The Most common mistakes that startup founders make when pitching to investors?
Overall, my perspective is pitching is a skill and it can be learned. However, it takes a lot of practice to be good at it and this time can feel like a tremendous tax as a founder. You are
You are running a company and handling all the challenges and stresses of that reality and finding the time to really practice your pitch and think about the tough questions you are likely to get asked and the ways you want to answer them feels important, but never urgent (until you are in the pitch and then it is too late).
The most common mistakes in the pitch meeting itself really boil down to time management
Burying the lead – if you get more than 3 minutes into your presentation and it is not clear to everyone in the room what you are building and why, you are lost.
Starting the pitch with a clear statement of the problem you are solving (including a well defined customer) and the solution you are building (with a strong link to your broader vision) frames the rest of the conversation and gets the investor’s mind working with you not against you.
Humans like narrative and we will fill in the gaps in a story with assumptions (in entertainment they call it suspension of disbelief). If you start with clarity on the vision and illustrate the problem/solution, your audience will work to tie everything you say back to this starting point. The audience will work with you to make the story make sense.
If you don’t do this, the listener is left to fall back on the default storyline that is most common and fill the narrative gaps with assumptions that support that narrative. In startups, the default end state is failure and for most investors, the highest frequency outcome of a pitch meeting is a decision not to invest.
BioHazard – The investor should have read your bios before the meeting, done some light weight internet stalking and used this as a primary reason to take the meeting in the first place. Any investor who doesn’t know who you are when you walk in is probably not the best partner for you anyway. Push the team slide towards the back.
Lost in the weeds – no matter how much you practice your pitch, when you talk to investors (who have a pulse and are paying attention) you will have to go off script and answer questions. It is critical that you have thought about these burning questions prior to the meeting and have concise, direct and clear answers. Equally important to practice is ending answers with natural bridges back to your narrative and the deck you are using to drive the presentation.
Many founders will over answer the question, go far far to granular in their answer, and spend 10 minutes on details when a one minute version would suffice. The challenge here is that you will always know more about your business than the investor and while going deep to answer a question can be a way to illustrate how much you know, more often than not, I have seen founders lose their audience in the details and struggle to get the story back on track and back to a level the investors can understand.
Words and spreadsheets – presentation decks with slides that are full of text (that needs to be read) or columns and rows that need to be analyzed make no sense to me. The attention should be on the presenter and when you include slides like this the audience is distracted from what you are saying by what you have put on the slides.
Some people have different versions of the deck – one to send ahead and one to present – others have moved these data heavy slides to the appendix and sometimes people find compelling ways to walk through specific data points in financial projections for example, but I rarely see this as a good use of meeting time. The data matters, but it can be consumed asynchronously before or after the meeting.
Rolling Deep – Like any meeting, you should only bring people to the pitch meeting who have a critical role in that meeting. A co-founder who does not participate in the practiced presentation is not additive to your process. I don’t buy the idea of bringing someone to answer detailed questions in their area of expertise “just in case it comes up” and never, never, never bring an advisor or other service provider to a meeting (we can read about them in the bio slide in the back of the deck.)
Don’t oversell – Some people try to puff up their companies to look like they are more than they are – the pitch is designed to convince people to invest rather than convince investors that the company has a chance to be a meaningful and lasting business that defines a category.
This shows up in lots of ways from team slides that include people “who will join once we close this round” and advisors who have great backgrounds but are not actively involved. I have also seen founders use pipeline interchangeably with customers and equivocate average CAC with paid acquisition cost or LTV with contribution margin. Good investors will see through these tactics and the problem is, if you use one vanity metric, a big discount gets placed on all your other numbers.
It’s not an act – the pitch itself is a piece of performance art, but at the end of the day, you are looking for a partner in your business and the best way to figure out if the GP you are talking to is the right match for you is to be yourself. You have decided to dedicate some large portion of your professional life to this company and everyone knows starting a company is obscenely hard, likely to fail and as a talented person, the opportunity cost is really high.
So why are you doing it? What is the inspiration and where does the motivation come from – how do you give investors confidence that you have the “it” to do the impossible? Be authentic on these points and talk about the data and insights that gave you the confidence to start this in the first place. Surface the things you are worried about, nothing shows confidence like being vulnerable.
Talk about the areas of the business that you believe are critical to get right in the near term along with how you plan to approach these risks and where you believe you could use help. If it doesn’t resonate with the investor, it is likely that they are not your best potential partner and it is good you found that out at this point in the process.
Remember, you are on the buyside – It is easy to get lost in the selling when you go out to raise money. There are lots of no’s and it is easy to become obsessed with overcoming objections.
But, in any investment that any VC has ever made, when they issue a termsheet, what they are implicitly saying is “your equity is worth more than my money” and they are selling you on why you should take their money vs anyone else’s.
As a founder your time and your equity are the only finite resources that you have and when you start to fundraise it is easy to put both at risk of being wasted.
To avoid this, make sure to ask questions about the product you are buying with your equity. Don’t just say you are looking for a “value added investor” – actually talk about what you need and see if the VC product being offered is right for you.