“The most memorable pitch decks resonate both personally and professionally,” says Sara Deshpande, partner at Maven Ventures. “When you see a pitch deck that awakens something you’ve already been thinking about or a shared passion or a shared thesis, or something where you say ‘I also think this is a huge opportunity and I’ve been waiting for somebody to come and present this to me.’”
One thing investors know, be it angel or venture capitalists, is that it’s thrilling to spend time around entrepreneurs and their grand visions. That means it can be easy to get swept away in someone’s impassioned speech about how they’re going to change the world—or at least solve a problem. We’re all susceptible to emotional rhetoric and inspirational prose. However, it’s critical to put on your rational hat when evaluating a founder’s pitch deck and the founder themself. It all begins with how well the founder actually seems to understand the problem they plan to solve.
Understanding of the market
One of the first questions Shauntel Garvey asks a founder, or wants to see in a deck, is “why are you doing this?” In the founder’s answer, Garvey, co-founder and general partner at Reach Capital, wants details about the founder’s experience in the particular field or market in which they’re trying to build a company. How intimately does this founder actually understand the pain point for which they’re trying to solve?
For Garvey, the answer also indicates the level of commitment to the cause. “The why question also determines if they’re fully committed,” says Garvey. “Is this going to be ‘oh, this is my side project’ or ‘I’ve been thinking about this for so long I can’t sleep unless I build this product.’ I’m looking for that passion and commitment.”
Isabelle Hau, partner at Imaginable Futures, frames experience as the proximity of the founder to the problem being solved. “Proximity can take different forms,” says Hau. “But we often ask questions about why this person came to solve that particular issue. A personal and proximate founder, we believe, would be much more likely to succeed at addressing a problem with a relevant solution.”
Investors need to critically analyze a founder’s business model: how well does the founder explain their business plan and will their business hold up under duress? Not you asking questions duress, but something volatile happening in the market duress. “I don’t want to see crazy plans,” says Linnea Roberts, founder and CEO of GingerBread Capital. “Even if you’re showing very high growth, can you articulate how you’re going to get there?”
Key performance indicators
Key performance indicators vary depending on the series of funding a founder is raising, but for founders early on, proof of success can be incredibly important to investors. Much like on Shark Tank when a founder comes in with a great idea and then Mr. Wonderful says, “what are your sales?” and the founder says, “well….”—they’ve made a valuation without ever making a sale.
Occasionally, it does work out because the prototype or the idea is just that good, but oftentimes, investors (Sharks or not) need to see some sort of proof that an idea has legs. “What have they done to date to do some type of validation?” poses Garvey. It might be a founder’s first round or maybe they only raised $10,000, but Garvey wants to see what they’ve done even with that little bit of money to validate some of their hypotheses.
Not all investors focus on impact or mission-driven investing specifically, but there is often a thesis or a primary motivator. Even if that motivator is just making the most money at whatever cost (essentially the polar opposite of impact investing), an investor should see that a founder feels similarly.
“One thing we put first, but it may be unique to mission investing, is impact alignment,” says Hau. “We ask a lot of questions around the impact and the alignment with what we aspire to see. If there’s no alignment, then it’s not a good fit for us. Not that it’s an uninvestable company, but just not a good fit for us.”
For Garvey, her fund similarly will evaluate founders for alignment.
“We invest in missionaries, not mercenaries,” explains Garvey. “We’re looking for impact alignment. Making sure that you’re doing this to also have an impact in the world and won’t be making those potential trade-offs to go after making a big buck.”
Knowledge of competitors and how to differentiate
As an investor, you want to make sure a founder intimately understands the landscape they’re entering and part of that knowledge is knowing the competitors and making a plan for how this company is going to differentiate. While this is essentially business 101, it’s important to probe founders to see how well they actually do know their market. Understanding a problem alone isn’t enough, you need to know how others have, or are currently, trying to solve for it.
It’s also likely at some point the founder is going to need to pivot to differentiate from competitors. For Clements, that means looking for one key factor. “Raw intellectual horsepower,” says Clements. “You have to be smart to navigate all the strategy and change that you need to make with the business and be able to rethink things from the ground up.”
Before you move forward, apply “marriage theory”
When it comes to marriage, one question you need to ask yourself is: is this the person you can navigate through a difficult time with? Roberts thinks about companies and founders in the same way.
“We would be delusional to think that all of our companies are just going to sail right through,” says Roberts. “We definitely don’t make an investment thinking they’ll fail. We make an investment knowing they’ll have significant challenges along the way and say ‘can this person make it through some really tough times?’ The only thing we know is that there will be those tough times.”
Roberts points out that for companies growing rapidly, that in of itself is sometimes the issue. Ask how the founder will manage that growth, and more importantly, build a team to manage that growth.