The Pitch Deck Trifecta: Problem — Solution — Product

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This article is a part of my Startup 101 series.

What is the Trifecta

In horse racing, a trifecta is a bet placed where you correctly pick, in order, the first, second, and third place winners of a race. What does that have to do with writing a pitch deck? Nothing, except that it is a great way to think about the inseparable nature of the following three slides in your deck: problem, solution, and product; and their natural presentation order.

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By the way, in my experience, much of the advice in this article applies to product management as much as it does to a startup. Product managers face the same challenges of presentation brevity and focus when they are championing their wares within and without an organization.

Exploring the Trifecta

Let’s explore this allegorical race. You need to convince a room of strangers (to you, they probably know each other) that you have identified:

1. A problem that is emergent, pervasive, and costly
2. A solution to that problem
3. The product that your customers will use buy spend a lot of money on to get rid of their problem

You will find many pitch deck examples clearly illustrating this, some real, some conceptual, if you search for them. My favorite comes from the Pitch Deck Coach. He has simplified and distilled the slides down into a few great examples and short descriptions. Go read it.

My purpose here is not to dwell on how to create these slides as much as it is to tell you how you are going to be evaluated from my side of the tale. This means I will cover both the slide content and the story you need to tell during your 30 minute pitch window, assuming you want to be a contender in this competition. And believe you me, you are most certainly competing for an investor’s dollars.

How Do You Win?

Easy! Simply demonstrate on three slides, using no more than five combined minutes, that:

• You are going to build something that solves a meaningful need (an actual market!)
• Your customers are excited to share with their colleagues (viral marketing!)
• They are willing to pay for the privilege of using it (a business!)
• They would be sad if you took that product away from them (great UX!)
• Nobody else can copy what you do, nor build a better, comparable, or cheaper product (it’s defensible!)

OK, I know I’ve just asked for a lot, but don’t give up yet. Like most things in life, there are a known set of best practices to consider and use, as well as many experienced professionals, resources, and coaches you can turn to. Believe it or not, the only thing that is actually hard is distilling it all down to just three slides and five minutes.

Why three slides? Because you have five minutes. Why five minutes? Well, remember what investors really want to see — the asset you are building that will substantiate your claims of an actual return on investment (ROI). If it takes you longer than five minutes to state what you are making and why, investors will get antsy and you won’t have enough time later to answer more important questions, such as how you are going to make build a business and an asset of value.

I can’t stress enough that this has to be done in three slides and in five minutes. It makes me sad to say that, because I still think like an engineer, and I really, really, want to show diagrams, equations, and plots.

I truly feel your pain. Rest assured there is a time and place for that, and that is the demo and due diligence that an investor will ask for if, and only if, they are suitably compelled by your value proposition. In fact, you will probably wish that they didn’t dig so deep at that point, and that you didn’t put that last chart in, because you just gave them another number to question.

So trust me, you’ll have your moment at the Whiteboard of Glory™, but that isn’t now.

An actual Whiteboard of Glory™

OK, So How Do You Win?

Right! Well, if you want to win, you first have to know how investors are keeping score. For this race specifically, that boils down to four areas: Belief; Innovation; Defensible IP; and Scalability.

Belief

This is the je ne sais quoi part. This is the “gut” or “instinct” test of an investor. Does it feel right? Do they believe your story? Is somebody actually going to buy this (this is before they even look at your traction data)?

Sam Altman, of Y-Combinator fame, explains this last question quite well in his playbook.

Some common questions we ask startups having problems: Are users using your product more than once? Are your users fanatical about your product? Would your users be truly bummed if your company went away? Are your users recommending you to other people without you asking them to do it? If you’re a B2B company, do you have at least 10 paying customers?

If not, then that’s often the underlying problem, and we tell companies to make their product better. I am skeptical about most excuses for why a company isn’t growing-very often the real reason is that the product just isn’t good enough.

When startups aren’t sure what to do next with their product, or if their product isn’t good enough, we send them to go talk to their users. This doesn’t work in every case-it’s definitely true that people would have asked Ford for faster horses-but it works surprisingly often. In fact, more generally, when there’s a disagreement about anything in the company, talk to your users.

