Why Give a Damn:
The average investor has seen thousands of pitches, which means that her goal isn’t to watch a unique performance—it’s to quickly separate the wheat from the chaff. If your pitch does these four things, I promise — you will get a follow-up meeting, and you’ll probably get an offer to invest.
The author of this post, Chris Yeh, has been building internet businesses since 1995 and currently serves as the VP of Marketing for PBworks, as well as a General Partner at Wasabi Ventures.
I had the opportunity to judge a pitch competition this week. Five entrepreneurs pitched their company to a panel of five judges, including me. The pitches covered the gamut. One entrepreneur used his company’s product to pitch in a unique and memorable way. Another entrepreneur wowed the judges with his energy and enthusiasm. But when the judges retired to a conference room to pick the winner, the deliberations took about ten seconds. Four of the five judges (including me) picked the same winner, and the fifth judge gave that pitch second place.
A shockingly large proportion of entrepreneurs fail to provide the basic information we need, which disqualifies them almost immediately.
The entrepreneur wasn’t the most energetic of the presenters. He didn’t tell a catchy story to start his pitch, or unveil a stunning demo. All he did was systematically give us, the judges, the information we needed to judge the prospects of his company.
You see, while investors are human, which means we love great stories and being surprised, the fact that we see hundreds or even thousands of pitches each year means that we’ve long since developed a set of simple heuristics to filter out bad investments—otherwise, we’d simply be overwhelmed. And a shockingly large proportion of entrepreneurs fail to provide the basic information we need to apply those heuristics, which disqualifies them almost immediately.
Before you start crafting that touching anecdote or perfecting your Jobsian “just one more thing,” make sure you cover the basics.
- Describe your team and their qualifications. We’re looking for skill, accomplishment, and relevant experience. Many of the presenters didn’t say anything about their team other than labeling their faces with meaningless words like “hacker” and “hustler” (boy do I hate that word!). The winning entrepreneur had a slide with the backgrounds of him and his co-founder, who had worked together at another company in the industry, which he had helped to grow to $100 million in revenues. He had been working in the industry for 16 years; his co-founder for 10.
- Describe the problem you’re solving. My definition of a problem is simple: Something that people care enough about to pay money to solve. Many entrepreneurs pitch what’s cool about their product. Guess what—cool doesn’t pay unless it solves a problem. Even Facebook and Twitter solve problems (stalking old flames and following the antics of Justin Bieber, respectively). The winning entrepreneur explained exactly how his company solved the primary business challenge of his target market.
- Have a target market and a go-to-market plan. This issue drives me particularly nuts. So many entrepreneurs start pitching investors without a real go-to-market plan. When someone says that their market consists of knowledge workers and college students, small and medium sized-businesses, and—dear Lord—“anyone” (all things I heard this week!) I know that they haven’t got a clue. The winning entrepreneur had a clear market and experience reaching customers in that market.
- Demonstrate traction. I won’t mention him by name, but one of the entrepreneurs described how his company had been able to convert 67 of 500 registered users into regular users of their free product. That’s not traction, that’s the population of a freshman dorm, and a small one at that. Provide real numbers, and if the numbers aren’t good, perhaps that’s a hint that you shouldn’t be talking to investors yet. The winning entrepreneur provided a customer count, historical revenues, and was able to explain the revenue mix.
I promise you, if your pitch does the four things I outlined above, it won’t matter if your presentation skills combine the intellectual rigor of George W. Bush and the personal warmth of Al Gore—you will get a follow-up meeting, and you’ll probably get an offer to invest.
An Unreasonable Challenge:
Pull out your investor pitch and make sure that it covers the four basics above. If you can’t cover the four basics above, stop pitching and get back to work on actually building the business.
If you can’t cover these four basics, stop pitching and get back to work on actually building the business. Tweet This Quote