The Mistakes Startups are Making when Pitching to Investors and How to Avoid Them

I’ve sat through 200 pitches in the past year. Some were good. Most were bad. After a year of doing this, you become well-versed in the analysis of human behavior and the trends surrounding how folks tend to think about the humbling art of asking for money.

For example, here is a fun magic trick that I picked up: take a look at your pitch deck - don’t worry, I’m not peeking. I’m going to guess that you used the word “Revolutionizing”… perhaps even in the title slide, right? 

Pattern recognition is an unfair advantage that VCs have. While we are analyzing dozens upon dozens of slide decks, startup founders typically haven’t gone through this exercise, so they end up reinventing the wheel. 

For today’s article, I’ll break down some of the trends that I’ve seen (both good and bad), and will highlight what the rockstars have done to really stand out and grab our attention.

Pitch Deck 101

When you put together a slide deck, there tends to be a formula for success that works across multiple sectors. Here’s what I recommend:

1. Title Slide - including the founder’s contact information.

2. Disclaimer - ask a lawyer buddy to help here, they likely have some preexisting language that you can just toss in there. 

3. Executive Summary - investors have the attention span of a cockroach… if they are only going to read up to this slide and no further, then make it worth their while here.

4. Problem - why you think people will throw money your way to solve their problem.

5. Solution - here is where you lift the veil on your offering.

6. Market Opportunity - show that you've done your market research. Ideally you are addressing a market worth at least $1B+.

7. Business Model - how do you make money?

8. Competition - be sure to answer why your company has the potential to be better than what is already out there 

9. Technology/Product - give an explanation, but don’t give away the recipe to your secret sauce and make sure you have at the very least filed a provisional patent! 

10. Traction/Validation - what have you accomplished so far? What has worked? FOMO is very real in the investment community, use that to your advantage.

11. Marketing and Sales Strategy - I once had a startup tell me that getting their drug approved by FDA meant that they were going to a multi-billion-dollar company, no sales team needed! Ooh boy... Anyways, just make sure you can show the investors that you have thought about educating/selling consumers.

12. Team - Why should we pick you over another company that has the exact same idea? Be sure to answer this while keeping the text on this slide to a minimum.

13. Financials - be realistic yet don’t get too bogged down. After all, a model is just a model, they are seldom spot on with their projections. We are typically looking for the point where the company could be acquired, and for what type of premium. I'd say a general rule of thumb is that a company could be acquired for 6-12x EBITDA, but of course that is a very generalist statement.

14. Roadmap/Milestones - Well, how are you doing this damn thing? Map it out! For example, if we give you $3M for your seed round, what do you plan to accomplish with that? How long will that take? Will that get you to the next fundraising round, or will you run out of money before that (if so, time to rethink your strategy).

15. The Ask - how much are you raising, and at what valuation? See below for more on valuation. 

16. Conclusion - I usually just copy the title slide and paste it here. Again, include your company's contact info in case the investor wants to reach out to you.

A few key points to keep in mind as you are crafting your deck:

• You shouldn’t’ have more than 25 slides. Ideally, keep it under 20. Nobody is going to actually read a 40 slide deck.
• Slides with lots of graphics/pretty pictures >>> text heavy slides. Keep all text as concise as possible. ChatGPT/Claude are excellent at helping you reword your content so that it is as brief and to-the-point as possible.
• Avoid using PowerPoint to make your deck. Why? Well, everybody uses it, so how unique could you possibly be if you use it too? I personally use Beautiful.ai, which does an amazing job at creating visually appealing presentations. And, it is free for one year if you still have your university email address! And no, they don't pay me to say that :'(
• If you are a technical person - be sure to dumb it down so that the average 14 year old is able to understand it. Again, ChatGPT/Claude are your friends here. You shouldn’t miss out on an opportunity to get funding because the investor with an MBA or CFA doesn’t understand your PhD lingo.
• Be humble. If you have a slide that only talks about YOUR accomplishments and neglects to mention your TEAM’s accomplishments, investors will assume that you are a megalomaniac… nobody wants to deal with that for the lifespan of the investment

Know Your Valuation

Now that you have a rock-solid pitch deck, it’s time to spam a bunch of investors, right?

Nope. We first need to prepare for the dreaded question: “how much are you raising, and at what valuation?”

I’ve coached quite a few startups on this one. It is important to be able to rationally and logically explain your valuation to investors. 

Somewhat recently, one of my consulting clients asked me to help them with the following scenario: a VC expressed interest in investing in them, but they are pressuring them into a $10M valuation cap. However, the CEO had a gut feeling that this was a ripoff. So, how should we approach this one?

Many bankers will push for a discounted cash-flow method, but that’s pretty hard when you are a young startup with no revenues (though definitely not incorrect and worth exploring if somebody is offering to do so for you). I like to start by identifying as much of the following as I can:

1. Relevant M&A activity - how much were any companies similar to yours acquired for? After you identify a few of them, you can take an average to get an idea around what type of exit your company might be able to achieve.
2. Peers - who is playing in your sandbox? Look at Crunchbase or for press release announcements to determine how much they raised.

