenth of 1% of the market, it would deliver US$200 million of annual revenue.
It finished with a competitor analysis and a brutal self-assessment of its own competitive advantage. All this in just 12 pages.
The Airbnb deck is getting a bit long in the tooth now. Over the past decade I’ve seen two other pieces of content increasingly being used to hook investors up front.
The first is a new way of looking at a problem. New insight to remove old pain.
A very current example is the Kiwi car parking app, Parkable. Everyone hates the stress of finding parks and everyone who rents a car park resents how much they have to pay.
Parkable looks at the problems a different way and solves both.
The other is irresistible functionality – features in your product or service that people just want to try. Features like the thumb swipe on Tinder, the various ‘‘what’s it worth’’ tools for houses or cars, or the music-recognising software like Shazam. Locally, a great example is the GeoNet app after you’ve just experienced an earthquake.
Meanwhile, the next time you get assaulted with a massive pitch deck, ask them that if Airbnb only needed 12 pages to raise US$600,000 why is it they need 50?
Mike ‘‘MOD’’ O’Donnell is a professional director, writer and strategy adviser.