I've been to a number of demo days since co-founding a seed fund, and I've seen a lot of demo day pitches. While pitches have become more and more polished and professional with each passing month, there are a few mistakes that founders continue to make. Here are some of the most common issues that I've seen (and how to fix them):
Problem: not telling people what you do.Once in a while, someone delivers a pitch that describes everything except what their company does. When I review my notes, they typically read: "HR Software is inefficient. Huge $50b market. Strong tech team with ex-Googler from MIT as CTO. Raising $500k. I HAVE NO IDEA WHAT THEY ACTUALLY DO." If you're pitching someone one-on-one, this is a tolerable omission because the person will just ask you what you do; if you're pitching as part of a group of 10 or 30 other companies, investors will just gravitate toward the companies that have a clearer pitch.
Solution: Follow this pitch recipe:
You won't have time to talk about everything during a demo day presentation, but at least cover the problem you're addressing, your solution, the size of the opportunity, your progress so far, and your team. Practice pitching to people who don't know anything about your company and make sure they understand what you actually do.
Problem: typos in the slide deck. Technically not a huge deal, but given that you're presenting in front of hundreds of people in order to raise money, a typo — or worse, multiple typos — are a yellow flag. They imply that you're not detail-oriented, or that you couldn't get a few people to proofread your pitch, or that you just don't care. None of these are good signals to send.
Solution: Proofread everything, then ask several friends or fellow entrepreneurs to proofread, too.
Problem: ludicrous exaggerations of traction and/or market size. Everyone wants to talk about 20% monthly growth or a $5b market opportunity. I get it. That's what gets investors excited, and it probably gets most founders excited, too. However, some pitches go too far. "We are targeting residential real estate, which is a $1 trillion dollar market!" Seriously? Yes, the total value of all real estate sold each year maybe be a trillion dollars, but 95% of that value is in the real estate itself, then real estate agents pocket a few percent, and that leaves perhaps $10b on the table. $10b is an awesome number, but by talking about the trillion you're just insulting the audience's intelligence. Most investors are not stupid. I've never had a investor come up to me and say (without sarcasm), "You HAVE to check out RealEstateMagicCorp! They're tackling a one trillion dollar opportunity!!"
Some founders also over-dramatize growth and traction. Pitch: "We recently launched and are on track for a million dollars in revenue this year." Investor's assumption: you made $20k last week thanks to your pre-launch press push, then multiplied that number by 52 weeks. Pitch: "Our consumer app's user base has been doubling weekly for the last two months." Investor's assumption: In week 1, the only users were the founders. Now it's week 8 and you have 400 users. Investors see through this stuff because it's common and they're not stupid.
Solution: Pitch based on the assumption that most people are turned off by blatant exaggeration. Optimism is good, but if you're quoting numbers in the 100s of billions or higher, or if you're hiding low numbers (400 users) with impressive sounding growth (2x growth every week), then something is wrong. Avoid hyperbole.
Problem: bugs in live demos.For certain types of products, demos are very tempting: voice-controlled software, motion-controlled hardware, novel gadgets, etc. The problem is that it's very hard to control a demo. Maybe the ambient noise in an auditorium wreaks havoc on your voice recognition system, or your walking robot works well on a carpeted floor but not on an uncarpeted stage. A demo is nice if it works, but embarrassing to the entrepreneur and off-putting to investors if it doesn't work.
Solution #1: Don't do demos. Here's a very effective pitch recipe: describe an interesting product, show a few teaser photos, then invite people to talk to you at the end of the day if they want a personal demo. Bring your cofounders along because there will be a line of investors waiting to talk with you. One way to think about 1:1 demos vs. on-stage demos: if your awesome on-stage demo has a 90% chance of working perfectly, then there's a 90% chance you'll attract a lot of investors and a 10% chance you won't attract any. If your awesome 1:1 demo has a 90% chance of working perfectly, then you'll attract 90% of investors 100% of the time. It's much better to attract the interest of 90% of investors all of the time than to risk turning away all investors 10% of the time.
Solution #2: Show a prerecorded video instead of a live demo.
Solution #3: If you're going to do a demo on stage, do a canned demo. For example, use HTML wireframes instead of a live site that connects to a remote web server.
Problem: stumbling through your pitch, having to refer to notes, etc. Bring notes just in case, but don't read your notes or your slides while you're talking. For an hour-long talk, some reading is fine; for a 120-second talk, just memorize it. I went to a 500 Startups demo day yesterday, and all of the presenters were somewhere between good and great. When everyone else is very good, you don't want to be the one presenter that stands out as mediocre.
Solution: Practice. Then practice some more. Practice until you can do your pitch consistently without the slides or a timer.
If you avoid these five common problems, you'll attract more investors after your demo day presentation. Good luck!