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Your Pitch Deck Is Wrong

October 14, 2024

I see a lot of pitch decks. Hundreds per year. Almost every one is wrong. Not the startup idea. Not the slide layout. Not the facts per se. But which facts and in what order. Nearly all founders use a structure guaranteed to kill their “conversion rate”.

The common flaw stems from a fundamental mismatch in the way our brains create versus consume content. Each engages a different rms of reasoning. I studied this general topic in graduate school under one of the pioneers in the field. I kept up with the literature over the years. And I observed a huge number of pitches. But it still took me years to realize what was happening (repeating the same mistake in my own pitches, of course). Once I did, I couldn’t help appreciating the ironic beauty of the situation.

First, some background in cognitive psychology. Your brain has two completely different reasoning systems. System 1 is the fast, associative pattern-matching module—good for sitting in the background while you walk the plains and then rapidly determining whether a rustle in the bushes signifies mortal danger or a tasty dinner. System 2 is the slow, logical alternative-weighing module—good for deliberately figuring out whether it’s best to make camp by the river or on the hill. (If you want the full general audience explanation of System 1 and System 2, read Thinking Fast and Slow by Daniel Khaneman, who was the partner of my late professor, Amos Tversky.)

Now, when you build a pitch deck, you have to call on System 2 to develop the content. System 2 is logical so you can’t help but try to construct a deductive proof of why someone should invest in your company. That’s why most pitches have 3-7 slides setting the stage: here’s the problem, here’s the size of the problem, here are the current solutions, here are the drawbacks of current solutions, here are the requirements for a better solution…” I refer to this pattern as “In the Beginning”.

However, when investors consume that pitch deck, either at Demo Day, in an email, or face-to-face, they call on System 1. For most people in most situations, System 1 is the default. System 2 takes much more energy and operates much more slowly, so it only gets called on when something special happens. Thus, unless your pitch quickly triggers investors' System 1s to recognize your company as a tasty dinner, their System 2s will never wake up and no amount of logic can help you. And then when you use your System 2 to try and improve your pitch, you'll be blind to the problem.

You may be wondering why none of your advisers notice this problem when they reviewed your deck or watched a practice pitch? Here's another ironic bit. People who sincerely want to help with your pitch will expend the effort to use System 2, also blinding them to the lack of System 1 appeal.

Perhaps the worst case of “In the Beginning” I’ve seen was at a pitch event several years ago with a brutal schedule of 12 fifteen-minute slots. A company in the last hour really started at the beginning: the last generation of technology, quotes on recent shortcomings of that generation, market sizing for the next generation, the founders’ previous experience designing this type of system, technical architecture of their new solution, and performance metrics versus the primary incumbent. Logical, but not engaging. Ran over his time and had to rush through the last slide, which was something along the lines of logos for 5 blue chip enterprise customers, an average annual contract value of $60K/year, and current $MRR of $35K/month with 20% MoM growth for 6 months.

WTF? By the time that slide flashed on the screen, 80% of the audience members were fiddling with their cellphones or chatting with their neighbors. Talk about a missed opportunity! Better to just show that last slide, drop the mike, and walk off the stage!

Luckily, identifying the problem suggests an obvious solution—focus on triggering System 1 to flag you as interesting. So without further ado, here’s Kevin’s “Hey, tasty dinner right here!” pitch template:

  • ‍Title Slide
  • Context Slide: super high-level explanation of what you do, 5 bullets max
  • BOOM! Slide: the most impressive thing about your company
  • Ask Slide: what the next BOOM will be and what you need to get there‍
  • Why Slides: details on how you made the first boom happen and why you’ll make the next boom happen too

Putting the Ask right after the Boom is key. The Boom triggers alertness and primes for action. Then you’ve got to give the investors something to pursue. Otherwise, you may lose their interest. Also, telling them about good stuff that will happen in the future right after good stuff that has already happened in the past naturally gives your good-stuff-forecast more credibility. Your investment ask will seem maximally reasonable at this point.

