As I’ve mentioned in the past, going through an accelerator like Techstars, YCombinator, AngelPad, etc. can make a big difference, especially when it comes to raising your Seed round. We raised our first $1M round after going through Techstars and I can tell you that it helped us a lot with the process of building a solid investor pitch deck.
While there are a lot of things that need to come together for an investor to fund your startup, the pitch deck is a critical piece of the puzzle. Founders that go through a YCombinator or Techstars often leave with very polished pitch decks that benefit from all the experience and expertise that comes from being surrounded by people who have done it before, and who look at pitch decks all day every day.
One of the topics that was covered early at Techstars was common mistakes founders make when building their pitch deck, and I before diving into tactical mistakes they covered one of the most common misunderstandings founders have about the purpose of a pitch deck. So let’s get to it:
For an early stage company a pitch deck is all about generating enough interest for an investor to agree to have a 30-60 minute meeting with you. You pitch deck will not convince someone to invest in your company – that’s your job and it will have to happen over Zoom (or in-person) over time.
I think Hustle Fund does a great job explaining this in their series about pitch deck mistakes, here’s what they say:
For an early stage company, the pitch deck has one purpose: to drive interest about your business… enough interest to schedule a meeting.
It should not (and will not) convince someone to invest in the company.(Source – Hustle.vc)
First, I can tell you I was confused about this when we first started our company, I always thought a pitch deck was all about getting an investment. It was really Mark Suster’s article back in 2010 that changed my perception here – it’s a concept commonly called “Invest in lines, not dots,” and here’s the gist of it:
The first time I meet you, you are a single data point. A dot. I have no reference point from which to judge whether you were higher on the y-axis 3 months ago or lower. Because I have no observation points from the past, I have no sense for where you will be in the future. Thus, it is very hard to make a commitment to fund you.(Source – Both Sides of the Table)
The reality is, expecting an investor to fund you, the first time they meet you, after running through your deck is very unlikely. Sure it happens, but when you see it happen you’ll often find it happening to founders who have either:
- Raised venture and exited a company before
- Worked for a VC firm (or were/are an EIR at one)
For the vast majority of startup founders, that first meeting will be all about showing an investor that you as a founder has what it takes not just to execute on your vision, but to pivot and grow your business at venture scale. This is the single hardest part about being a founder, it isn’t building the deck or landing your first customer, it’s convincing investors that you have what it takes.
This is also the #1 reason why an investor actually passes on a deal. While VCs give good excuses like “your TAM is too small,” they really mean they don’t believe in you and/or your team and your ability to get them a good return on their investment.
When venture capitalists tell you “your TAM is not big enough” what they are really saying is “I don’t think your team is smart enough to move to an adjacent market once you dominate your initial niche.”
They are not really saying your TAM is too small. Great VCs invest in companies with small TAMs all the time. They might believe that the founders’ think too small or that the founders just are not very good.(Source – Summation.net)
So let’s do a quick recap:
- Your pitch deck isn’t about convincing an investor to fund your company, it’s about getting them interested enough to meet with you
- It’s unlikely that even after meeting with you the investor will fund your company right away, build relationships, understand the concept of lines not dots
- If an investor does pass, don’t beat yourself up about it but also don’t necessarily trust they’re doing it for the reason they said