Common Pitfalls to Avoid in your Startup Pitch Deck
Sharing some of the pitfalls often found in pitch decks from my experience and other investors I was fortunate to have worked with. These are not the golden rules but it’s the rationale behind that I hope are helpful to know.
1. A ‘first-mover advantage’ statement
“We are the first to market with no players and will dominate the market.”
Being the first mover never guarantees the success of any company without a good defensibility. If your target market is a really attractive one, there will always be newcomers, copycats or indirect substitutes.
If it’s a hi-tech product, would keeping it as a trade secret or patenting it be better? If it’s a marketplace, are you building the brands that consumers trust or able to secure the best terms from the key suppliers? If it’s SaaS, would your price or key features be the major factor you will keep ahead of competition? This post will not go into details but here are something to work on than just the first mover term.
- Network effect
- Lock-in effect / Switching cost
- Brand value / Trust
- Expertise (a novel or proprietary approach to do something, e.g., produce, process, reach)
- Price
- Exclusivity
- Regulation
It is also good to note that many successful companies are not necessarily the first in their respective market. Google’s search engine was introduced after Lycos, Yahoo! and Ask.com, while Microsoft’s successful Excel came years after VisiCalc and Lotus 1–2–3.
2. Using only a quadrant diagram for competition
“We truly differentiate from our competitors as positioned in this top quadrant.”
To be honest, a quadrant diagram tells almost nothing without data. Investors don’t care your positioning but want to know they are betting on the best team who have a genuine understanding of their market. Apart from the product/demo and traction, the competition page is a big opportunity to catch the investors’ attention which surprisingly many founders just ignore.
Give your investors more confident with some insights or numbers — prove that something there seriously works. If you have a story, tell it. Have you been consistently growing 30% while others fail to? or have you got an unfair advantage over the others? In most cases, investors do not expect to see you as the No.1 horse today, but you should be convincing that you can be there.
3. Not having a tech talent in the founding team
“We will use the money to hire engineers.”
While investors don’t have any problem with non-tech CEOs, securing a tech guy in the founding team should be done way before you start approaching any investor — after all it’s a technology company you are building. Imagine if someone asks for your money so they can go and hire the world’s best chef to work in their to-be Michelin-star restaurant. Why would anyone bother investing in a project which the most critical asset (people) is missing since the start?
4. Ignoring the goal to profitability
“It is not our priority right now as we need to capture the market.”
The thing about building cash-burning company with the only goal to sell and jump ship is that you are totally relying on things you cannot control. With some luck there will be exception like the Lazada case, but how likely can one expect that to happen to a particular company? At the end of the day, going public or not, profit is the one holy grail which keeps every business running, paying their talents and generating return to shareholders (including founders). People who build real businesses care about profit since day one and never make the company expenses other people’s problem.
5. Overusing the buzzwords
“We provide disruptive, cloud-based, cross-platform solution to help merchants advertise in a personalized, real-time and innovative way.”
Though we are not in the silicon valley, investors in SEA still have a considerable amount of proposals to screen each week. The key here is to keep things simple and away from redundancies (for example, the quote above could be trimmed to half-length and still convey the same meaning). There can be natural temptation to use fancy, catchy words to feel more confident but it’s the essence that excites the investors, not the sugarcoating.
This post is a part of my Venture Fundraising Basics series where I will try to share the fundamentals of raising venture capital for entrepreneurs and some local perspectives from my experience in Southeast Asia. For the complete outline and links to other posts, please visit here.
