Pitching a startup effectively means telling a story, but rarely in chronological order.
Get to the point. Immediately, if not sooner. And what is the point of your pitch for investors? Investors want to earn a return on their investment. Entrepreneurs have to start with this. Explain the investment return potential.
I recently reviewed a pitch deck that gave me the mistaken impression that it wanted to build a not-for-profit company. Then, near the end, the deck shows that similar companies in the same space had recently sold for billions of dollars and I realized that this startup shared those examples because they thought they could replicate that success. Why not start with this? If you have fifteen minutes to present, you don’t want your audience to struggle trying to figure out what the opportunity might look like for ten of those precious minutes.
We are accustomed to hearing stories in chronological order. It makes sense. From the first stories our parents read to us as children, we hear the beginning and move through the events as they occur until we get to the ending – or, in the case of a pitch – to the present with projections for the future.
We are comfortable communicating what we know, and we know our stories: the stories of our company; how we recognized a need; how we formulated our idea; how we came together with our fellow-founders to conceive an offering. These may be fascinating stories that would be very valuable to tell down the road, but not in a pitch deck, and definitely not at the beginning of a pitch.
The team is the most important thing. In my discussions with seasoned investors, based on their experience, they would rather invest in a mediocre offering with a great team than in a great offering with a mediocre team. If you have assembled a great team, showcase that up front right after giving a high-level view of the opportunity you are presenting.
State the Problem. Many successful ventures sprout from inside an organization when a founder notices a problem for which their organization has no solution. Think about the problem you identified and how you conceived a solution. Communicate this at a high level, sparing the details for further discussions.
State Your Solution. This part is complex because it isn’t enough just to state that you have a potential solution. You have to explain that you searched for other solutions before concluding that yours is superior. You also have to show that others need this solution as well and provide a sense of how many of them exist as potential customers. You have to have an idea of how it affects them financially and how you plan to price your offering to capture some of the value you intend to provide.
Go-To-Market Plan. If you are successful raising the capital you need to build your offering, how do you plan to take it to market? A lot of technology developers don’t have experience with this, and if you don’t know how to go to market, it is okay to state that this is something that you are going to need help with. But you should have an idea of how big the market may be and how long it will take to reach it. Even if you don’t yet know how you are going to acquire customers, you need to know, if very roughly, how long it will take to reach certain goals, the most important of which is profitability if your marketing efforts succeed.
List Feasible Exits. I’ve said this before, but it bears repeating. Don’t pitch a startup suggesting that you plan to go public. Very few companies go public, and it’s a big red flag for investors that indicates that you really don’t know what you are doing. Research other companies that are similar to what you are trying to build, if not in product, then in size or business space. Find out if they were acquired, and if so, how long it took them to get from startup to acquisition. If possible, learn the selling price and calculate a multiplier of the investment capital for a rough idea of what you are facing and what your investors might expect to see if you succeed.
Be Realistic and Honest. Your investors want you to be experts in your technology. They don’t expect you to know everything about how business works, but they want to work with people who are receptive to advice about how business works. Investors also won’t expect you to know everything about how the capital raising process works, but they will expect you to have done a bit of homework on your market so you can speak intelligently about what you expect to accomplish with your technology, especially your timeline for building your business, which feeds directly into their exit/liquidation timing goals.
Don’t Get Discouraged, But Take a “No” as a Learning Experience. Sometimes people have great ideas that they pitch really well, and surprisingly, nobody bites. Helen Hunt and Paul Reiser recently reprised their hit comedy “Mad About You” for twelve episodes. The original series had 162 episodes, and the creators of the new season thought they would have their pick of streaming service providers. Everybody that watched the screenings laughed and loved it and then, no offers. None. Until Spectrum Originals picked it up. Not the bidding war they were hoping for, but better than nothing. Peter Jackson went to every studio pitching Lord of the Rings and got turned down by everyone until the absolute last meeting he had available with New Line Cinema who asked why he was cramming three books into two movies. Stephen Schwartzman pitched Blackstone to hundreds of investors until his meeting with Prudential gave him a commitment and advice to go to Japan to pitch his idea there.
Most likely, these builders/founders/creators improved their pitches with each presentation. These are very experienced, polished, professionals with great reputations and they still had trouble getting people to buy-in to their plans. This isn’t an easy path, but make it easier by giving your audience the information that they need to make a decision. If you’re lucky, you’ll get the funding you need to start your business and the hard work will shift from getting funding to executing your plan and delivering results. It’s a great ride if you succeed, and it should be a great learning experience even if you don’t.