Next up, here are four different methodologies that you can use to calculate valuation:

• Berkus Method: Assigns $ value for each of five risk factors to determine pre-money valuation.
• Scorecard Valuation: Compares startup to similar ventures, assigns scores, and calculates average pre-money valuation.
• First Chicago: Values startup based on best case, base case, and worst case scenarios.
• Venture Capital Method: Calculates required ownership percentage based on expected ROI and projected exit valuation.

Lastly, take the average of these 4 calculations. THAT is what I like to use as my basis for valuation. 

So, remember that investor that was pushing for a $10M value cap? Well, using the methods I outlined, we calculated a $27M valuation. We then walked him through our logic and rationale during our next Zoom call.

How did he react? One would think like a gentleman. But in actuality:

The investor ignored all logic and rationale and instead insisted that if we don’t cave in to his demands for a low valuation, then he will tell all of his investor buddies to look past us. Which leads us to the question: is this somebody that we want to work with for years on end?

This wasn’t the right investor for that company. Fortunately, they then went on to raise capital at a MUCH higher valuation than $10M, and that VC probably got an earful from his LPs for missing the boat due to greed. The lesson here? Know your valuation before booking meetings with investors.

The Pitch - Actual Reasons Why We’ve Turned Companies Down

Comically enough, many of the principles one should have in place for a first meeting with an investor are actually quite similar to those one should have on a first date.

A few simple things to keep in mind when pitching:

• Be a good listener. One of my biggest pet peeves is when a founder speaks without even so much as taking short pauses for questions. Nobody likes being talked AT. Make this a two-way conversation and be sure to engage with the investor every step of the way. 
• Be modest. I’ve met some seriously large egos in the past. And while it is important to demonstrate that you and your company are impressive, it is also just as important to show us that we won’t want to scream into a pillow after working with you for 10 years. I’ve found that the best founders are super down-to-earth and humble - they don’t feel the need to cover their insecurities with their Stanford MD/PhD/MBA/who gives a crap. 
• Control your emotions. We purposefully ask some very difficult questions to founders, and we have found many to come across as defensive and annoyed by our inquiries. Don’t take these as personal attacks (which they aren’t), but rather as learning opportunities. I’ve found that the best founders LOVE to be challenged, and tend to respond by saying “you know, that’s an excellent question. We’ve thought about this quite a bit, and here is how we are approaching it.” 
• Don’t be a jerk. One would think that I shouldn’t need to outline this… but here we are. I recently was pitched by a startup in the AI-enabled clinical trial space for gene therapy. When I asked about what is keeping companies such as OpenAI from entering the space, he became visibly annoyed and didn’t really answer the question. When I pushed again, he snarkily replied: “perhaps you just don’t have the background in this… you probably don’t know anything about gene therapy.” After I explained that I previously worked for a gene therapy company, he got annoyed, ignored my associate’s request for further questions, and dropped off the call. Then, we wrote him a $1M check! JK, never talked to him again.

When and Where to Get Help with Taking your Cap Raise to the Next Level

As an entrepreneur, one of the hardest lessons that I learned was admitting when to accept that I can't possibly do everything on my own and that I needed help. I encourage you to take an honest look in the mirror and ask yourself, "what is my achilles heel?" If you are able to find an individual with that skill set to join your team (either as an employee or as a consultant), it is a golden opportunity to grow your team and turn YOUR weaknesses into your TEAM's strengths.

If you are looking for a capital raise consultant, be careful. There are tons of organizations that claim to be experts, but they can never guarantee results since it is hard to convince somebody to just part ways with a minimum of $50k to put into a startup that has a >10% chance of success. If you do your shopping, you will find plenty of organizations that claim to have a robust investor network. Perhaps they will be "kind enough" to let you pitch for 10 minutes on a webinar in front of their "qualified investor network" for the low, low price of $10,000.

As the Principal and Founder of Renegade BioConsulting , I have worked with dozens of startups to help them raise the capital that they need to take their company to the next level. We believe in the old adage: "Give a man a fish, he can eat today. Teach a man to fish, he can eat for life." We work with our clients to put together a robust investor relations strategy and to craft their narrative/pitch materials to make for a fantastic and compelling story. After listening to hundreds of pitches, we have the unfair advantage of knowing what works and what doesn't, and we teach our clients what will stick the landing. And, we of course do valuation prep work to ensure that they are ready for investor meetings.

Lately, we have found webinars to be a powerful tool, especially through LinkedIn, as it lets you invite up to 1000 connections per person, per week! Once you are ready to kick off your raise, a webinar can help you figure out which investors have some interest in your company based off of who is RSVPing to the event. We work with our clients on that, and no, we don't charge $10k for a 10 minute pitch :)

If anything from today's article resonates with you and you would like help with your capital raise initiatives, feel free to reach out to me: doug@renegadebc.com