For all the focus on pitch decks (and more than 80 articles on the topic), you’d think that it’s impossible for startups to raise from angels or institutional investors without one. That’s not entirely correct. Here’s why.
Going far enough back into the history of investing, you needed a comprehensive business plan to raise funding from institutional investors. The Harvard Business Review has a great guide to how to create one. The exact details of what goes into a business plan vary but often include history, market analyses, strategy, product and service descriptions, org charts, competitive analyses, management team, financial plans and projections, along with all the research to back up each section.
That’s all good and well, but by the time you’ve completed all of that, your business plan has ballooned to a novel’s worth of pages — and that’s before you add in all the graphics and charts. Business plans are great for teaching you business basics and dynamics, and mistakes in a business plan are a great way to show would-be entrepreneurs how to avoid problems before they happen.
The problem is that it will be out of date before the ink is dry, and the financials will be inaccurate long before you even hit “print.” It isn’t that startups operate on different dynamics than other businesses, but they are essentially the agile equivalents of the old dinosaurs. Build it, test it, iterate.
Essentially, startups are the equivalent of how software is built these days: Rather than spending six months writing out a full product spec that’ll be wrong before you write a single line of code, you launch a lean MVP version of the product and adjust from there.
There were a few advocates for doing business plans differently, including Guy Kawasaki, whose “you only need 10 slides” argument may be a little too far into deep minimalism, but at least it was more helpful for weaving a pitch narrative than a 90-page business plan. In short: The pitch deck was to the business plan what agile software development was to waterfall software development.
From there, the market evolved further, and some founders chose not to use a deck at all.
“The story is super important,” said Tom Hacohen, the CEO of webhooks-as-a-service company Svix, who recently raised a round of financing from Andreessen Horowitz without using a deck. “Investors are not webhook experts, so they have to understand the story. To do that, we had to tell a great story — and when we did that, they really started digging into the business. They understood our metrics and started talking to a good chunk of our customers. At that point, the deck is just going to help me walk them through what they already know.”
Let’s walk through how to tell the story of your company without relying on a deck!
The core of getting to an investment decision is to reach conviction among whoever will be signing your term sheet (and later your investment check). Some people find that a deck is a good way to ensure you cover all your bases. Decks may have a place if your story is very visual or if you have a lot of graphs and charts to convey your data. These days, however, many companies have dashboards, and it’s just as easy to pull that up when you’re talking to your investors rather than exporting and reimporting the data to a slide.
Other stories, such as Hacohen’s webhooks startup, simply aren’t very graphically appealing; the product is focused on the plumbing that drives the internet. Very important but not terribly exciting visually.
The majority of early-stage VC deals fall apart in due diligence
There are other reasons not to use a pitch deck. For one of my previous companies, LifeFolder (rest in peace, my favorite failed startup), the product was a chatbot that helped people have their very first conversations about the end of life. Yes, that means I spent 45 minutes or so talking to investors about the business of death.
Whenever I did a pitch, I’d say, “Hey, I have a pitch deck, but I don’t need it, and we are going to go on a pretty emotional journey together. Shall we just talk like people?” Of course, that was part of the gimmick: Talking about emotional subjects was the whole point of the chatbot in the first place.
“A lot of founders start by sending a deck, but honestly I hate that and I’ve never done that in my life,” Hacohen explains. “I want to control the story. I want to pause when I want to pause. I want to tell a compelling thing at my own pace. And a deck with information doesn’t do that. Another part of this is that I’m a solo founder, and I just don’t really have time to make a deck.”
Think about why you need a deck in the first place and whether your presentation needs it to tell the best story. Do you need the deck to show your competitors, or can you just talk about them? Do you need it to show your product, or could you demo it live or leave investors to try it out by themselves? For financials, there’s often a better tool than a deck (a spreadsheet, say), and for your business metrics, if you have a set of dashboards or something similar, why would you move the story from that tool to another?
Ironic, perhaps, given that I’ve written a book about how to make a pitch deck, but I often start with the startups I work with by asking a question: What’s your story? What’s the best way to tell that story? What do you need to tell that story in a way that helps investors get to where they need to go?
Realistically, in a lot of cases, it’s helpful to have a deck; it’s the most common way to convey the specific set of information investors are expecting to see to decide whether to take the next step toward investing. But there may be other ways of getting the same info across, and if your startup is hot enough, chances are that the deal gets fast-tracked into due diligence anyway, as Svix experienced.
“Andreessen reached out to us after [ … ] the YC demo day we did a couple of years back, but we had already closed a round at that point,” Hacohen explains. “Over the years, investors kept reaching out to catch up. I always say ‘no,’ because we’re not fundraising. But Andreessen sent a note that caught my eye; they had done some research into our space and wanted to hear my thoughts on it. We ended up jumping on a call, and from there, we ended up raising a round.”
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