Through the years we have evaluated a number of Investor Pitch Decks from startups, and we have noticed at least 7 recurring mistakes. If you are in the process of creating your startup pitch deck, here are some things you should really try to avoid.
1. No Compelling Story
Your slide deck absolutely needs to relay a story, your growth story, to be precise. This means that it needs to have a structure, a beginning – a middle – and an end. Each slide needs to advance this story, and make it a compelling one. It’s the narrative that investors will follow, so if your presentation deck is jumping from one string of data to the next without a very clear and coherent link between the two, then you really need to work on your structure.
Tip: Build an outline of your investor deck, and try to see how the flow of your content works. Is there an organic or intuitiveness to it? Is there a buildup? Do a dry run of your outline and if you find yourself needing to go back and forth, trying to link information presented on your 8th slide with info on your 2nd slide, then you have to rework the structure of your pitch deck.
2. Poor or Negating Market Size
This is the first set of data that affects the market penetration scenarios your pro-forma financials reflect. Don’t just throw vague figures or unsubstantiated claims hoping they’ll stick. Use credible sources, site your sources, and spend the time to size your market properly. Make sure that your assumptions don’t negate your growth claims, or require insane penetration levels to achieve them. Provide data that is relevant to the revenue templates you create. Your idea, your product, your platform, must absolutely have a monetization strategy in place, how this strategy will materialize has very much to do with what market you are trying to penetrate, and ultimately size.
Example: Say you have a B2B SaaS product targeting the EU market. Dig deep into the EuroStat database (horrible to work with, but much information there), and develop a market sizing technique. Start by choosing the industries that your product would be marketed to, create an exemption list i.e. exclude companies based on number of employees, or any other criteria relevant to your product, and assign a value to those left. This will yield a well-rounded market size, one that at the very least you can walk your investors through during a startup pitch.
3. Underestimating Competitors
This is a very common mistake that many startup investor decks make, and it should be avoided. Claiming you have no competitors is almost like saying that you are pursuing a market with very little worth. Neither is something you want to have in your presentation deck’s story. After all even the most disruptive ideas had to compete with the status quo at some point. That being said, you should research your competitors as much as possible, it will help you find ways to optimize your product, locate where you have a leg up over your competition, and allow you to communicate your positioning in a very tangible way.
Tip: Create an extensive product fact sheet template and fill in the blanks for your top competitors, including yourself. Make sure to focus on companies that have similar products and pay extra attention to those that might be active in your territorial positioning. This template will help you locate your USPs and allow you to find ways to highlight them in a much more visual way during the design process of your investor pitch deck.
4. Underdeveloped Business Model
Even though this is a no-brainer, you’d be surprised how often we are asked to review investor pitch decks that have a huge problem explaining their business model. Spend the time to develop a solid business model, and test to see if it is scalable. Beyond that, make sure that you have properly addressed all revenue streams your market sizing indicated an opportunity to claim a share in. This not only creates a coherent pitch deck, tying one piece of data to the next, but it also offers diversification benefits to your investment case. Create distinct revenue templates for each stream, and use that throughout your financial projections and market scenarios. Think of it as an extra precautionary measure to really put your business modeling to the test. If for whatever reason these templates aren’t working, then you might have actually stumbled upon a very serious problem you’ll need to fix, before presenting your startup pitch deck to anyone.
Example: Say that you’ve built an app that allows users to order concierge services from vendors near them. If your core monetization strategy is based on transaction fees from orders processed through your app, then this means that a transaction revenue template is the first one you need to create. However, if your app also allows these vendors to upgrade their status and be treated as featured vendors at an extra cost, then that would be the second revenue template you would need to create. If your app gains traction, which ultimately will translate into a large number of users, then an ad revenue template could also be created, activated in the second or third year of your projections.
5. Inflated EBITDA Margins
Be very careful when presenting your EBITDA margins as they need to be within very logical bounds. Inflated EBITDAs can occur due to a number of reasons such as unrealistic growth rates, underestimated costs, etc. This is a very crucial point because whatever growth rates you claim must be supported by your marketing, sales, and other costs. Additionally, make sure that your EBITDA growth rate is healthy. After all you are asking for an investment, you must show that this money is required for a set of things, and you must instill trust that you are aware of how markets operate. Assuming that you can recoup investment and turn profit within 8 months from your launch is not realistic and will make investors doubt the credibility of your entire startup pitch.
Tip: Project for a 5-year period, and don’t be afraid to show a negative EBITDA for the first or second year, especially if the investment asked will be used for heavy development, which takes time. If you end up with an 80%+ EBITDA margin on your fifth year, then you most likely have an inflated projection in your hands, which needs to be amended.
6. Horrible Design
Your Investor Pitch Deck is a very important fundraising asset, it is your collateral, it is an extension of you, your product, and your brand; treat it as such. Poor or sloppy design can only hurt your investment case and your deck presentation will most certainly fail in doing the one thing it is meant to, i.e. communicate your story. Try to be concise, use particular design accents throughout the deck, develop a layout that complements your story, and be visual. Organize your data in such a way that someone could digest it even without you holding their hand through it, and follow the golden rule of storytelling, “Show don’t tell.”
Tip: Write out all your copy and then pinpoint which parts of that copy could be translated into a visual element. If you are designing a PowerPoint deck you are given a set of tools to work with, but consider creating some additional assets in Photoshop or Illustrator so you can produce an infographic feel.
7. Bad Investment Allocation
Your investor pitch deck needs to culminate to a particular ask. This figure not only needs to complement your entire assumptions, but it also needs to be allocated in a balanced way. Investors want to know how their money is going to be used, and believe that in your hands their investment will multiply. Creating an allocation that only addresses product development, for example, begs the question what funds you’ll use to bring this product to market?
Tip: Try and group your expenses in three or four categories, and distribute the investment ask among those categories. You do not need to distribute equally, but you should certainly have a balanced approach between development, marketing/sales, and don’t forget to leave something for general working capital.
We hope this helps. If you want to check out our IPD toolkit, you can take a look at it here, and feel free to email us if you’re really stuck on something with your slide deck, we’ll gladly take a look at it.