Dear Startup Investors, It’s Not Us, It’s You

🌈 Abstract

The article discusses the disconnect between entrepreneurs and investors, and how the focus on "killer pitch decks" has led to a vicious cycle of funding unsuccessful startups. The author argues that investors need to differentiate and look for innovative ideas beyond the standard pitch deck format.

🙋 Q&A

[01] The connection between the two questions that infuriate entrepreneurs

1. What are the two questions that infuriate most serious entrepreneurs?

• "Why them and not me?" - Entrepreneurs are frustrated when they see other startups succeed while their own does not.
• Investors are also frustrated because they don't know why they only pick one winner out of 10 instead of nine winners out of 10.

2. Why are these two questions rarely discussed?

• Entrepreneurs don't want to come off as jealous or imply that investors are clueless.
• Investors are also frustrated by this, but don't openly discuss it.

[02] The evolution of the pitch deck and its impact

1. How has the role of the pitch deck changed over time?

• Originally, the pitch deck was about describing the business idea.
• Over the last 10 years, the pitch deck has become more about the pitch deck itself rather than the actual business.
• Founders now spend more time on the "sizzle" (fonts, images, wordsmithing) than on the "steak" (market research, business model, execution plan, financials).

2. How has this shift in focus impacted the startup ecosystem?

• Investors have come to expect a "killer pitch deck", creating a vicious cycle where startups focus more on the pitch than the actual business.
• Many startups are now being built primarily to fit the killer pitch deck, rather than addressing real market needs.
• This has led to a high rate of business failures, as startups are not focused on sound business fundamentals.

[03] The author's perspective on business failures

1. What is the author's view on why businesses fail?

• In the author's mind, business failures should only be caused by bad business ideas, bad planning, or bad execution - not external factors like "Acts of God" or pandemics.
• The author believes that with the technical infrastructure available today, there is no reason for well-funded businesses to fail, except for these fundamental business issues.

2. How does the author propose to break the vicious cycle of funding unsuccessful startups?

• The author argues that the responsibility lies with investors to differentiate and look for innovative ideas beyond the standard pitch deck format.
• Founders will continue to pitch bad ideas and focus on pitch deck "sizzle", so investors need to recognize the limitations of the current system and seek out startups that don't fit the mold.

[04] The author's advice for investors

1. What is the author's advice for investors?

• The author suggests that investors recognize that the technology hype cycle has peaked, and that the next billion-dollar businesses may not look like the ones that came before.
• Investors should be on the lookout for ideas that are different from the "nine-out-of-10" that have failed in the past, as these may come from unexpected places.

2. How does the author characterize the current state of startups and investor expectations?

• The author states that startups are not "scratch-off lottery tickets with prizes hidden behind opaque windows" - there is enough technical infrastructure in place to allow smart founders to innovate and execute effectively.
• However, the ubiquitous "killer pitch decks" are trying to put "sizzle on a steak that's been sitting under the lights way too long", and investors need to look beyond this.