Seeing the Red Flags in a Tech Startup Investment Pitch

By Cameron Chell CEO, Podium Ventures

Cameron Chell

Not every presentation that you witness is going to be spearheaded by the consummate showman. The truth is, even the best products are sometimes fronted by poor pitches. It’s an art form that very few ever truly master.

Especially when it comes to startups, the presentation is all about selling the sizzle and trying to keep the steak out of view. Most of the time, this is due to the fact that the product is still in a conceptual stage and the startup itself only really has “potential” to sell. Even when that’s the case, there are a number of red flags that investors should be on the lookout for during pitches, whether they’re dealing with the consummate showman or a technical founder who has only just ventured into daylight.

What Are The Actionable Steps?

Commonly referred to as the ‘Use of Proceeds’ in a pitch, this tends to be nothing more than a single page in a PowerPoint presentation , offering a basic summary of what the money raised will be used for. This can be a problem for investors. $750,000 allocated to ‘Business Development’ might seem reasonable to the Entrepreneur, it might even be realistic but, if there is no further insight that supports that figure, how can an investor move forward? And why would they want to?

Numbers without definition and context can quickly become the downfall of a presentation. Is a section of the money raised being denoted towards Marketing? If so, what is the customer acquisition strategy? A good investment pitch highlights not only the Use of Proceeds, but gives key, actionable steps that will be undertaken to ensure the money raised is used in the best way possible.

These steps aren’t set in stone, but if they aren’t included in the pitch, it essentially means the company isn’t thinking about them. If they aren’t thinking about them, it means they are being reactionary with investor money which is always dangerous.

What Are The Imposed Deadlines?

Having actionable items is incredibly important in the development of a startup and knowing the tactical steps necessary to get from Point A to Point B can make or break an early stage company. This is something an investor should always be wary of.

When a startup and their founding team are giving a pitch, knowing when something is going to be accomplished is just as important as knowing what is going to be done. It’s comforting to know that, with the money raised, a startup plans to go from their current point A to point B and in what timeframe. If there aren’t imposed deadlines on tactical operations then the Use of Proceeds once again becomes flimsy and little more than a placeholder.

Getting to Point B may involve substantial time and effort which is understandable in a growing startup. Investors should expect pain points and setbacks along the way as it is part of the natural evolution of a startup. What investors want to see, however, is a development timeline highlighting important, tactical milestones the startup needs to accomplish.

Have They Validated?

Startups exist to solve pain points. A good startup team will have recognized a market opportunity and found out where they can fit into the niche and begun growing their business.

Even in early stages, companies should be focused on understanding what they are solving. Having a product or service is important, but being able to accurately solve real pain points of people in the market, is what brings success. Early stage companies can adapt and pivot far faster than their larger corporate cousins, interacting with the market in an entirely different way.

Early customer communications can make or break a startup. If no feedback is being sought and startups aren’t focused on growth in a way which echoes customer feedback, the startup will falter. If they’re taking customer feedback seriously, chances are they’ll talk about the customer acquisition and growth models in their pitches. If it is conspicuously absent, it should act as a warning flag.

By Cameron Chell CEO, Podium Ventures

Cameron Chell

Not every presentation that you witness is going to be spearheaded by the consummate showman. The truth is, even the best products are sometimes fronted by poor pitches. It’s an art form that very few ever truly master.

Especially when it comes to startups, the presentation is all about selling the sizzle and trying to keep the steak out of view. Most of the time, this is due to the fact that the product is still in a conceptual stage and the startup itself only really has “potential” to sell. Even when that’s the case, there are a number of red flags that investors should be on the lookout for during pitches, whether they’re dealing with the consummate showman or a technical founder who has only just ventured into daylight.

What Are The Actionable Steps?

Commonly referred to as the ‘Use of Proceeds’ in a pitch, this tends to be nothing more than a single page in a PowerPoint presentation , offering a basic summary of what the money raised will be used for. This can be a problem for investors. $750,000 allocated to ‘Business Development’ might seem reasonable to the Entrepreneur, it might even be realistic but, if there is no further insight that supports that figure, how can an investor move forward? And why would they want to?

Numbers without definition and context can quickly become the downfall of a presentation. Is a section of the money raised being denoted towards Marketing? If so, what is the customer acquisition strategy? A good investment pitch highlights not only the Use of Proceeds, but gives key, actionable steps that will be undertaken to ensure the money raised is used in the best way possible.

These steps aren’t set in stone, but if they aren’t included in the pitch, it essentially means the company isn’t thinking about them. If they aren’t thinking about them, it means they are being reactionary with investor money which is always dangerous.

What Are The Imposed Deadlines?

Having actionable items is incredibly important in the development of a startup and knowing the tactical steps necessary to get from Point A to Point B can make or break an early stage company. This is something an investor should always be wary of.

When a startup and their founding team are giving a pitch, knowing when something is going to be accomplished is just as important as knowing what is going to be done. It’s comforting to know that, with the money raised, a startup plans to go from their current point A to point B and in what timeframe. If there aren’t imposed deadlines on tactical operations then the Use of Proceeds once again becomes flimsy and little more than a placeholder.

Getting to Point B may involve substantial time and effort which is understandable in a growing startup. Investors should expect pain points and setbacks along the way as it is part of the natural evolution of a startup. What investors want to see, however, is a development timeline highlighting important, tactical milestones the startup needs to accomplish.

Have They Validated?

Startups exist to solve pain points. A good startup team will have recognized a market opportunity and found out where they can fit into the niche and begun growing their business.

Even in early stages, companies should be focused on understanding what they are solving. Having a product or service is important, but being able to accurately solve real pain points of people in the market, is what brings success. Early stage companies can adapt and pivot far faster than their larger corporate cousins, interacting with the market in an entirely different way.

Early customer communications can make or break a startup. If no feedback is being sought and startups aren’t focused on growth in a way which echoes customer feedback, the startup will falter. If they’re taking customer feedback seriously, chances are they’ll talk about the customer acquisition and growth models in their pitches. If it is conspicuously absent, it should act as a warning flag.