Founders, “Why” Matters as Much as “What” & “How”

Hunter Walk

The average pitch contains substantial time dedicated to the “what” and the “how.” What is the market you’re serving? What is the product you’re building? What is the customer pain you’re addressing? How will you build your product? How will you recruit a team? How will you get customers? All of these questions are essential and certainly factor into any investment decision we make. That said, “what” and “how” haven’t been sufficient to get us to YES. In the handful of investments we’ve made to date and the termsheets we generated this week (it’s been busy), there has consistently been a strong “Why” as well. Why are you taking years from your life to work on this problem? Why does your company deserve to exist and why is the world a better place when it succeeds? Founders who can answer the “why” are usually called “mission-driven.”

 



Filed Under:
Collection: Funding
Category: Pitch Content & Format

What to Tell VCs When You’re Missing the Data They Want to See

Hunter Walk

As a seed stage investor I’m often looking at an incomplete picture when trying to assess an opportunity. Inevitably there will be a question where the data I’m seeking isn’t something the company has yet calculated/tested, or haven’t thought to research or maybe even not as important to their business as I’m suggesting it might be. For founders, these blank spaces are great moments to stray from your standard pitch and really connect with an investor. They’re also pitfalls where I’ve seen some entrepreneurs mess up and hurt their credibility. So here are some ideas of what to tell VCs when you’re missing the data they want to see.

 



Filed Under:
Collection: Funding
Category: Pitch Content & Format

Size Markets using Narratives, Not Numbers

 Chris Dixon

Anyone who has pitched VCs knows they are obsessed with market size.  If you can’t make the case that you’re addressing a possible billion dollar market, you’ll have difficulty getting VCs to invest. Smaller, venture-style investors like angels and seed funds also prioritize market size but are usually more flexible. For early-stage companies, you should never rely on quantitative analysis to estimate market size. The only way to understand and predict large new markets is through narratives.

 



Filed Under:
Collection: Funding
Category: Pitch Content & Format

What's the Vision?

 Babak Nivi

 High concept pitches are great for getting your foot in the door (“It’s Friendster… for dogs!”). But once you’re in the building, pitch a bigger vision. Vision isn’t a replacement for traction and milestones. But a compelling vision helps differentiate you from the competition (i.e. every other startup pitching that investor). 

 



Filed Under:
Collection: Funding
Category: Pitch Content & Format

Save Your Spin for Someone Who Cares

Mark Suster

I don’t think that’s what he was expecting.  Entrepreneurs get so used to friends and family congratulating them on their press coverage that they forget sometimes that this isn’t real.  A positive news story means NOTHING about the core performance of your business.  A good friend of mine was features on the front cover of the LA Times business section with a glowing article.  He had 2 weeks’ cash left in the bank and was facing massive layoffs or potentially bankruptcy. Press doesn’t mean anything other than free advertising.  Don’t get me wrong, I’m very pro PR but please see it for what it is and don’t think that smart or experienced people are going to see it as any more than it is either.

 



Filed Under:
Collection: Funding
Category: Pitch Content & Format

Pitch Yourself, Not Your Idea

Chris Dixon

What you should really be focused on when pitching your early stage startup is pitching yourself and your team.  When you do this, remember that a startup is primarily about building something.  Hence the most important aspect of your backgrounds is not the names of the schools you attended or companies you worked at – it’s what you’ve built.  This could mean coding a video game, creating a non-profit organization, designing a website, writing a book, bootstrapping a company – whatever.  The story you should tell is the story of someone who has been building stuff her whole life and now just needs some capital to take it to the next level.

 



Filed Under:
Collection: Funding
Category: Pitch Content & Format

How to Deal with Skeletons in Your Closet

Mark Suster

What about issues that might have a slightly negative connotation that the VC couldn’t know in advance? Skeletons in the Closet are these types of issues. They are issues, though, that your VC would certainly find out during due diligence or at a minimum you’d be ethically obliged to tell them. These are all things that you know you’ll eventually need to tell your VC and ethically you must tell them before they fund you. But when in the process should you tell them? I’ve had this debate several times with VCs – sometimes they agree with me and sometimes they violently disagree. In this particular case – I’m right. Here’s my advice: Don’t reveal your “skeletons” in the first meeting but you need to tell your sponsoring partner before the full partner meeting. 

 



Filed Under:
Collection: Funding
Category: Pitch Content & Format

Deal with Your Elephant in the Room

Mark Suster

There is only one way to deal with your Elephants – head on.  Don’t pretend it isn’t in the room.  Know in advance what you’re going to say and don’t wait for the VC to bring it up.  When VC’s bring up Elephants they feel like they’re “catching you out” and you’ve lost the high ground.  When you bring them up you take the issue off the table.  I can’t say that they’ll get over the issue, but they won’t hold it against you for not bringing it up.

 



Filed Under:
Collection: Funding
Category: Pitch Content & Format

Are Business Plans Still Necessary?

Mark Suster

I don’t care if your projections prove wrong over time.  I care about your assumptions going in.  I care about the thought that you’ve given to the customer problem.  I care about how much you’ve thought about market share, competitors, adoption rates, etc. My suggestion is that you do a detailed MONTHLY plan for the first 24 months and then an annual plan for what we call the “out years,” 3,4 and 5.  Why do VC’s care about these years?  Good ones don’t care about the granular details in a startup but they do care about how big the market is, what share you’ll get and what assumptions you make about pricing over time and other market factors.  VCs care that you’ve thought about these issues.

