Don’t pitch investors like we’re customers

After looking at thousands of pitch decks, the most common mistake I see early-stage startup founders make is trying to adapt their customer presentation into an investor pitch deck.

It’s tempting to start with the customer presentation. The graphics are beautiful. It has a flow that resonates and all the right keywords. You’ve gone through it a million times and can present it in your sleep.

All you need to do to create the investor deck is add some extra slides at the end — revenue projections and deal terms, maybe something about patents, right?

Wrong.

I know it’s tempting. I’ve even done it myself. It seems fast and easy. It’s the worst thing you can do.

Investors are not customers. Let me repeat. Investors are not customers. We come from different worlds. We speak a different language. We want different things.

It’s not just the jargon we don’t understand. It’s the point of the entire pitch.

Customers vs. Investors

A customer elevator pitch may sound like this: “We made a network simulator to test application performance over different bandwidth, latency, and loss parameters so you can see how applications will perform between your offices and datacenters.” Notice the focus on functionality and the use of specialized keywords.

A customer presentation is a story for Ms. Customer about how our wonderful product will solve your problems. How it will save you time and money and make you the hero of your company. How it works and who else is using it, and how much it will cost you.

The investor elevator pitch is: “We make an application test tool used by the IT departments of thousands of large companies. We just hit $1M ARR with sales growing 25% each month.” I talk about who’s using it and how fast we’re growing without even saying what the product is or what it does.

The investor pitch deck is a different story. It’s the story of how you, Mr. Investor, will make money investing in our company. How we’ll be the one investment that returns 100x and makes your fund a huge success. How we’re the one investment you will regret saying no to.

Both pitches are selling something — the customer pitch is selling a product to users; the investor pitch is selling stock to investors.

We might have the greatest invention since sourdough, the greatest product since Tesla. Of course, that doesn’t mean it’s a good investment.

The product is important, of course, but as an early-stage startup adjusts and pivots, the product itself will change. Maybe only a little, or maybe it morphs into something completely different. As investors, we look at the current product and even the company vision as just starting points on a long journey.

There may be a graphic or two we can borrow from the customer presentation, but it’s best to start the investor pitch from a blank slate.

The 3-Act Pitch

I look at a startup pitch as a 3-act play.

  • Act I is the here and now: the problem, solution, and market size. While this includes information on the product, it needs to be very high level for a general audience who knows absolutely nothing about the industry. 
  • Act II is how the startup will scale from $0 to $100M in an incredibly short period. What’s the plan to ignite hypergrowth, and what evidence do we have that the plan is viable? Who are the competitors, and how will we lock them out? Do we have the right team not only to build a product but that knows how to pilot a rocketship?
  • Act III is the climax of the play — how will the investor make money? What are the terms of the investment? How much more will be needed before the grand finale of the exit? Why would another company pay a huge multiple to acquire us?

That’s a lot to get through in a 10–15 minute pitch, which gives us only 2–3 minutes to describe the problem and solution to people who don’t have a clue about our specialized industry.

Contrast that with the customer presentation, which is typically 15–30 minutes of detail for a specialized audience that wants to dive into the details to understand if it’ll help them.

The Parent Test

Instead of starting with a customer presentation and revising it for investors, start with a blank page and my list of 11 topics that need to be covered in the pitch.

But finding the right wording can be difficult, especially if you’re not used to talking to investors all day. Worse, it’s hard to get useful feedback from investors on what works and what doesn’t other than “sorry no thanks” or “seems too early” for us.

My solution for creating an appropriate pitch is what I call the “parent test.” Pretend your parents are investors. For many of you, they are. Imagine them as your audience when you write the pitch. What are you making and why? How will you grow it quickly? How will you sell it to Google or General Motors so you can not only move out of their home but buy them a mansion in Malibu to thank them for all they’ve done?

And if your parents happen to be Ph.D.’s in machine learning, try it out on Aunt Janice, the lawyer. She’s a smart and accomplished woman, but she doesn’t know the first thing about the tech stack for building a SaaS product. Good. Exactly the kind of person you want to pitch your SasA product to.

Don’t just imagine your parents as the audience; try out the pitch on them. If they say, “Oh, honey, you’re so smart,” throw it away and try again.

Practice on parents, grandparents, aunts and uncles. When you run out of relatives, start on your friends. If you have kids, try explaining it to them. Once you’ve made your pitch simple and compelling enough to get an 8-year-old excited, you’re finally ready to start presenting to investors.

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