Financial Insights

Let's talk about the pitch deck mistake that kills most investor pitches when people are out there raising money for their company. My name is Stefan. I run a nationwide wealth management firm called Whitwell & Company. The pitch deck mistake that instantly kills investor interest. So, as you can imagine, in our business we see a lot of different investment decks, whether it's from venture capital, individual companies, private equity, you name it. So many, just flooded, every day, all the time. So I can tell you, the good ones stand out. And there's a lot of crap ones that I see that are just terrible. And I feel bad, because obviously they spent a lot of time on those decks, they desperately need to raise money for their business, but their deck is terrible, and they're going to have a really hard time raising money.

The most common mistake

The fact is, raising money doesn't need to be that hard. It's work. But it's so much easier if you avoid the most common mistake. And the most common mistake that I see made over and over again is a deck that is focused on you and your product. You say, wait a minute, isn't it supposed to talk about us and supposed to talk about the product so that the investor can evaluate us? Yeah, but the investor doesn't care about you. And they don't care about your product. If they're writing an investment check, what do they care about? They want to make a return, and they want to be able to sleep at night until the date that they get their return, which means they've got to have some comfort that they're not going to lose their money. So think about that before you write a deck. It needs to be about the investor, not about you.

Make it about the investor

I know that sounds so counterintuitive, and people get so proud of their product and their company and their way of doing things, but nobody cares. Let's be honest. That's just as true with our company. If I'm pitching a new prospect and all I do is talk about me, or our company, or our way of doing it, it's not going to be effective. I'm missing the opportunity, in that case, to listen to the person I'm speaking with and to understand their needs, their pain points. If I do a good job of listening and I find out they've got tax planning pain points, or they're frustrated with a very plain vanilla portfolio, they wish they had access to non-traditional investments, or whatever the case may be, then I can make a much more personalized offer to them. Not a pitch, just an offer. Hey, if you want help on the tax strategy front, I can help you with that. And if it's a real pain point for them, then there's an opportunity to work together. But if you just lead talking about yourself, you're going to put your audience to sleep. There's ways to do it, but it's got to be about the investor. So first and foremost, figure out: what is it that you're doing for the investor? Make sure that you are doing a good job of walking the investor through the experience of investing with you. If it's a medical device company, it's an opportunity to literally change the world, to save lives, and also to make money, and here are the ways that we make money, we can provide you with a fair return. Again, it's always got to connect back to the investor. If it's just about your new shiny object, just about your new invention, just about your company, and just about you, worst of all, there's nothing worse than these long team bios. I don't care about that up front.

Answer the basic questions, including skin in the game

And you need to also make sure that you answer some of the most important basic questions. Like, have you done this before? Number two: how much skin in the game do you have? I get that you're trying to use my money to invest, how much skin in the game do you have? Very important. If you don't, then be open about it. But the best answer is to have a lot of skin in the game. The worst is when you look at a deck and you're like, wow, these guys are paying themselves fat salaries, they don't have any money invested, they want to grow with my money, wait a minute, there's no skin in the game in that. Or they put up just a little bit, but you're like, yeah, their first two paychecks, they'll have gotten all their money out, they're going to have no net skin in the game. So skin in the game is good, because that means they're going to worry about the details as much as you worry about that investment working or not. And it aligns your interests.

Focus on the exit

The third question, which I learned from an investor when I was trying to pitch that investor and kind of got schooled on it, is you need to answer the question of how they get to the finish line first. What is your exit? A deck that only has one scenario where they get their money out is not very compelling. The most compelling decks are ones where you can say, hey, look, when we hit these numbers, which we believe are fairly conservative, in this period of time, we'll then have these two or these three different exits. Exit number one: cash flow. If we couldn't find an external buyer, we could distribute 15% a year, and in seven years we'd have returned all of your capital, something like that. [Editor's note: this 15%/seven-year example is a hypothetical illustration of how a founder might frame exit scenarios in a pitch deck. It is not a projection, an offer, or an expected return from Whitwell & Co. or any investment.] Option number B, which is our preferred option: we find a strategic buyer, it buys us out at a premium, and this is how you make your money. Option number C: we sell it to a private equity roll-up firm. It's not our preferred option, because they're not going to pay as much for us, but it would be an exit, and if we hit these numbers we'll still make a profit, and here's how much we think we can get, and here's why we think we would be an attractive acquisition target to the PE firms. Things like that. So instead of just, hey, everything goes perfectly, then we exit, and there's only one exit, life doesn't always happen perfectly according to plan, and you're saying, hey, this exit only happens if everything goes perfectly according to my one plan. That's not very compelling. On the other hand, if you have viable multiple exits, then that's going to be very compelling for the investor, because they have a much higher degree of confidence now that they're going to get their money back. And once they get their money back, their principal back, and they're playing on the house, it totally changes the game. Makes them a lot more relaxed, a lot more willing to ride with you for the remaining part of the journey. A lot of benefits to that. But you've got to focus on the exit. People that have not focused on the exit have really not thought through the investor experience. So when I meet with somebody and I ask them what their exit strategy is, the degree to which they've thought about that is very insightful. It tells me a lot about how much they've really thought about their plan. Most people are really focused on, oh, we're just going to get this money from you and then we're going to spend it this way, on all the immediate stuff. But investing is not a game of checkers, it's chess on steroids. So you've got to think two, three, four, five steps ahead, and that means you've got to be thinking about the exit. And as an owner, work backwards and go, okay, what do we need to do, working backwards from that exit? What do we need to be doing now to be able to achieve that exit? And that's just different. A lot of other people are thinking purely in terms of, hey, if we do this and we can give this revenue that we can grow, or if we grow this much then we'll eventually end up with X, and they really haven't spent time thinking about the actual exit process. They'll say, oh, well, we'll just find a strategic buyer. Why do you think a strategic buyer would have an interest in you? And the people that are really prepared will have very compelling stories around that, because they've spent the time on that. They'll say, well, here's why the strategic buyer is going to have interest in this: they've been looking for this, due to the way the company runs it's not attractive for them to incubate it, on the other hand, once we've de-risked it and we've done this and we've done that, then they're willing to pay a premium, because they can accelerate it, it can solve this very real problem for them. So if somebody has really gotten in depth and they can explain the logic and why it makes sense for this industry, this product, those specific buyers, that's going to give me, as an investor, a lot more confidence than somebody that just blindly states, oh, we'll find an exit here, we'll do this, we'll go public, we'll do that. That tells me they really haven't spent the time thinking about the exit. Don't make the mistake of talking about yourself. Understand that the investor wants to make money, but to do that, they've got to get out. They don't want to be in this investment forever. So make sure that you make this investment pitch deck about the investor, that you describe it from their experience standpoint, and that you answer their most important questions. Hope this helps. If you have any questions on how to improve your deck, feel free to reach out.