Bursts of Color - Pitch Deck Red Flags
I read a lot of business pitch decks these days. I generally find this to be an enjoyable and effective way to quickly learn something about a business and determine whether to ask the founder for a meeting.
When reviewing a deck for the first time, the top green flags I’m looking for include:
Impressive founder backgrounds that demonstrate skill, tenacity and “why you”
Compelling traction that suggests “the train is leaving the station”
Big and obvious market opportunity
Interesting new take on a problem and/or solution
Natural fit with my own interests, experience and portfolio
On the flip side, there are a number of common things in these decks that tend to make me cringe and less likely to pursue an investment. I hear other investors mention these things too. Of course there are exceptions to every rule, and founders may have a great reason for being different. But all else being equal, I tend to encourage entrepreneurs to avoid some of these classics:
Too Much Problem Statement. If it takes 10 pages to explain the problem, either the market is scary complicated or the storyteller is struggling.
Multiple Business Models. Ideally the core business has a path to $100m revenue without spin-offs. When a small company has multiple revenue lines, it suggests: (a) they haven’t found a lucrative one and/or (b) the team is unfocused.
Obfuscated Backstory. If the the company started 5 years ago and recently pivoted, that’s fine - just explain. It doesn’t build trust if the deck says the company is 6 months old, but LinkedIn and Crunchbase show 5 years.
Obfuscated Metrics. Preferably we can just show a table or bar chart of monthly revenue with actual data points. When we get too clever with new metrics or time periods (500% m/m growth for 2 months!), it suggests we’re hiding something.
TAM Based on Internal Pricing (e.g., our $10k rate card x 1m hypothetical users = $10b market!). Market size is way more believable when we can point to existing spend (e.g., Uber’s original market = US taxi revenue).
Inflated Titles. When 3 or 4 young co-founders all have C-level titles, I foresee ego and power struggles ahead — not to mention difficulty hiring other execs. Cleanest approach here is one CEO and others are simply Co-Founders.
Overselling Minor Investors. If Jeff Bezos is an investor in a small VC that invested in the company, don’t mention Bezos unless he’s personally involved. Similarly, if a Sequoia Scout invested $50k, don’t say Sequoia invested.
Lack of Targets For This Financing. Don’t say: “We want $3m for hiring and runway.” Do say: “We are raising $3m, which will get us to $2m ARR and 100 customers in the next 18 months. This includes +4 engineers and +3 salespeople.”
Setting Valuation Without a Lead Investor (e.g., We’re raising $10m at $40m post). Just stay silent on valuation and let the market speak. Trying to signal valuation up-front can only hurt the cause.
1990s Powerpoint Look. Pitch decks don’t have to be beautiful, but they are a reflection of the company’s marketing and UI capability. So it’s worth getting a designer friend’s input… or at least using a decent template from Canva.
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