 



Filed Under:
Collection: Funding
Category: Pitch Content & Format

Do You Need a Powerpoint Deck for a VC Meeting?

Mark Suster

If you’re not good at giving demo’s you’re going to have to learn to be.  Practice.  Get feedback.  Find great presenters and have them hear your pitch.  Giving great demo’s matters in every part of your business operations.  The kiss of death is the CEO who says to me, “I’m not good at demo’s – my product guys never let me do them” (you’d be surprised at how often this gets said).  If you’re not intimate with the product it’s hard for me to buy that you’re going to be a successful tech entrepreneur.

 



Filed Under:
Collection: Funding
Category: Pitch Content & Format

Pitching a VC – Dealing with Competition

Mark Suster

One of the most common ways to present the competition slide is to show your company stacked against your main competitors, who will be plotted in vertical columns against each other.  On the horizontal rows you will plot a set of features or key attributes of how you define your competitive differentiation.  This is not only a way to talk about you versus your competition but a chance to reinforce two things: 1) what you see as the most important buying criteria for your customers and 2) how you believe your firm differentiates.

 



Filed Under:
Collection: Funding
Category: Pitch Content & Format

Sorry Guys – It’s the Size of the Wave, Not the Motion of the Ocean

Mark Suster

“How big can this get?”  It is one of those vague objections that is used to kill off many deals.  The reason that many companies fail on this question is that they don’t put enough effort into this analysis (and frankly, if more people did do this analysis some businesses might actually not get started). My own hypothesis on why more market sizing doesn’t happen is that many entrepreneurs are in love with product features rather than thinking through how much they could charge for their product, how many people would actually buy it, how many competitors they will have and therefore how big the market might be.

 



Filed Under:
Collection: Funding
Category: Pitch Content & Format

Doing a Demo (VC pitch or otherwise) – Part 5 in VC Series

Mark Suster 

The key to a demo is to tell a story.  You need to put yourself into the “role” of a person using the product who has a problem that he or she is trying to solve. You need to describe how this users thinks and describe what they do in their daily interactions.

 



Filed Under:
Collection: Funding
Category: Pitch Content & Format

The First VC Meeting (Post 4 of Many)

Mark Suster

By this point in the VC pitch I know your teams bio’s, the 50,000 foot view of what your business does, the big problem that you’re solving.  Now it’s time for the meat.  I want to know in detail what you actually do and how you do it.  I think this is where a lot of companies get hung up.  It can be quite hard to tell me what you actually do in a concise way.  I’m sure you have a million features and are solving a ton of problems.  Many companies that pitch at this stage are “all over the map” in terms of explaining what they do.  I think that it still boils down to giving me a simple explanation of how you solve that big problem you told me about on the last slide.  Otherwise my brain is spinning wondering, “WTF do you actually do … and more importantly … why?” Honestly, about 20% of all meetings fall into this category.

 



Filed Under:
Collection: Funding
Category: Pitch Content & Format

The First VC Meeting (Post 1 of Many)

Mark Suster

Begin with you Bio and that of the Key Members of the Team: I’m passionate about this point.  I am always surprised when people jump into their topic and start telling me about their patent pending technology that is going to revolutionize the way that Internet advertising as we know it works.  They’ve developed optimization technology for banner advertisements that is going to increase premium eCPM rates by 60% or more.  As they’re talking and already on slide 7 I still am trying to decide whether or not I believe them.

  



Filed Under:
Collection: Funding
Category: Pitch Content & Format

How to Nail the Elevator Pitch

Mark Suster

The elevator pitch is vital to an entrepreneur’s repertoire and so often they are poorly delivered.  For starters, I think the term “elevator pitch” should be changed to “cocktail pitch” because it is a more realistic scenario.  You’re an entrepreneur and you bump into a VC, customer, partner, potential employee, journalist – whatever – at a cocktail party, conference, airport lounge.  How do you get your points across effectively in a way that leads us to want invest, partner, join you, write about you.  

 



Filed Under:
Collection: Funding
Category: Pitch Content & Format

VC’s Care About the Upside Case, Not the Mean

Chris Dixon

The biggest mistake entrepreneurs make when pitching VCs is to argue that their startup is likely to succeed.  Instead, they should argue that there is a small probability their startup could be a billion dollar or greater exit.  There is a big difference between these arguments – the mean of the return distributions might be the same but what VCs care about is right side tail of the distribution.

 



Filed Under:
Collection: Funding
Category: Pitch Content & Format

Why Startup Pitches Fail (and How to Fix Them)

Eric Ries

Pitches usually fail because they answer the wrong questions. The right questions depend on the stage of your business—for example, some businesses are just getting started with an idea, while others are printing money. Focus your pitch on the key questions for your stage and if you keep getting non-key questions,something is wrong with your pitch. This post includes a hierarchy that you can use to classify your business and the key questions for each stage in the hierarchy.

 



Filed Under:
Collection: Funding
Category: Pitch Content & Format