You may wonder why you need the Why slides at all? Well, once you wake up System 2, it needs to eat too. But keep the Why section as small as possible. The more facts you present, the more chance that System 2 will find a strong objection and dismiss you so it can go back to sleep—remember, System 2 requires a lot of energy. The goal is to just satisfy System 2 and get to the next step in the process. where you can bring other cognitive mechanisms into action. Oh, and when delivering the Why, keep referring back to the Boom as much as possible to maintain alertness. For example: “[Supporting Evidence]… which is why X customer loves us so much and is paying us so much money.”

My guess is that most founders’ pitch decks already contains 80%+ of this content. It’s just in the wrong order and probably too much detail on Context and Why. The big question you probably have is, “What should my Boom be?” Sorry, no blanket advice here. It’s situation dependent. But guess what? By simplifying the problem to one question, we’ve made it amenable to A/B testing. If your Boom isn’t obvious, generate 3-7 alternatives and test them against several investors each. Also, if you can’t come up with a decent Boom, it might be a signal that you haven’t made enough progress to fundraise with much success. So your near term goal becomes to make something Boom-worthy happen.

That's my preliminary diagnosis and treatment. I’ve given this advice face-to-face to many startups over the past two years and have received a lot of positive feedback. But it’s an inherently limited sample. So if you read this post, try out the approach, and learn anything interesting (positive or negative), please drop me a line and let me know! Maybe someday we'll be able to develop a thoroughly researched system of Evidence Based Pitching (EBP).

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This post was originally published on 05/10/2016 and was last updated on 10/14/24.

Further Reading

Enjoyed this post? Here are a few more posts that you might find just as insightful and engaging.

For Founders

How Could Funding Possibly Be Bad for You?

One of the most critical (and often overlooked) pieces of advice for founders is this: Think very carefully before taking any round of funding. And no, the primary concern isn’t dilution. The real issue? Funding closes off exit opportunities.

Wait, what? Isn’t an investment supposed to help you build a more valuable company, making it more attractive for an exit? Yes—but it also drastically increases the price tag on your company, which shrinks the pool of potential buyers.

The Economics of Higher Valuations

Investors aren’t in the business of breaking even. They expect a return, and their expectations set a “floor” for acceptable exit outcomes. Most professional investors aim for a 5X to 10X return on their investment. More importantly, they often have legal stock preferences that allow them to block exits that don’t meet their expectations.

At the same time, they have an anchor for how much of your company they want to own—typically 20% to 30% per round. Let’s work through some quick math based on midpoint values of these expectations:

  • Investors want to own 25% of your company.
  • That means the post-money valuation of your round will be 1.33X your current value.
  • Investors want a 7.5X return, so the required exit price becomes 10X your current value.

Every round of funding you take raises your required exit price by an order of magnitude.

The Exit Math in Action

Let’s put this into perspective:

  • Seed Round: Suppose you raise a seed round at a $3M pre-money valuation. Now, to hit a 10X investor return, you need at least a $30M exit. Doable.
  • Series A: You raise at a $10M pre-money valuation. Your new required exit price jumps to $100M. That’s a steep climb.
  • Series B: Now you’re raising at $25M pre-money, pushing your required exit to $250M. How many companies exit at this level annually? Only about 50 to 100.

And yet, each year, there are roughly 1,000 early-stage VC investments competing for those exits. The odds? Not great.

The Series A Cliff (and Beyond)

There’s a well-documented drop-off in exit opportunities at Series A and beyond. Every round you take exponentially reduces the number of viable buyers, making an acquisition increasingly difficult. Founders should weigh this reality carefully: is the progress you’ll make with additional funding worth the dramatically narrower exit path?

Funding isn’t inherently bad, but it fundamentally changes your trajectory. Before you take that next round, ask yourself: Are you truly ready for the stakes to go up?

This blog post was originally published on 07/02/2013 and last updated on 12/14/25.

