The Role of Change in a Pitch Deck Answering the "Why Now?" Question

All founders, regardless of whether or not their startup is at an early or growth stage, are at some point faced with the challenge of pitching their product to investors aiming to secure their first - or new - funding round. A successful pitch starts with a well-thought-out pitch deck. If we consider how much time investors spend on average reviewing the deck (3 minutes and 44 seconds, as pointed out by Forbes), or how long an average pitch lasts, a founder needs to make sure that all the key points are made concisely, yet nothing of value is omitted.  

One of the most powerful, and yet most commonly overlooked parts of an investor pitch deck is the "why now" slide. More often than not, founders seem to be unaware of its value. It might be the case that founders, many of whom come from technical backgrounds, find it more natural to focus on the product itself or the innovative technology it makes use of than explore the reasons why today is the best time for their product to appear.

Another reason why entrepreneurs might fail to highlight the right timing point in their deck is that they attach far more importance to the problem-solution part of the pitch, thus answering the question “why” their product has to exist, but dismissing the “now” component.

However, the “why now” slide has to be distinguished from the solution, value proposition, or product-market fit, and is not to be disregarded. Studies show that in terms of the amount of time investors dedicate to each deck slide, "why now" outranks both product or problem and solution slide types, coming fourth after financials, team, and competition. Also, the "why now" slide seems to appear in 54% of successful pitch decks, as opposed to 38% of those that failed to receive funding. These facts indicate that investors are most certainly interested in having the "why now" question answered and draw upon that information in their decision making.

In order to give a precise, straight-to-the-point answer to the "why now" question one needs to consider change, though not the change that the startup will prompt or create with its product, but rather the transformations that are already taking place and foster those favorable circumstances for the business to thrive. It might be a changing market, new technology trends, or a cultural or even behavioral shift. It might also be a combination of factors simultaneously at play. The key point here is to persuade investors that now is the perfect time to act, by creating a sense of urgency and picturing an opportunity that they would not want to miss out on. In other words, with the "why now" slide, founders should aim to convince investors that not only do they have an impactful business idea but also that they are about to ride the trend with it. 

"Why now" is the question that any startup founder has to ask themselves not only when working on the fundraising pitch deck. It is ultimately an extremely helpful way of gauging whether the timing for the product is indeed right. According to statistics, as many as 90% of startups end up failing, and the primary reason is that they launched their products either too late or too early, when the market was already saturated or simply not ready yet for the idea to be monetized at scale.

In its recent article TechCrunch shared stories of startups that shut down in 2022; in many cases, the cause of such a disappointing end was a prematurely launched product. One of the most vivid examples is the demise of Kite, a startup developing an AI-powered coding assistant. Founded in 2014, Kite had dedicated 7 years to the development of its tech for AI-assisted programming and managed to secure tens of millions of dollars from VC investors along the way, before winding down the business and open-sourcing the solution in November 2022. In his postmortem address, the founder Adam Smith admitted that the startup was “10+ years too early to market” and the technology required to achieve the projected results was not ready yet. Another company to close down this year is Kitty Hawk, an air taxi trailblazer backed by Google co-founder Larry Page. The manufacturer aimed to build an ultra-light eVTOL aircraft to be used as air taxis in urban areas. During the 12 years of operation, Kitty Hawk mainly worked on developing single- and two-passenger prototypes, which proved that making flying transportation a reality was a greater challenge than expected. Even though the company has not provided reasons for the closure yet, it is clear that the battery technology needs to advance a lot further, as well as multiple safety and infrastructure concerns have to be addressed before flying vehicles will stand a chance at becoming a new norm. 

Apart from the many technological, infrastructural, regulatory, and market challenges that startups normally face, 2022 exacerbated the situation with the economic crisis and record-breaking inflation. The downturn that the economy now suffers from creates an unfavorable fundraising climate, where funding dropped dramatically, leaving many companies short of cash and struggling to continue operations. According to a Crunchbase report, in Q3 2022 global VC investment levels plummeted by 53% year-on-year, marking the end of billion-dollar early-stage financing.

Founders need to keep a watchful eye on the changing VC environment and the new investment trends that are forming. One such trend, as pointed out by Forbes, is the transition from short-term investment strategies, oriented on rapid growth, to long-term thinking, where VC investors are interested in observing traction and strong financial performance rather than being presented with a breakthrough idea. For high-tech ventures that stake on innovation, such as Kite or Kitty Hawk, this means that now is not the best time to be fundraising, especially not as an early-stage startup. 

It also means that, in today’s turbulent times, the "why now" question is more relevant than ever before. Should they decide to seek funding, founders need to consider all circumstances carefully in order to justify why today is exactly the right time for their startup to appear. A good place to start is the Value Net and PEST frameworks explored by Raymond Luk in his blog as handy tools to evaluate the current climate and identify the changes that could create a favorable context for the startup. The Value Net approach helps to determine the key stakeholders that a business interacts with (e.g. suppliers, partners, customers, competitors) and how they are related to each other. The next step here would be to consider if any of those groups are affected by 'change' and in what way. This model allows entrepreneurs to shift their focus from consumer behavior and look for new trends elsewhere.

The second framework, PEST, serves a similar purpose by looking at four broad categories of changes–political, economic, social, and technological–that affect the business environment. For a founder it might be natural to concentrate on technological changes; however, it might turn out that a shift in social values and norms or the newly introduced regulations will become a driving force behind the new business. A combination of these two frameworks–where each stakeholder type behavior is considered together with those four factors–can help founders phrase the answer to the "why now" question even more precisely. 

Even in a favorable economic climate, with funds plentiful and VCs keen to offer generous financing, success was never guaranteed to startups. In times of crisis, any new business is up against even bigger odds. However, times of crisis are also times of change, which are unprecedented and far-reaching and occur on all four levels described above.

A resourceful founder can turn that into their startup’s “why now” if they correctly identify the opportunity that results from the change and communicate the urgency to act on it to investors. And then (who knows?) they might well win their next funding round.