The Investor’s Perspective: How Pitch Decks Often Miss the Point
Over the years, we’ve seen thousands of pitch decks and had countless conversations with both investors and early-stage startup founders about investment opportunities.
As a result, we’ve gained a comprehensive understanding of both the solicitor and the solicitee’s perspective. Generally speaking, pitch decks tend to be too long and not comprehensive enough in addressing the financials; but this article focuses on one particular slide: the use-of-funds slide.
We explain the purpose of this portion of the pitch and how a paradigm shift can increase your appeal to potential investors.
Two approaches, one clear winner
After hearing your pitch, investors should understand how you plan to use their money. Enter the use-of-funds slide.
Sidenote: You shouldn’t use raised capital for re-investment purposes. The point of seed money is to give you the cash flow needed to grow your business.
Let’s put you, momentarily, in the investor’s seat. You’re about to hear two use-of-funds explanations from a space engineering company looking for a $1,000,000 investment. Which are you more likely to fund?
With your investment, we will:
- Hire three space engineers
- Purchase fuel
- Order the tech systems needed to support the launch
- Buy necessary hardware
With your investment, we will:
- Build a pilot-scale rocketship
- Run six test launches
- Analyze data from the pilot study to report what we learned and next steps
Pitch B is far more likely to close the deal. Here’s why:
Pitch A focuses on what the startup company will buy with your investment. While it does provide clear information about how the raised capital will be used, it doesn’t illustrate what the investor gains from the partnership. Many investors simply don’t care about this part of the process.
Pitch B instead focuses on what the startup company will do with your investment. The talking points are big picture items, focusing less on how the company approaches the work and more on what the investor gets by signing on the dotted line.
Pitch B illustrates what the investor can expect to receive from their investment. It shows the end result, which is what most investors care about. It’s also far more exciting to think about the outcome.
Flip the script
A relatively simple way to improve your investor pitch deck is to look at this common oversight. How have you presented the use-of-funds portion of the conversation?
Are you explaining what you’ll accomplish with the investment, or are you sharing how you’ll get there?
Typically, investors value deliverables above all else. Therefore, they need and want something tangible and measurable so that when you approach them in your next round of funding, they can assess how well you utilized their first chunk of change and (hopefully) agree to continue funding your business.
Reframe your points, focusing less on the day-to-day use of funds and more on the results. It’s a simple tweak to your pitch deck that can change the game.
This article is based on an episode of the WTFAQ Podcast.
Get straightforward answers to all your startup questions from Wiss CPA Matthew Barbieri.
Early Stage, Founders, investing, investors, Matt Barbieri, New Media, pitch deck, startups