Revealing the Truth

Recently, I had a candid conversation with a venture capitalist friend who expressed his annoyance with the current state of deal flow, which he described as lacking substance. After a year of silence on this issue, I felt compelled to voice my thoughts.

Perhaps the issue lies not with entrepreneurs but with investors. Maybe the types of startups ambitious founders wish to launch no longer align with what investors are inclined to support. Additionally, the founders who fit the mold of what investors seek may not possess the qualities necessary for achieving success.

This cycle of expectations is perpetuated by both parties, leading to a repetitive yet unproductive pattern.

The Pitch Deck Conundrum

Historically, the modern venture-capital-backed startup era began with the shift from detailed business plans to succinct pitch decks. This transition was solidified in the early 2000s when entrepreneurs began to rely heavily on pitch decks to showcase their ideas.

However, over the last decade, the focus has shifted from the substance of the business to the aesthetic of the pitch deck itself. This phenomenon, which I term the "killer pitch deck problem," encapsulates the frustration surrounding why many potentially successful startups fail to capture investor interest.

I first recognized the extent of this issue five years ago when I observed someone prioritizing the design elements of their pitch deck—fonts, images, and wording—over critical aspects like market research, business models, and financial forecasts. This disproportionate emphasis, where 90% of time was spent on presentation and only 10% on substance, is indicative of a broader trend.

The Cycle of Expectations

This fixation on impressive pitch decks has been fueled by investor expectations, which creates a detrimental feedback loop. While not every investor is overly concerned with design choices, many businesses today seem to be structured around what can be effectively presented in a polished pitch deck.

This trend mirrors the practice of drafting a script based on a movie poster, an approach that can lead to superficiality. Although the phenomenon of crafting narratives before product development is not new—Amazon, for instance, often writes press releases prior to launching products—the current environment is increasingly obscured by illusion.

The truth is that savvy founders will shape their pitches, and even their businesses, to align with what is currently attracting funding. The emphasis on presentation has overshadowed the core elements that drive business success.

Examining the Outcomes

The results have been disheartening, especially as economic conditions worsen, leaving little room for missteps. In my view, there is no justification for a funded business to fail, barring unforeseen external crises such as natural disasters or pandemics.

Business failures should stem from flawed ideas, inadequate planning, or poor execution—not from the lack of funding. Yet, the processes and methodologies that govern investment decisions have remained largely unchanged.

To break this cycle, we must alter its inception. Many failure cycles begin at the moment funding is secured, often driven by the allure of the killer pitch deck—the very tip of the iceberg.

Who Holds the Responsibility?

The onus lies with you, the investor. While it is not your duty to educate or regulate, it is crucial to discern between genuine potential and mere hype. Entrepreneurs will continue to pitch questionable ideas and strive for maximum presentation flair, as no one wants to be the outlier who prioritizes honesty in a landscape where others seem to be profiting from flashy but flawed concepts.

We have reached a peak in the technology hype cycle. Initiatives like Web3 and AI are not the groundbreaking innovations they were touted to be. It is time to move beyond traditional metrics of success, as the landscape of technology is ever-evolving.

Startups are not mere lottery tickets with hidden prizes. The technological foundation built over decades allows astute founders to harness innovation effectively. The next wave of billion-dollar companies will not resemble their predecessors. Today's prevailing pitch decks may attempt to add allure to outdated concepts that have long overstayed their welcome.

Look for ideas that defy the trends of the past decade, as they may emerge from unexpected sources.

For those who found this discussion enlightening and practical, I invite you to subscribe to my email list at joeprocopio.com for updates on my latest publications. Additionally, if you seek hands-on strategic advice, consider joining Teaching Startup, my initiative aimed at nurturing better entrepreneurs, innovators, and leaders.

The first video, "The Secrets That Venture Capitalists Don't Tell You," provides insights into the hidden aspects of venture capital that entrepreneurs should be aware of.

The second video, "The 4 Pillars of Venture Capital: $1B Venture Capital Fund Manager Tells All," reveals foundational principles that guide successful venture capital investments.