The pitchdeck is a snapshot of the business
Anu Adebajo, Investment Manager at British Business Bank, discusses the importance and limitations of investment pitchdecks for assessing the investment potential of a company. What information should and shouldn’t you spend the most time on? How can we make sure our analysis is critical? We’ll also touch on what elements of a pitchdeck get Anu to invite a company for a meeting, and what turns her off straight away.
Anu has also previously worked as an Investment Analyst for the British Business Bank’s Angel CoFund, which makes initial investments of between £100K and £1M, alongside syndicates of business angels in order to support high potential businesses and give them the capital they need to develop and propel growth.
What is a pitchdeck?
It is a snapshot of the business – you’re trying to sell an investment into your business. You’re not always going to be able to be there when the decision is being made, so you need to give the investor some information so they can decide if they want to meet you, or follow up. It is a distilled version of your company, usually in PowerPoint form. Sometimes you will never have come across a particular company before and the very first point of introduction is the pitchdeck.
Is there is a particular process you should follow for analysing the pitch?
It depends how it comes to me – did it come to me through someone I know? Was I expecting it? Is it just a cold introduction? That determines a little bit how I look it. I also ask myself if I’ve seen it before, which can be positive or negative. If it’s been sent to me through various people I know, that’s good. It shows my network is plugged into that deal and that it might be good to look at.
However, it can show the founder doesn’t know who is sending me their pitch. Sometimes I’ve been approached by a founder, but then someone, perhaps a corporate finance advisor, will send it me again even though I’ve already started that process with the founder. That sometimes makes me uncomfortable – the founder should have a dialogue with their advisors and know where their deck is being sent.
Once I’ve established that I then decide whether I’m going to pay a lot of attention to this deck, a little bit or if I’m just going to skim it. I usually start by skimming – just to see how long it is and how much time it’s going to take me to go through. I tend to do it quite methodically, or sometime I might go straight to the end. If you’re in a fund that has specific criteria, sometimes it’s good to look at the end where they have the terms, and you can evaluate whether it fits the terms of your fund.
I then tend to go through it in order but I give weight to some parts more than others. The team page is crucial, a lot of VCs say the team is the most important part of the company. Whilst its great to have a good product or service, things change and companies have to be able to adapt. That can only happen if you’ve got a strong management. When I look at that page, I’m seeing if its just one or two people or whether its an actual team. I’m looking at the experience of the team – where they’ve worked before (if it’s relevant) or if they’ve been at companies where there’s a tie-in and it adds value to this proposition. Details about the team can be misleading. I’ve seen decks where I’m really confused as to why they’ve decided to bring someone into the team or advisory board. Again, this is something that builds with experience but you’ll begin to realise that certain people don’t fit in teams when you know the markets better.
I’m also obviously looking at the product, and what the problem they’re solving is. Is there a market opportunity? With early-stage businesses, there might not be much traction or real figures. If you’ve got revenue, say it. If you’ve got customers, say it. If you haven’t got that, you have to show why. It could be the date you started, you might say you have a pilot scheme running, you could say the first revenue is expected at a given date. Do make it clear in some way what the state of the company is.
I find the competition slide uncomfortable. It is an important one to include because it shows the founder understands the competitive landscape. The problem is it’s usually presented on an X-Y axis and the company has placed themselves in the best place. If you’re coming up against established businesses, it’s hard to objectively place yourself in the market. I prefer it when businesses don’t plot themselves on the graph at all and just show me they know what the competitive landscape is like. When companies don’t place themselves on the graph, they tend to fill it out more and look at the market more objectively, looking for any companies who fit that space. When you put yourself in it, you start to exclude yourself by looking at companies and comparing what you do differently, thus leaving those companies out of the analysis. It means you don’t have a full picture. As an investor, you see so many different things and get to know lots of different markets well. There have been times when I’ve seen a pitchdeck and thought, we’ve invested in ten companies that aren’t in this deck. It can be a big turn off to see that.
What puts me off as well are things that aren’t factually correct or are misleading. This comes with experience, and you get to know the landscape of the area your investing if. It could be they’re claiming something about customers you have or are about to sign up, but an investor knows that’s not the case. It could be that they’re a particularly hard customer to get, that they’ve said through previous investments that they don’t want to deal in this particular area etc.
How do think critically about pitchdecks and do your own research?
With the competitors slide, even if you’ve never seen a pitchdeck in your life, you can do research. When I started out as an analyst, I signed up to Crunchbase and every day still I get alerts of all the funding rounds. By doing things like that you can build a picture of what’s going on in the industry and be on top of the deals that are happening. Go to networking events and get a sense of who’s around. With all of this, you have to be willing to give the time to expand your knowledge and your network. It’s a little bit harder to do your research on the team slide, which is often the most misleading one – think social media stalking!
Are there any slides you can take for granted as being true?
I’m a big fan of keeping decks short and sweet – you don’t want to shoot yourself in the foot by laying everything bare and leaving room for investors to start picking holes. Most importantly you need to look at the team slide – if there isn’t one, go to the company’s website. The team should be listed there, or there should be links to LinkedIn and such at least. You also need to ensure you really understand what the problem this company is trying to solve is, and what solution they are proposing. It’s easy to cross-reference the information provided with a quick Google search. Some slides, such as customer base, you can’t do much with. I tend to ignore it and file it at the back of mind with the view to looking at it in more detail if I decide to invite the founders in.
Is there anything founders put in pitchdecks that is an immediate turn off?
The obvious things – such as lots of spelling mistakes, or anything that makes it clear not a lot of time has been invested in it. If I can’t trust a founder to check ten to fifteen slides to make sure there are no errors, it’s unlikely I’m going to want to give them a large amount of money. I never expect pitchdecks to be perfect, but decks which are overly complicated and long, I might not even look at. I don’t really like looking at decks which are longer than fifteen slides, mainly because I just don’t have the time to read something so in-depth. It’s a real skill to know your business so well that you can condense it down into a succinct form and sell it. Quite often we get asked to sign non-disclosure agreements, which is a turn-off. I see so many pitches that if I had to sign an NDA with every single one, it’s all I’d ever do. Another thing is that although we see many unique ideas, there is always some sort of cross-over. I can’t monitor every company to see if they’re encroaching on another’s space. Finally, when I’m sent pitches that require me to download the pitch from another platform, such as Dropbox. Don’t do this – just send me the pitch as an attachment so I can read it then and there.
Is there anything that really makes a pitchdeck stand out?
I’m always more inclined to take a meeting when someone’s been able to express and explain their proposition in a concise way. I like it when founders leave me wanting a bit more when I feel myself having questions but want to meet them face-to-face to find out the answer. I pay more attention when I see a pitch that touches on an area of the market we’re interested in investing in, or where our portfolio is a little underweight. But, a lot of it is intangible – it’s more a gut feeling that there’s something more, something I want to find out about and understand. If I think I want to invite someone in, I give them a call first and then compare that conversation with the pitch before I make a decision. Someone’s ability to put together a compelling pitchdeck is not necessarily an indicator that they’re going to be good at running a business. If you can do it, you certainly have an advantage over other people, which I’m conscious of. Some people aren’t great at selling, but there are lots of resources online to help a founder put together a pitchdeck.
What's your top tip for student VCs starting out?
This industry is very much based on gut-feeling, but it’s also an informed feeling. At this stage in your career, you have the luxury of time. Use it to absorb information, because that will make your gut feeling more reliable – knowing what deals are happening, which entrepreneurs are leaving which companies thus could be available, and so on.