For Investors
For Founders

What Is Pre-VC Funding? It’s Investing Ahead of the Herd

It used to take millions in funding to build a tech startup. Before cloud computing and open-source software, launching a product required expensive hardware, in-house servers, large engineering teams, and significant capital just to reach early milestones. Because of these high costs, venture capital firms primarily funded startups at the Series A stage, when companies needed large investments to scale.

Over the past two decades, however, the cost of building a startup has plummeted. Cloud infrastructure eliminated the need for expensive servers. Open-source software reduced development expenses. Low-cost distribution channels made it easier than ever for startups to access customers. As a result, early-stage investing has evolved, giving rise to new funding stages—first Seed, then Pre-Seed, and now Pre-VC—each emerging as the capital required to launch a company decreased.

For investors, this shift presents a compelling opportunity. While traditional VCs continue to focus on larger deals, many early-stage companies are raising smaller rounds well below the investment minimums of traditional institutional venture capital. The result is a funding gap—the Pre-VC stage—that remains largely overlooked by institutional investors, creating an open playing field for those who recognize its potential.

How Early-Stage Investing Evolved

From Series A to Seed: The First Shift (2000-2010)

Before the 2000s, Series A was the starting point for venture capital, with round sizes typically ranging from $3 million to $10 million. Startups at this stage were often pre-revenue, and investors focused on market size, the strength of the founding team, and long-term growth potential rather than financial performance. Funding rounds below $3 million were often limited to angel investors, friends & family, and bootstrapping.

As technology became more capital-efficient, startups needed less money to build and launch products. This shift led to the rise of Seed rounds. By the mid-2000s, dedicated Seed-stage VC firms formalized Seed investing, with round sizes typically between $1 million and $3 million, making Seed a critical bridge to Series A.


The Rise of Pre-Seed: The Next Gap (2010-2020)

As costs continued to decline, some startups needed even less capital before raising a Seed round, which led to an explosion of Micro-VC funds and the emergence of Pre-Seed funding, with rounds typically ranging from $750,000 to $3 million, a space that had formerly been the sole domain of angel investors, friends & family, and accelerators. However, as more founders sought early capital, Pre-Seed investing became more structured. Also, the introduction of the SAFE note by Y Combinator in 2013 played a major role in standardizing these early rounds, making it easier for startups to raise funds without the complexities of traditional equity financing.

Much like Seed rounds a decade earlier, Pre-Seed investing grew over time. Traditional VCs were initially hesitant to participate due to the small check sizes and the labor-intensive nature of early-stage investing. But as startup funding continued to evolve, Pre-Seed rounds became more popular, and many institutional investors now actively participate in this stage.

The Emergence of Pre-VC Investing

Just as Seed investing institutionalized in the 2000s and Pre-Seed evolved in the 2010s, a new funding gap has emerged between angel rounds and institutional VC: Pre-VC investing.

Today’s institutional venture capital firms typically avoid participating in rounds below $1 million, leaving many early-stage startups reliant on friends & family, angel investors, or their own resources. If this story sounds familiar, it’s because it is. In the 2000s, Seed investing was considered too early for institutional venture capital—until it wasn’t. In the 2010s, Pre-Seed investing was dismissed as too small—until it wasn’t. Now, Pre-VC faces the same skepticism from traditional investors, even as it quietly grows.

While large VC firms hesitate, this emerging stage presents an opportunity for investors willing to adapt. Just as institutional investors once overlooked Seed and Pre-Seed, they are now bypassing Pre-VC. This stage represents a market inefficiency, one that investors can leverage by building diversified portfolios of high-potential early-stage startups.

Why Pre-VC Hasn’t Caught On with Most Institutional Investors

Traditional venture capital firms aren’t ignoring Pre-VC because it lacks potential. Instead, structural challenges within their investment models make it difficult for them to participate effectively.

One challenge is that early-stage investing is labor-intensive. Most traditional VC firms pride themselves on using their subjective expertise to pick winners. They evaluate thousands of pitches annually and conduct extensive due diligence before making an investment. The hands-on nature of their involvement makes it difficult to justify small investments.

