Pitch Decks are dead — It’s the Technology Stupid — “ Lessons for VCs and Startups”
Seedstars recently announced a $100 million fund for African Startups. Okay, work with me here, that is not the story for today. What I found fascinating, they revealed how some of their investments have gone south (read burst). This comes as no surprise to some of us seasoned veterans.
A closer look at most venture firms will reveal the underlying problems hiding in plain sight. The Venture Capital firms (VC) are usually staffed with MBAs and interns. Nothing wrong with that if you ask me, however evaluating tech startups has proven too big for their britches. The outcome can’t be any clearer than night and day. Investors monies are being burnt like a wild forest.
VCs should not blindly look at pitch decks as their primary source of data. They need to look at the technology, the user experience. This would give them a clearer lens different from what we see today. We can get ahead of ourselves and fool our selves that the market is tough, startups face enormous challenges, but the number one reason for high failure rates in tech startups is using dated 1970 technology.
Pitch decks are good, and they are important, however if you don’t have tunnel vision, you will realize they serve mainly 1 purpose, selling snake oil. What value do pitch decks provide to an end user. Or are we now living in a world where the money lender (VC) is the most important customer.
I have seen several startups with very good ideas, but when you look under the hood, at the tech implementation, your shoulders crumble. Am old skool and pitch decks don’t amount to a hill of beans in my world.
Listening to pitch presentations is nauseating, founders talk about how they are in $ 12 billion market. Really, a $12 billion market, explain to me how this is important. I really can’t blame these founders — they have been to startup schools (Accelerators) which shove this piece of baloney down their throats. Market size is important, for example if you are providing a tutoring service you can talk about the number of teachers, number of students, etc but mentioning a market size of $12 billion industry is feeding me with bread crumbs. Don’t pee on my leg and tell me it’s raining. We deserve a little piece of respect, spare us the glurge.
Another thing, I find counter intuitive is this myth, that this startup is the only one doing this. We are the first to do this, we are the only ones solving this problem this way. That is good for your internal staff meeting, but it provides no value in itself to the rest of us. Multiple people were working at inventing the light bulb. Being the only one working on something even if it’s true, is only important to your friends at your local dive bar. Anyone remember Myspace, how did that pan out?
The human brain is a very complex animal, and some times it plays tricks on us. Subconsciously it’s very easy to fall in a trap where we think we are communicating something important but the real world works in mysterious ways.
Even after a tech startup gets initial seed funding from a VC, the problems are just getting started. Hiring tech talent is a major challenge for startups. Tech hires make or break a startup. It’s akin to playing poker, with similarities to the lotto. They are more misses than hits. For complex tasks for every 100 coders out there, only 2–5 are good. You are free to follow the old fashioned traditional human resource hiring practices or employ the services of a recruiter, but you are likely to fall in a cesspit than hit pay dirt. Startups should stay away from coding challenges and aptitude tests. These are good for entry level positions, but the jury is hung on these practices. The world has changed since 1970, it’s no longer important to write the best code, most code can be found online, what is important is to make things work not write the best code. Have a cup of coffee with a potential hire. Approach the hiring like a pro poker player not your average kitchen table player.
Avoid hackathon’s and startup competitions like the plague. Yes, you are very likely to catch the plague in these competitions with so many contagious diseases in the air. Hackathon’s are good, but not for the reason they are designed for. The free food and cocktails are usually nice, however use these events to network, make friends, and get fresh ideas for the weeks ahead. In Europe the prize pool usually consists of a T shirt, a pen, and a gift hamper. In the States, the top prize for the good ones hovers around $100k USD. Pick and choose the startup competitions, don’t go for everything. Nothing good comes out of these competitions anyway, most of them are usually boy’s clubs with attendance gender ratios hovering at 90% for males.
To achieve gender parity in Tech, we can’t employ Jim Crow tactics of separate but equal. If am a hackathon organizer and my plan is to encourage female participation I would make it a requirement, that teams must be formed with at least 50% female representation. Girls out perform boys in high school and college, this is an open secret. So what goes wrong along the way. The reasons for their low numbers in tech are far and varied. If you look at the language used to advertise the hackathons you might find a few culprits. Some women have children, maybe if hackathon organizers provided child care facilities, this would help. To solve some of these challenges we don’t have to think outside the box, because there’s no box. We just have to clean our eye glasses and see clearly ahead, while avoiding tunnel vision.
To bridge the gender divide in these hackathons some feminist organizations have started organizing female only hackathon’s. While the intentions are from a good place and heart, such initiatives are derived from ignorance. This is a clear example of how to bark up the wrong tree. Kevin O’Leary from the hit tv show shark tank analyzed his investments and realized female led teams in his pool, gave him a higher return on investment. Some of us have known this for decades. A female only hackathon, is telling girls that they are not good enough to compete with boys, this is utter rubbish. What most people don’t know about shark tank, no one used to watch due to average pitches on the show. And the culprit, you won’t believe your eyes when you read this, the shows producers would ask for equity in order for a startup to appear on the show, when this requirement was removed, the quality of pitches improved from the cat litter delivery app pitches that we were accustomed to.
The low numbers for women in tech, is down to our patriarchal culture of discrimination. Women were able to vote after blacks in the United States, little wonder Obama was picked over a more experienced Clinton, and she could not even win against one of the worst candidates in modern times in the next election.
Women are not the only marginalized group. The disabled are receiving the short end of the stick too. These are things society needs to deal in order to give every person a fair shake, that will invent the cure of cancer. Some kid who is not going to school in Africa or Syria, might be holding the keys for this cure up his sleeve.
About the Author — Cavin is the founder of two companies in Edutech and Fintech. In his free time, you can find him on the golf course trying to reduce his handicap from 9 to zero.