Your palms are sweaty. Your heart is racing. You’re staring across the table at a group of investors, eyes locked on you, already skeptical about what you’re about to tell them. The stakes are high. You know that if you can just nail the next 10 minutes and deliver a knockout pitch, you could change the trajectory of your business. You take a deep breath, and you go. Your pitch is perfect. The investors stand and clap. You collect your checks on the way out the door.
This scene only exists in a TV studio fantasy land.
Whether it is made-for-TV “reality” drama or a local room of VCs, while your pitch deck is a valuable storytelling tool, it should not be the sole basis for making their decisions.
At its best, the pitch deck summarizes what you’ve accomplished and looks at where you’re going. I’ve seen and worked with thousands of entrepreneurs, and it’s simply too easy to get caught up in the myth of the pitch early on and lose focus on what’s important: building your actual business.
Some truths about the pitch.
At its worst, the pitch—especially in front of an untrained audience—can be a platform for focusing on the wrong things, reinforcing unconscious biases, and ignoring underlying fundamentals of a business. Accelerators are notorious for this. According to a 2020 Yale study of 1,100 startups at brand-name Silicon Valley accelerators, several interesting factors contributed to an increased likelihood of selection for funding:
- Teams that looked happy and positive
- Teams that were more enthusiastic
- Teams that used warmer and more engaging language
The problem? Happiness, enthusiasm, and warmth have zero correlation to the strength of your customer relationships, your business model, or your ability to build a great company. The study also found that the companies selected based on the criteria above, on average, underperformed on key indicators such as raising follow-on funding and staying in business. As the study finds, “an enthusiastic presentation overshadowed a lackluster business plan.”
And, to put a fine point on what this study found: “This effect was especially pronounced for teams composed entirely of women. In those cases, investment decisions were seven times more sensitive to pitch performance. The researchers speculate that investors simply reward women who fit their stereotypes—women should be warm and positive—and avoid those who do not.”
So, this problem is clear: if the “pitch” is the only time you have with the investors, there’s a good chance their assessment may be based on something other than the substance of your business.
Focus on building your underlying business—get commitments from customers, validate your technology/solution, and build a profitable and scalable business model. Savvy investors will look for and value these parts of your business. In my experience, the best investment opportunities surface after spending significant time with a team to understand and appreciate the opportunity. The pitch is simply a summary at a point in time.
Here are a few approaches to consider so you can address the problem:
- Build relationships with investors before you’re in front of that investment committee. Don’t limit your interaction to those 10 minutes. Spend time with key members of this audience to share more about your business and get their enthusiasm and alignment around what you’ve accomplished and where you’re going. Investment decisions should be based on hours, days, and weeks spent with you—not minutes and seconds.
- Avoid the shark tank-y crowd. If there’s insistence and infatuation on the pitch as the decision tool, it may not be the audience you want. Find partners willing to spend time with you, get to know your business, and fall in love with what you’re doing, not how you’re presenting.
- Don’t ignore these biases. It is an unfortunate truth, so practice your pitch. Practice builds comfort and consistency, which produces confidence. A more confident presenter is more engaging and will be perceived as calm, collected, and positive.
The bottom line: the true test of your investment readiness will be based on the substance and strength of your business model, your team, and your accomplishments. Take the time to build proactive relationships within your investment market, and prepare for when the right investors align with your opportunity.
In a future post, I’ll outline the components of a good pitch deck, including things to cover, questions to expect, and hot buttons to avoid.