Why Investors Ignore Your Deck- What They Mark Down Before the First Meeting

Why Investors Ignore Your Deck: What They Mark Down Before the First Meeting

Why Investors Ignore Your Deck: What They Mark Down Before the First Meeting

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Investors decide whether to take a first meeting from the pitch deck, the email it arrived with and a few quick checks on the business. A deck gets no reply when something in that first read tells the investor the business isn’t for them: it’s outside what they invest in, the opportunity looks too small, the traction is thin, the amount or the valuation isn’t explained, or the team or the numbers don’t hold up.

How Investors Screen a Deck

A pitch deck’s job is to get the meeting. The investor reading it is deciding whether the business is worth an hour of their time.

Before replying, many investors also look the business up. In the UK, anyone can see a company’s filed accounts, its directors, its past names and any charges registered against it, free, on Companies House. A deck whose figures differ from the filings raises questions before the first meeting has been arranged.

Whether the Business Fits What They Invest In

Every investor backs particular sectors, stages and cheque sizes. An angel who invests £25,000 at a time in software won’t back a manufacturer raising £3m to build a second factory, however good the business is. A fund with a minimum cheque of several million won’t look at a £400,000 seed round.

When a deck goes to investors who never back that kind of business, the rejections say nothing about the business. Before sending, the founder needs to check each investor’s past deals: what they’ve backed, at what stage and for how much.

The Size of the Opportunity

What gets an equity investor’s attention is the size of the opportunity and how fast the business can grow into it. An equity investor makes their return when the business is sold or its shares are bought by someone else, so they need a business that could be worth many times more than they’re paying.

A deck that shows a tidy, profitable business with steady, modest growth can be a good business and still be the wrong fit for equity. The market slide needs to show who the customers are, how many of them there are and what they spend, built from figures the investor can check, and the deck needs to show how this business takes a meaningful share of it.

Traction

Traction is the progress so far: proof that customers want what the business sells. Investors weigh it by how much the customer has committed. A customer paying every month shows more than a signed contract, and a signed contract shows more than a letter of intent.

Evidence What the customer has committed
Recurring paying customers Regular payments
Paying customers One or more payments
Signed contracts A legal commitment to pay
Paid pilots A payment to trial it
Pre-orders and deposits A payment before delivery
Letters of intent A written intention that isn’t binding
Free pilots with real use Time and effort using it
A waitlist An email address
Interest Nothing yet

A waitlist counts for something, but it sits near the bottom. A deck that leads with a waitlist of thousands and leaves a handful of paying customers on a later slide has the order the wrong way round for the investor reading it.

The Amount and What It’s For

The amount being raised has to come from the plan. It’s the cost of everything the business needs to reach its next milestone, such as a finished product, a first major contract or a set level of revenue, plus enough cash to keep going while it raises again or starts to fund itself.

A round size with no breakdown, or an offer to take as much as investors will give, reads as a plan nobody has costed. The use-of-funds slide needs the main items with their costs, and the milestone the money gets the business to.

The Valuation

The founder sets the valuation, which is what the business is worth before the money goes in, and the founder has to justify it. The methods investors recognise, such as comparing it with similar businesses that have raised or sold, or applying a multiple to revenue or profit, are the backup for that number.

A useful way to see a valuation is as a number from today multiplied by a story from tomorrow. The number from today is revenue, profit, customers or contracts. The story from tomorrow is the growth the plan says the money will produce. An investor marks a deck down when the valuation has no visible link to either.

The Team

Investors are backing the people who will deliver the plan. They look for a management team with the experience the plan needs, and for a business that doesn’t depend on the founder for every sale, every decision and every relationship.

A deck that shows one founder doing everything, with no one senior in finance, sales or operations and no plan to hire them, shows the investor a business that depends on one person. Where key hires are part of the raise, the deck needs to name the roles and show they’re paid for in the use of funds.

The Numbers

The financial slides need to show the history as far back as it exists and projections built from assumptions the investor can test: how many customers, at what price, at what cost to win each one, and how long they stay. A forecast that grows faster than anything the business has done before, with nothing in the deck explaining why, is the slide investors will question.

The figures in the deck also have to match the accounts, the filings and anything the founder has said elsewhere. Each difference becomes a question the founder has to answer.

The Rules on Sending a Deck

A pitch deck that invites people to invest is a financial promotion, and in many countries who it can go to is regulated.

In the UK, section 21 of the Financial Services and Markets Act 2000 stops anyone in the course of business communicating an invitation to invest unless an authorised firm makes or approves it. Private raises usually rely on the exemptions for high net worth and sophisticated investors, who confirm in a signed statement that they meet the tests.

In the US, a company raising under Rule 506(b) can raise an unlimited amount from accredited investors but can’t use general solicitation or advertising, so the deck goes to people the company or its advisers already have a relationship with, not to a public audience.

Australia, Singapore and the UAE have their own versions of these rules, and the check is made in each country where the investors are.

Fixing What Gets Marked Down

Some of what investors mark down can be fixed before the raise goes live: the deck itself, the breakdown of the amount, the reasoning behind the valuation, the investor list and gaps between the deck and the filings. Some takes longer, such as turning pilots into paying customers or hiring the people the plan depends on, and the timing of the raise has to allow for it.

Done-with-you services such as Capital Raiser start with this work. The first 30 days go on finding everything an investor would mark down and fixing what can be fixed before the raise goes live, along with building a list of investors who back that kind of business.

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Ryan Bradman
Guest Blogger & Outreach Expert - Interested in Writing Blogs, Articles in Business Niche | News Journalist By Profession in the United Kingdom