Another challenge is portfolio construction math. A traditional $100 million venture fund might invest in 25 companies, with an average of $4 million per company. Smaller investments don’t make economic sense for most VCs because they require just as much time and effort as larger deals while contributing little to overall fund returns. A $250,000 Pre-VC check, for example, is too small to justify the labor involved and too insignificant to meaningfully impact the fund’s performance.

For large institutional VC firms, Pre-VC investing simply doesn’t fit their model.

Why Pre-VC Is a Significant Opportunity for Investors

The Pre-VC stage is attractive to investors for two key reasons: capital efficiency and competitive valuations.

Startups at this stage tend to be exceptionally capital-efficient, benefitting both founders and investors. Highly capital-efficient startups have less reliance on external funding which means greater resilience during bad funding markets, like what we’ve seen over the last couple of years. This can mean less dilution risk and higher potential return on investment. Capital-efficient companies can also pivot faster and adapt to market changes.

Many companies at this stage reach profitability early, which means Pre-VC isn’t just their first funding round—it could be their only funding round. Investors at this stage have the rare opportunity to buy meaningful ownership in startups that may never need to raise additional capital.

In addition to capital efficiency, valuations at the Pre-VC stage remain highly attractive. While valuations at all VC stages have soared in recent years, Pre-VC valuations have remained relatively flat. As an example, between 2014 and 2024, Seed valuations rose by 183% according to Pitchbook. In contrast, valuations for Pre-VC investments at Right Side Capital Management (RSCM) increased by only 10% during that same period. This is all a function of supply and demand of capital. During the past decade, especially before 2022, thousands of new VC firms were created, and the VC industry raised tremendous amounts of capital, leading to ever-increasing valuations.  But at the Pre-VC stage, demand has risen every year from founders but very few institutions address this demand, keeping valuations depressed.

Since 2012, RSCM has invested in over 2,000 startups, specifically targeting this funding gap. By streamlining the investment process and challenging traditional VC norms, RSCM has been able to exploit the inefficiencies at this stage and invest in promising early-stage companies at significantly discounted valuations.

Data from Pitchbook

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Pre-VC Funding: Investing in the Future Before the Herd Arrives

Early-stage venture funding has always evolved. Seed rounds were once an informal and overlooked segment of investing until they became institutionalized. Pre-Seed rounds followed a similar trajectory, initially dismissed as too small before maturing into a widely accepted funding stage. Now, Pre-VC is emerging as the next logical step in the evolution of early-stage investing.

This funding gap exists not because startups don’t need capital, but because traditional investors aren’t structured to provide it. For those who recognize this shift, Pre-VC represents a rare and valuable market inefficiency.

  • The cost of building a startup has never been lower.
  • Institutional VCs are ignoring this stage.
  • Valuations remain competitive.

As the venture capital landscape continues to evolve, investors who recognize this shift now will find themselves ahead of the herd—investing in the future before the rest of the industry catches up.

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For Founders

The Truth About Small Seed Rounds

Have you ever finished a challenging task and thought, I went about that all wrong—why didn’t anyone warn me? If you’re gearing up to raise a seed round, consider this your warning.

When faced with a challenge, most entrepreneurs seek out as much data as possible, then dive in. For fundraising, that often means scouring TechCrunch, listening to founder stories, and analyzing top VC blogs. But these sources are inherently biased—only the most unusual cases make the headlines. If you optimize for the outlier, you’ll struggle with the typical case.

At RSCM, we've observed or participated in hundreds of rounds over the last decade. We know what the typical seed raise looks like—and how to navigate it successfully.

The Two Most Common Mistakes: Too Much Money & Fixating on a Lead Investor

The biggest fundraising mistakes we see are:

  1. Setting a target raise that’s too high.
  2. Getting anchored on the idea of securing a "lead" investor.

Raising a seed round is rarely easy. But the difficulty increases dramatically when moving from a $500K target to $1M+. At that stage, you usually need significant revenue, a well-known founding team, or truly breakthrough technology. While it’s possible to find investors who fall in love with your idea, the odds are low, and the effort required is high.

