Dan Simmons runs Propelia, a UK platform helping investors navigate early-stage deal flow. He also hosts the podcast FounderTech Decoded.
It's hardly a well-kept business secret that many founders don't like their pitch deck. No matter how much time and effort they invest in it – refining, iterating and rehearsing how best to present it – most come to resent what is their main vehicle for attracting, communicating and engaging with investors.
They bristle against having to take complex personal motivations and a hard-earned deep-sector insight, while enduring ongoing day-to-day uncertainty, and having to contort and compact all that narrative, depth and nuance into what feels like a highly rigid format and a cold, arms-length exchange.
Given this, plus all the new understanding around agile planning and modeling, it's unlikely if anyone starting from scratch would design the pitch deck in anything similar to its current form. Most people simply don't share or tell stories and frame strategic narratives in that way any more.
The idea that a business founder can, on any given date, tell an accurate story about a business' future in any kind of linear and predictable way beyond the next 45 days (90, tops) in such uncertain and changing times doesn't seem right for the modern age. Post-Covid, we understand that most future trajectories are liminal and uncertain at best.
Most pitch decks don't work like this. They represent a moment, frozen in time the minute the founder presses submit, which is supposed to quickly convey key sector assumptions, the current market opportunity and a proven ability to operationally execute. Everyone knows that what's being presented in the pitch deck will probably become irrelevant within three to six months as any sort of accurate guide or future planning template.
However, it's always been assumed that pitch decks are the only way investors can, at scale and at speed, evaluate new opportunities arriving in their deal funnel. This made sense, back when you could quickly differentiate investment opportunities simply on the feel and format of the pitch deck itself.
Flaws in the system
In the past, a submission that seemed exactly like how a pitch deck was supposed to look, accompanied by a consistent, clear design and logical structure, was immediately notable. A founder who showed that they clearly understood the perspective and language of the investor was immediately ahead of 80% to 90% of the other pitch decks in the current funnel.
Then you had to account for investor bias and outside influence. Naturally, some pitch decks are: i) referred from a trusted source; ii) in a hot, sought-after disruptive sector; and iii) created by a founder who knows how to talk the ‘product-market fit’ language of NPS, KPIs and CAC (net promoter scores, key performance indicators and customer acquisition cost, if you didn't know) – acronyms that have caused sleepless nights for many experienced founders trying to translate their business' progress into the metrics of this lexicon.
Add to that the much higher barrier of having a demonstrable ‘minimum viable product’ (the much feted MVP), alongside a credible financial narrative around how this might translate into a viable reality.
The below is a typical pitch-deck ratio, which has historically formed the early-stage deal-flow landscape and helped calibrate the design of most typical investor runways.
• 1,000 pitch decks are typically received in an average investor's funnel.
• 500 of those pitch decks were immediately dismissed and rejected.
• 40 of those pitch decks moved into due diligence.
• 20 are opportunities that partners would vote on.
• 10 were invested in.
• One business' success, which was supposed to cover all bets.
Despite its inefficiency and that this pitch-deck ratio has been much maligned by most founders, from the investor's perspective, it all made rational and commercial sense – when within those decks lay a treasure trove of potential opportunities. Within the 1,000 pitch decks at the top of the funnel, there could be the next Deliveroo, Uber or Netflix at the end. In this landscape, the purpose of the pitch-deck ratio is to simply uncover one of these potential ‘unicorns’ in any investment cycle.
Within the other rejected pitch decks, there may have been a fascinating and compelling founder navigating a valuable market problem, which the investor may have believed in and wanted to back – but that's beside the point. As long as the 10 out of 1,000 that could be invested in were found and one provided a massive return on investment, the design fundamentally worked. In essence, the end justifies the means, in a self-fulfilling logic with a cold efficiency – the brunt of which most of the founders bore.
But there's a problem with this model, and the accompanying ratio is starting to creak at the seams – which leads to the question: is the pitch deck running out of runway?
Calling time on the pitch deck
There's fewer of these low-hanging opportunities hidden with the 1,000 pitch decks received in an investor's funnel today. Additionally, due to freely available online tools, most savvy founders can churn out a perfectly formatted and designed pitch deck and accompanying MVP over a weekend. Plus, if those in your network who refer opportunities to you are coming across less high-quality options then, suddenly, your pitch-deck ratio stops working so well. This eventually impacts your whole runway.
This is where we are just arriving at today, and it's starting to affect both founders and investors – and, for the first time, fundamental questions are being asked about its function, intent and design.
This should be embraced and come as a relief for all involved. If it was a well-known secret that most early-stage founders and investors find the pitch deck a bluntly inexpressive tool for opening a meaningful initial conversation, then perhaps it's an opportunity to fashion other mediating tools and frameworks that are much more fluid, adaptive and fit for purpose.
We need tools that are designed to be in the interest of both parties to meaningfully negotiate increasingly uncertain and agile futures – no matter what a founder's demographics, background or if they know the right person.
If the true purpose of identifying and backing founders is in their ability to navigate challenging paths, unencumbered by the pressure, politics and power dynamics of the past then, surely, with all the complex challenges that we're currently facing, the chance for different tools to evaluate and elevate these exceptional founders is both most timely, needed and welcome.