Don’t Make This Easily Avoidable Mistake in Your Investor Pitch
As a founder, you know exactly why you started your company. You’re living and breathing your product value proposition daily, and you’re closely involved with your customers. You’re probably also raising money from investors in parallel with your client-facing work. But your investor-facing message needs to be significantly different from the one you present to your customers. Despite knowing the product inside and out, a lot of founders faceplant when it comes to investor pitches. They make some simple mistakes that inadvertently treat prospective investors just like customers. If you want to maximize your chances at funding success, though, you need to tailor your pitches better.
Is It a Customer Deck or a Pitch Deck?
I recently helped the founders of a startup to raise money. Their software has a great value proposition: It automates common enterprise workflows to make employees more efficient, which increases overall business productivity. It’s a compelling product with a measurable benefit, and it’s easy to show investors how the company’s valuation will grow rapidly as a result.
As I worked with the CEO recently on the investor pitch deck, I was startled when one of the revisions looked like a customer presentation instead of an investor presentation! The deck went into great detail about product features and included multiple user interface (UI) screenshots. But it didn’t address the market value of increasing business productivity and how giving employees back time by automating basic, everyday tasks directly contributes to that productivity. Despite several meetings and attempted revisions, the founders couldn’t make the deck reflect the higher business value that investors would want to see in order to invest.
The founders clearly understood where they fit into the market and how their product measurably impacts business performance. And they seemed to understand how important it was to tell the investors this story. But they just couldn’t seem to articulate it in the pitch deck. I had trouble understanding why this was the case until I put myself into their shoes. Back into their shoes, that is — shoes that I’ve worn several times as a founder and CEO.
Once I took myself back to where they are, I remembered this struggle all too well. Stepping away from the minutiae of your product and why you decided to build it can be hard. As a founder, you’re deeply involved in the day-to-day aspects of your product and its growth. You’re hands-on in developing features and roadmaps, and you spend a lot of time with customers. Given this, it’s easy to conceive of the value of your company too narrowly. You’re focused on the story of your product and why you’re building it for your customers instead of rolling it up to the higher investor level.
Constantly context-switching is hard, remembering to speak about features and pain points to customers then pivoting to address value for investors. But you must be able to do this fluently so you can simultaneously — and rapidly — secure customers and raise money.
Effective Founders Pitch Multiple Stakeholders in a Unified Way
If you’ve founded a company and created a product or service, there’s a reason. You’re solving a problem for someone or have a passion for something specific. You’ve identified a market need and a space you can fill. You see a way to build value in your company by solving for that need and have a path to make money for your team and your investors along the way. The problem you’re solving becomes your core driving purpose, and the unique way you’re solving it fills your head and your day-to-day life.
This solution-oriented focus makes developing a message that resonates with each of your stakeholders difficult. Even more difficult is creating a message that you’re comfortable repeating every single day. As the founder, you’re responsible for evangelizing the company and its mission. Whatever message you develop has to feel completely authentic to you since you’ll be repeating it frequently as the voice of the company.
I didn’t fully appreciate this until I had “graduated” from being a repeat founder and CEO and began advising startups. Now, with the benefit of hindsight and a broader perspective, I understand why it’s difficult to craft the right message for the right audience — especially for your prospective investors.
Your 4 Key Stakeholders and What They Need to Hear
Effective founders ask themselves, “Who are my stakeholders, and what do they need to hear about my value proposition?” This is a fundamental exercise to help you create a unified message that is specific enough for each of your stakeholders.
Stakeholder 1: Yourself
The first key stakeholder(s) is yourself and, if applicable, your co-founders. It’s critical that your messaging resonates with you so you can repeat it day in and day out and that it feels – and sounds – authentic. Why did you start the company? What problem are you solving, or what gap are you filling? When you solve that problem, what value does that bring? Spend time articulating the answers to those questions.
Stakeholder 2: Your Customers
A misconception common among founders is that your customers are simply ignoring the problem that you’re addressing. But they’re still in business, so they somehow manage to deal with it, even without you. Identify how they’re handling the problem today. Next, ask yourself what makes your solution so compelling that they would switch to you. What merits the cost, the learning curve, the risk and the unknowns of adopting your solution? When you develop your customer messaging, you also need to segment it into end-users, influencers and purchasers. The value propositions need to be tailored to each of these audiences. The higher-level message is also critical here: As you solve the specific pain point, what value does your customer experience? Are they saving time so they can focus on something else? Are they saving money so they can reinvest elsewhere? Are employees safer, happier, more satisfied or more productive? Think strategically about how solving a specific problem conveys value to the customer’s organization at a higher level and be able to articulate that value to decision makers.
Stakeholder 3: Your Partners
If your business model supports or requires partners, you have to articulate how you bring mutual value to each other. Do you add value to their ecosystem, expand into new markets or verticals or help expand horizontally within their existing accounts? Partnerships can consume a lot of resources, so this is a critical step to justify their investment.
Stakeholder 4: Your Investors
Your prospective investors need to know how your company will reach a sufficient valuation to drive returns that merit their investment. What is your path for an exit? How will you convince potential customers of your value so you can rapidly scale your revenue? You may have created an amazing solution to a vexing problem, but if you can’t contextualize the broader value for an investor, they will find the next passionate founder to invest in.
Why Is It So Important to Get This Messaging Right?
All of this matters because you have clear, urgent goals for your company.
- You need to raise money rapidly from high-quality investors who will be a pleasure to work with, who share your vision for the company and who can be strategic for your growth.