Yes, we really do put ourselves in the shoes of your customers and try to empathize from their perspective. We draw on our own experiences and ask ourselves, if I were in that person’s shoes, would I use this? If the answer is no, well, you’re done.

Photo by Aleksandra Mazur on Unsplash

Finally, one more thing. Are you, the presenter, believable? Are you confident? Do you answer questions directly and succinctly? Do you look me in the eye when answering a question? Are you also speaking to the room? Is your answer “I’m not the technology person, so you have to ask Jennifer”? If the answer to any of these is no, you’re done. Except for the last one, always know the answer, unless Jennifer is right there in the room with you.

Innovation

The basic question you are answering is why this isn’t already available. Because trust me, somebody has already thought of this somewhere, and tried to build a business around it. As Mark Twain wrote,

“There is no such thing as a new idea. It is impossible. We simply take a lot of old ideas and put them into a sort of mental kaleidoscope. We give them a turn and they make new and curious combinations. We keep on turning and making new combinations indefinitely; but they are the same old pieces of colored glass that have been in use through all the ages.”

As I evaluate your product, the following questions go through my head:

• Is this something I read about twenty years ago in one of my engineering classes (note to reader, this is a real question that goes through my head with every pitch)?
• Is there risk in this technology — i.e. it may not work?
• Is there market risk? (Which usually means there is not a big enough market, or a market with very few players where losing single digits of customers is significant percentages of total available customers)?
• Is it a known technology and a known market of substantial size, which means this is a pure execution play?
• What gives you the right to win this technology, market, and/or execution play?
• Is this hard? Could I do it myself, without knowing anything about anything, by hiring some independent contractors? (Note: I will never do this myself, but I do ask, could I do it myself. If the answer is yes, then I am highly skeptical that this is really going to be a successful business).
• Has somebody already done this and failed and ran out of money? Why? Was it too hard, was the market timing not right, relevant technology didn’t exist, or just couldn’t figure out how to make any money doing it?
• How much does your product improve over today’s state-of-the-art or state-of-the-industry? (Or is it enabling something totally new and never before seen?)

You can answer the above directly in your upcoming slides or verbally, and I will be checking them off as you address them and silently judging you if you don’t. The more obvious it is from the material presented, then the more time you have to talk about other things.

Defensible IP

Here, the question is what makes this product uniquely yours? If you start doing it, is somebody going to copy it? The answer is probably yes. In fact, somebody is probably doing it right now. If the answer is no, then you probably don’t have an idea worth copying, so you’ll never build a business with a meaningful ROI.

So, what keeps somebody else from copying you? Or more specifically, how hard is it to copy you? Hopefully your answer is “I have patents”. Patents are good and supposedly defensible. Another good answer is “years of academic study”.

Years of experience or in-depth market knowledge is also an acceptable answer, but be careful here, as I explain below. This answer is especially compelling when you are implementing a very complex system. e.g. Rockets — they are easy to make, relatively easy to get them to space, hard to keep them from exploding, and very hard to get them to altitude with the right orbital insertion parameters.

Hopefully your answer is actually some combination of the above. That is very good. Usually though, I get the following answer:

• First mover advantage
• Trade secret/tribal knowledge

Now, both of those are honest answers and could be true, but they are hardly defensible. Let’s take the first one: First mover advantage. There is no such thing. Do you remember Friendster or MySpace? I doubt it. But you do know Facebook.

Photo by Goh Rhy Yan on Unsplash

Here is my favorite example. Let’s say you are running the 800m dash. You start, and Usain Bolt is loitering around the track. It takes him a minute to notice you are running. Think you’ll beat him? I mean, you have first mover advantage!

No way. Usain Bolt decided to join this little jaunt. You will lose. He finishes the 800m dash in 2:07. You would be lucky to finish in 3:15. He just beat you by eight seconds despite you have an 30% more time to run! Maybe you are an above average runner, and you can close something out at 2:45. But run the race again. And again. And again. How do you do? Yep, you lose, repeatedly, except for that first race, which you may have (narrowly) won.

Not very defensible at all.

