The startup’s ‘customer partners’ slide: All those logos and no dollars? 

Pitches for early-stage companies that have already released a B2B product typically include a slide full of client logos, which they use as proof of “traction.” Whenever I see this my ears perk up, as it’s no easy feat signing on so many paying customers at an early stage, and my mind starts calculating the probable revenue run rate.

But then, when I ask how much these “clients” are paying to check if my calculations are correct, it’s as if I’ve caught the entrepreneur off guard. Like a deer caught in headlights, they tell me “well, for the pilot/beta phase we are giving a deep discount, but from here on out we’ll be charging $XXX.” When this happens, the credibility and excitement built up to that point leaves the room like air leaving a balloon.

The pitfalls of faking traction 
Trying to “fake it till you make it” by exaggerating traction may get you attention in demo days and press releases, but vanity metrics don’t fool serious investors. This form of exaggeration just makes it more difficult for investors to take anything you say at face value.

To avoid creating this doubt, don’t try to gloss over traction by showing off a bunch of impressive logos without any context. Rather than hoping investors won’t ask detailed questions and reactively fumbling through your response, use this slide as an opportunity to build trust and to demonstrate your thought process and plans.

Less logos, more explanation
Be clear on why you are charging current clients much less than your business model indicates, and why you will be able to charge more in the future. Perhaps these were reference clients, or perhaps they were early beta testers who paid less in exchange for providing meaningful product feedback. Whatever the reason, don’t just say you charged them less because it was easier to get them on-board faster, as it won’t be clear why in the future it will get easier to charge everyone a full price that nobody is paying yet.

On the slide itself present this in more of a structured, timeline-driven fashion. Upfront, you can indicate with a pipeline image how many users you have, how many are paying, and how much they are paying. Then, another slide can match your projected improvements on the key metrics to your product roadmap and planned milestones. This sets the groundwork for the later conversation about how much you want to raise and what you plan to achieve.

The takeaway
The best investor pitches are more like conversations than presentations. If you have not yet reached product/market fit, instead of trying to cover this up with impressive but meaningless numbers, use this as an opportunity to discuss your future plans for the product roadmap, business model, and financial projections. Investors will have more confidence in someone who has a firm handle on what needs to be done and how to get there than in someone who is not authentic.

Jonathan Friedman is a Partner at LionBird, an early-stage fund investing in startups that use technology to improve offline processes in healthcare, commerce, and the enterprise. He blogs about the Venture Capital Point of View at VCPOV.com