- You need to attract and convert high-value customers who will evangelize your product and your company, and who will become references because they love your product or your service.
- You need to secure partnerships to scale faster or reach target customers or markets with the help of high-quality partners if your business model supports or requires it.
Now that the stakes are clear, let’s focus on how to keep your investor messaging tight, focused and compelling so that you can raise money rapidly from the right investors.
Jackson Pollock Pitch Decks and Messaging Whiplash
As I hit the road to raise money as a founder, I was surprised that not everyone loved our pitch deck. It told the story of our product, which was already securing multiple patents and delighting customers. It highlighted that we’d partnered with large companies like Dell and Hewlett Packard Enterprise and that we’d won awards for innovation. It clearly showed how much we needed to raise as well as when and why. And it showed the key revenue and profitability milestones we expected to hit and when.
That’s all clearly important information for prospective investors. But it wasn’t enough. I was awash in feedback after every meeting. Everyone had comments about what information they wanted me to add or remove, what topics I should be addressing and wasn’t, what financial projections we should be modeling and showing and how to display and talk about the information. My head was swimming. Wasn’t my message clear enough?
This is not an unusual problem. I’m currently working closely with a founder who had a very solid pitch deck. Notice the use of the past tense. When I saw the deck after her first set of investor “preview” meetings, it looked like a Jackson Pollock painting. (If she’s reading this, know I say this with affection!) It was clear that she added slides and content to address each and every piece of investor feedback. Consequently, it had lost the clean, crisp narrative arc that made it so strong in the beginning. We sat down to return the deck to its original state and move the additions — all good suggestions from prospective investors — to the appendix, where much of it belonged.
In addition to how you structure your messaging and your deck, your core messaging itself can undergo whiplash based on feedback. In my most recent company, we had a very enthusiastic executive who loved to incorporate investor and customer feedback into messaging. If someone tied our value proposition to a new trend or hot industry buzzword, we suddenly had presentations or data sheets that reflected it. His philosophy was to present our solution and value proposition the way our customers perceived it. There’s validity to that, but it was too much, too fast, too responsive and not sufficiently thought out. He extended this to how he talked about our value in investor meetings. If I didn’t carefully monitor and weigh in on it, our messaging would have evolved as rapidly as social media hashtags do, based simply on the last conversation he’d had.
5 Ways to Craft an Effective Investor Message
Every prospective investor has a different idea of what they want to see in a pitch deck and in what sequence. And they suggest you keep the deck short and sweet. You’ll be balancing a lot of things to get the message just right. Here some key things to keep in mind so you stay sane and can raise money rapidly from the right people.
Do the Work to Identify Your Real Value
Your value proposition is not your product or service. It’s the value that your product or service creates. Does your solution free your customers to do “x,” or save them an order of magnitude of money so they can do “y?” Identify and benchmark this so you can offer deep context about why the problem exists and the true value of solving it.
Remember Your Investors Are Investing in More Than Your Product
If a prospective investor thinks your pitch deck is a customer deck, you’ve lost them. You need to speak at a level that resonates with them and explain your value in their language. Think like an investor, not a customer. You’re spending a lot of time with your customers and a lot of your energy on your product, so it’s natural to want to talk about it in detail with the people who will be enabling you to make it bigger and better by providing more resources. But your prospective investors aren’t funding the company just to make your product better. They’re funding the company so that your product can fulfill its higher-level value. Your product is a means to an end. It is not the end itself. Don’t confuse these two things.
Rely on Trusted Advisors Who Have Been Founders
Many investors have never been founders or operators. They haven’t been in your shoes. The most valuable advisors are veteran founders who have succeeded and failed and who are now investing in companies at your stage. They will instantly spot message creep and can help you lift your investor message to the right level. They can also help you anticipate and prepare for the questions, objections and feedback you’ll get during your investor meetings.
One of my founder clients received feedback from a prospective investor that her pitch was too serious and analytical. He suggested she add more “buzz and energy” to her pitch. My advice was not to change a thing. Why? Her financial services firm is deeply qualitative and highly regulated. Her personal brand is serious and analytical. Her ideal investor is serious, thoughtful and deep. There’s nothing buzzy or bouncy about the deal or the founder herself. She wouldn’t be authentic if she changed her pitch to appeal to his feedback — it was simply a bad founder/investor match. It’s incredibly important that you feel authentic and comfortable with your message, the tone of your pitch and the investors you ultimately choose.
Trust Your Gut
I coach founders and seasoned senior executives about the importance of learning when to trust their instincts. It’s critical that you learn to take input and listen carefully to your trusted advisors. But sometimes, things don’t work. Maybe you’ve done dozens of pitches without a second meeting or a signed check, or the advice you’re getting just doesn’t feel right. You started the company for a reason. You’re the one selling the message and the company, and it has to feel right for you. If you feel like your investor pitch needs to be tweaked, go ahead and do it, while still taking the rest of these lessons into account.
You should understand that investors aren’t customers. They don’t care as much about the product itself as much as they do whether it gets your customers and the broader market to the best end state. Don’t be immune to or closed off to feedback from those who have already learned this the hard way — fellow founders. Maximize your chances of success by incorporating feedback from a credible, small group of advisors you trust. And iterate your message by seeing what is working and then tweaking and testing. Most importantly, be authentic. You are the voice and face of the company and if the message doesn’t ring true, you won’t be able to effectively sell the vision and raise critical capital.