But is there truly no such thing as a first mover advantage? Sigh, no — theoretically, there is. It’s when you have already addressed the technical superiority and designed a product that customers truly love, and the customers in your market represent a zero-sum game. In other words, if they use your service, then they will not use any competing service. Then, and only then, does getting the customer first matter, and hence a “first mover advantage”. But your advantage in this case really is that you have a better product than your competitor, because if theirs was better, customers would switch, so you have a short-term win at best. I cannot think of an example where two products were identical with no clear advantage over one another, where consumers didn’t just use both (think Lyft and Uber), or switch between them periodically to take advantage of new customer discounts.

And now the second one, trade secret or tribal knowledge. Are you telling me that you are the only person on the planet has this knowledge and using it? Probably not. I mean, you likely learned it from somewhere. Again, not very defensible.

You need a great answer to why you will continue to be better than your competitors. And it is not an easy answer. But maybe, just maybe, if you can’t provide a defensible answer, then your product is not safe from competition, and therefore your company is a very risky investment, which is fair for any investor to point out. So have your answer prepped and ready to go.

Scalability

Ah, last, but not least. Is your product scalable? In other words, it is easy for me to believe that you can satisfy your first 10 customers. But what about your first 100? 1k? 10k? 100Mth customer? I’m going to work that through my head.

Another concept that is not new in nature, but has recently become popular, is the concept of the network effect. This phenomenon means that a product or service becomes more valuable as more people use it, which in turns leads to higher adoption of the product, which in turn makes it more valuable, ad infinitum. Think of Uber — if you only have 50 passengers in San Jose, and 30 drivers, the odds of a driver and a passenger being close to one another, at the same time, is low (San Jose is quite large). But if you have 500K passengers and 300k drivers in San Jose, the odds of connecting a passenger to a driver instantaneously improves significantly.

What does this mean from a product standpoint? The question is how much money will need to be pumped into a business before said network effect takes place. Think of it like a nuclear reaction. Below critical mass, nothing happens. Just the right amount, and you get a chain reaction. I want to know what it will take to create that chain reaction, and when you’ll create it.

The network effect is a very compelling investment trait, so if your product will benefit from it, be sure to call that out clearly (or make it obvious in the slide deck), and when investors expect to see it, relative to the current funding round.

The Complete List

There are more than four things you have to cover, but the above are the most critical. Here is my complete list that I look at while evaluating a pitch:

• Believable
• Innovative
• Defensible IP
• Scalability & Network Effect
• Competition
• If physical goods/hardware: Durability, Manufacturing, Cost Recovery, Refills
• Gross Margin & Cost of Goods Sold
• Market Ready (is market ready for product, and is product ready for market)
• Minimum Viable Product
• “Stickiness” of product

The competition slide will come later in the presentation, so don’t worry about that, but the rest should be addressed in those five minutes. The more obvious it is in your presentation the less time you need to spend talking about it. This means you have a huge job when crafting and distilling the story to make sure your words are in alignment with an investors thought process.

In fact, practice. Pitch to a friend or a colleague. Poke holes in your talk. Ask tough questions to yourself. Answer that question directly, do not waffle or misdirect, I will notice. Develop a FAQ with short answers. Practice delivery. Speak confidently and look people in the eyes. Learn how to defeat the question. Predict and practice, just like you would in any game or sport. Time yourself!

The Takeaway

You already know what I am going to say. If there is one thing you need to remember from this article, it is that you have three slides, five minutes, to succinctly present the problem, solution, and product. Look at yourself in the mirror and practice saying the words out loud — three slides, five minutes. Chant it during your daily meditation. Create a bubble font of 3S5M and incorporate it into a henna tattoo on the back of your hand.

Three slides. Five Minutes.

That’s all you have to do to create a winning trifecta.

This article originally appeared in TheEntrepreneurd on August 03, 2019. I use my background as a co-founder who has dabbled in business development, software development, sales, and angel investing, to create original and synthesized thought content related to the world of entrepreneurship and startups.

The thoughts and musings presented in this article are my own, with the exception of those that aren’t, and I always give credit where credit is due. I would love to hear your thoughts, feedback, and insights.