Even if you meet these extreme criteria, raising $1M+ often requires a lead investor. You might think, That’s fine, I want a lead! But consider this analogy: If you’re an engineer, would you design an architecture with a single point of failure? In marketing, would you create a campaign targeting the lowest-converting users? In sales, would you prioritize prospects with the longest sales cycles? Probably not—yet that's effectively what founders do when structuring a round around a lead from the outset.

If you don’t secure a lead, you could end up with nothing. The universe of lead investors is smaller, they take longer to engage, and closing them is a lengthy process. This delays fundraising and distracts from building your business. Unless your company has at least $20K in monthly revenue, a dozen professional investors already interested, or an absolute need for a large capital infusion, this approach is suboptimal.

A More Effective Strategy: Modest Raise, Brick-by-Brick, Graduated Pricing

If you have little revenue and a limited investor network, start with a modest raise—$250K to $500K. Ensure your plan demonstrates clear progress with this amount and that your cash burn aligns with reasonable milestones.

Step 1: Secure Initial Commitments

Begin with your strongest supporters—friends, advisors, early customers. Many founders hesitate to ask for small checks, thinking it won’t move the needle. But at the start of a raise, momentum is more important than amount.

Offer attractive terms to incentivize quick commitments. A convertible note with a 20% discount, 5% interest, and a compelling cap is a good starting point. A lower cap at the beginning rewards early investors for moving quickly.

Step 2: Raise the Cap Gradually

Once you’ve secured $100K–$200K, bump the cap up. The “great deal” becomes a “good deal.” The increase should reflect investor demand—if early commitments came quickly, raise the cap two notches; if it took longer, only one.

Continue creating urgency. Tie limited-time offers to natural deadlines, such as an accelerator Demo Day, a major product release, or a customer launch. Investors respond to scarcity—use it.

Step 3: Build Toward an Optional Upgrade

Once you’ve closed 50% of your target, you gain leverage. You now have money in the bank, customer traction, and reduced risk. At this stage, you can:

  1. Tap into bigger geographies. If you’re outside SF or NYC, start pitching investors in those markets.
  2. Leverage platforms like AngelList. A strong lead can attract syndicate funding.
  3. Approach small funds that lead rounds. With momentum, you can explore a larger raise.

Sidebar: Process Matters

Fundraising requires structure. Track your prospects in a CRM or spreadsheet. Categorize investors into:

  • First check: Early believers who can move quickly.
  • Second check: Investors who follow others’ lead.
  • Later check: Those who need more traction before committing.
  • Lead investors: Professional funds who might anchor the round.

Initially, focus on first and second-check investors. Ask them for referrals to expand your pipeline. Engage with later-check and lead investors early but don’t prioritize closing them until you’ve built momentum.

Oversubscribing, Securing a Lead, and Converting if Necessary

If demand is strong, you may be in a position to upgrade your raise. There are two paths:

  1. Oversubscribe: If interest exceeds your target, tell investors you’re at capacity and need firm commitments. Use scarcity to drive action.
  2. Entertain a Lead Investor: If a fund expresses interest in leading, push for a term sheet within 7–10 days. Avoid holding out so long that you lose other investors.

Most institutional investors are comfortable leading a seed round with a convertible note. If you’ve already raised via notes and a fund insists on a priced round, don’t worry—you can always convert the notes into equity.

Final Thoughts

It’s easy to adjust when things go better than expected. Plan for the typical case, not the outlier.

Depending on market conditions, only 10-20% of seed rounds have a true lead, and another 10-20% are oversubscribed. That means 60-80% of rounds follow the standard path: a gradual raise without a formal lead. And that’s completely fine.

Fundraising is difficult. Raising $250K to $500K gives you roughly a year of runway. And we’ve seen firsthand how much founders can achieve in a year. Focus on building, execute strategically, and the capital will follow.

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This blog post was originally published on 07/18/2016 and was last updated on March 12, 2025.