Bad Startup Advice: Anything Related to Pitch Deck Formats

Dear Fellow Founders,

In the early-stage of your journey, you’ll likely be searching for answers and inundated with a thousand different perspectives. Knowing which way is up or down can be extremely challenging if you’ve never done this before, and it’s made even worse by the barrage of trite “close your round using this one weird trick” content you see all over LinkedIn.

The goal of these Bad Advice reviews isn’t to call people out (okay, maybe a little bit), but to help you form your own perspective and deeper understanding of what most of these authors are really trying to say. At En Verite AI, we’re really focused on helping new founders, specifically, find their footing as first-time CEOs because we realize it’s incredibly hard.

Today, let’s look at some bad advice around pitch decks. If you Google “best format for pitch decks” you’ll get hundreds of different articles that all claim their format is the best format to pitch with. But frankly, that advice focuses on the wrong things: aesthetics and personal preferences.

One of the most eye-opening pieces of advice I ever got as an early-stage investor was from a mentor of mine who built a unicorn, took it public, then set up his own VC and now manages several billion in assets. He told me very early in my career that: “the thing you have to understand is - most investors aren’t great operators. What makes us successful is the ability to pattern match accurately, and the ability to recognize momentum when we see it.”

Ten years after he taught me that, I can honestly tell you - I don’t think I’ve ever heard a more accurate perspective than that in my life.

So, if you’re a Pre-Seed or Seed-Stage founder, let’s take a step back and forget the format of your pitch deck - instead, let’s talk about what investors are really looking for from an early-stage perspective:

1. Patterns to match against, and;
2. Momentum (or potential momentum)

1. Pattern Matching: If you’re a Pre-Seed company, the odds are, you’re not going to have the kind of momentum in the market that makes investing a no-brainer. So, early-stage investors have to ask themselves a few questions:

1. Do I think the market for this product is big enough to build a real business? Let me sidetrack for a second and say: this is where a lot of investors go wrong, early - they think about things in terms of the size of your TAM. I can’t stress enough how bad a metric that is to use for most things, but I’ll address that in a later post.

What investors are really trying to assess is the following:

Can you generate enough revenue to build a viable, scalable business that grows fast enough to return a profit to me in the timeframe I want?

Notice that I didn’t say “enough customers,” I said “enough revenue.” In markets like fusion-based energy, there are maybe a few hundred potential customers, but each customer could represent hundreds of millions if not billions of revenue to the company that cracks that problem first.

One question I like to ask founders when I’m unclear about their market is: why is this problem worth solving? The best founders don’t answer that question with soaring rhetoric - they answer it with numbers: how big the problem is, how much people currently spend trying to solve (or manage) it, and why their solution is better than what we have today.

2. Does the thing you built solve the problem your market faces in a way customers can accept? If you read my first Bad Startup Advice post, you may recall my example about supply chain startups that had cool technology that was completely useless to their customers’ supply chain because they couldn’t easily integrate it into their operation.

If you told me your startup was trying to solve the problem of tooth decay, which the US spends $136B treating every year (yes, that’s an actual number per the CDC), and you had a toothbrush that reduced the odds of tooth decay by 99.9%, I’d think to myself - wow, that’s fantastic.

But if you then told me that your toothbrush required users to use two arms and a foot to operate, cost $3,000, and needed to be used 17 times a day to be effective, I’d still pass - because even though you’re solving the problem, you’re not doing so in a way that your customers will ever accept.

One of the most impressive things you can illustrate in your pitch deck is that you understand the purchasing behavior and day-to-day life of your customers.

3. Are you the team that’s going to win? But what that really means is:
   
   1. Do you really understand what you need to build?
   2. Do you really understand how to sell your product?
   3. Do you understand how to operate your business?
   4. Do you understand - first, that you have competition, and second, how you’ll beat them?
   5. Do you understand how to return value to MY investment? (I’m not running a not-for-profit VC, here).

Because early-stage, specifically Pre-Seed startups usually don’t have the quantitative progress to establish real credibility (although, shameless plug: En Verite AI can help you with that), founders have to establish it by laying out a clear, concise vision and a deep understanding of the dynamics of their market. But it’s also the reason why investors fall back to and prioritize pattern matching.

You remember a few years ago when every startup claimed they were the “Uber” of whatever it was they were doing? The reason why investors gravitated to that analogy is that they were looking for a pattern match to every Angel investor’s favorite unicorn (I’m looking right at you, @jasoncalacanis). Uber had an incredible business model: outsource your logistics and capital expenses to independent contractors so you can keep your S&W down, build software that enables those contractors to provide services to your customers, and take a fee for facilitating that transaction. We’ll forget for a second that Uber is basically the business model you see in long-haul trucking applied to taxi cabs, and give them credit for an incredibly innovative application of that model to a market still living in the Jurassic.

For years, investors were on the hunt for other startups who were applying similar models to similar markets. So, if you’re a Pre-Seed founder pitching, don’t underestimate the power of analogy, and craft a credible, well-thought story to paint a clear picture of a pattern that I can match against.

2. Momentum: We’ll keep this short, I promise. The absolute most profitable time to invest in a company is the split second after they’ve established momentum in the market - you often hear investors talk about the need to see “traction”. Startups that have traction have better odds of hyperscaling with the aid of venture capital, which is why demonstrating momentum, especially if you’re a Seed-Stage company is so critical.

You can demonstrate momentum (if you really have it) in several ways:

1. Financial:
   
   1. Raw sales growth
   2. Letters of intent
   3. Partnerships
   4. Non-dilutive grants
   5. Funding milestones
2. Product:
   
   1. User growth
   2. High engagement and retention
   3. Waitlists
   4. Paid pilots
   5. Testimonials and case studies
   6. Fast execution of your roadmap
   7. Patent filings

The key takeaway from all of this is: you can tell a story that enables an investor to pattern match and establishes your momentum using a variety of different slide formats and orders. What’s more important is that you have a deck that aligns with the story you want to tell and how you want to tell it. Remember: if your story is strong and you’re genuinely comfortable telling it, investors will be paying attention to you, not your deck, when you pitch. If your story is clearly articulated in your deck, they should be able to establish patterns and assess momentum at a glance.

I hope this helps give you some comfort - at the end of the day, early-stage investors invest in people, not pitch decks, so the physical presentation is nothing more than a way to establish your credibility and showcase your visual storytelling ability for investors. That’s why there’s no one correct way to structure it and it’s more important that your deck format sets you up to authentically tell your story.

For first-time founders, I have the world of respect and admiration for you. It’s an incredibly tough, oftentimes lonely job, and I hope this perspective will give you a little comfort in processing the 100 other different points of view you’ll encounter as you decide, for yourself, what’s right for you.

Thanks for reading,

Collin