So, I came across some interesting reading the other week about the median number of pitches a VC hears before getting a (uno) single deal done. Turns out that the number of opportunities a VC reviews before getting a deal closed is 87 (for those interested, the supporting research is here.) So if you’re a startup, you basically have a 1% chance of ending up in a business relationship with a given VC that you’re meeting with and pitching. I’ve written about this dance between VCs and startups previously, but there are many things you as an entrepreneur can and should do to optimize for success before and after the actual pitch (your approach) to increase this 1% chance.
However, having been on both sides and more recently having sat through many startup pitches at Spark Capital or at business plan competitions or just informally, I remain surprised about how some basic mistakes are made in or during the pitch itself. I will certainly acknowledge being guilty on a few of these and admittedly, some of these might be pet peeves that bother just me, myself, and I. But in the spirit of continuous learning and improvement, for what it’s worth here are a few friendly and simple suggestions for do’s and don’ts for your startup pitch:
DO - verify the amount of meeting time you have. Wouldn’t you change the speed of your delivery and what you’d cover if you knew you had 5 minutes of time versus 55 minutes with an investor? So ask this right off the start and verify the time you have to present. And be prepared for it all, from the proverbial 60 second elevator pitch to what you’d expand on in an hour.
DON’T – create a mountain of content. Even if you have 55 minutes versus 30 minutes, your presentation content should be the same. This isn’t a lecture; you don’t need to double down on your 30 minute pitch if/when an investor informs you he/she has an hour to meet. Be brief and succinct in your materials and delivery. No matter ½ hour or an hour, you only really need to cover the basics (only 1 slide needed for each, 2 at the max): team, opportunity, market, value proposition, business model, go-to-market/customer acquisition strategy, competition (more on this later), progress, and funding. And even if you get down to 10 slides (including a title/opening slide), please don’t have 20 bullets and 4 point font on each slide. Concise statements and visuals are very welcome. If you have data and statistics that you’re presenting, unless they are basic known facts (the population of the US is roughly 325 million people), cite the sources – it gives you points for research and credibility.
DO – introduce who YOU and the TEAM are up front. This can be a voice over to start the meeting or can be laid out in the first slide or two. Much of the betting early stage investors make is on TEAM, yet I’m always surprised by how many start-ups don’t introduce themselves or their team overviews until the end of the pitch. Think about it - if you’re waiting for the subway and begin to feel dizzy and faint, and a stranger rushes to your aid, which introduction would you rather hear?
a) hi sir, I’m an ER nurse, why don’t you lie down slowly, prop your feet up, and tell me when’s the last time you had something to eat or drink?
b) hey man, my nutrition teacher showed my middle school class this episode of ER last week and some guy was acting goofy just like you, so I think you should take a bite of my Snickers bar.
Your background matters and helps provide context for the pitch. Now, you yourself don’t need to possess all the relevant experience (subject matter, technical or otherwise), but hopefully someone on your management team or advisory board does.
DON’T – NOT have a demo of your product or service. Regardless of what your product or service offering is, have a demo or sample ready to reference. I don’t know about you, but back in my day during elementary school, it was called SHOW and TELL for a reason. No matter how great your elocution is, isn’t it always better to SHOW what you’re talking about to let people react to it? Too often entrepreneurs worry about having the right business plan detailed out, the right graphics for the presentation or the right delivery for their pitch. Investors get a ton of business plans in Word and pitches in Powerpoint. These often look, feel, and smell the same. But key differentiators in a pitch? People and product. We like to experience first hand what it is you’re hawking. So be prepared not just to tell us what you’re working on, but also show us.
DO - show energy and passion in your startup and pitch. Imagine that you’re the keynote speaker, center stage in front of a large audience. You don’t want to bore your audience to sleep, you want to engage them and have them sitting forward in their chairs. To do this, you need to show some life and excitement! Who would you rather listen to during a pitch: Ben Stein from Ferris Bueller’s Day Off or Billy Mays (no matter what he’s selling)? Now, don’t go drink 3 Red Bulls before your meeting and get revved up to the point you’re bouncing off the walls and screaming instead of delivering your pitch, but definitely show some passion for the space, the opportunity, and your startup.
DON’T - have your cell phone out…or your iPad out for that matter (unless you’re using it to present or showing a demo). Regardless if it’s a 1:1, 1:many, many:1, or a many:many pitch, realize that you (and your team) are at an audition or an interview. This means you should look people in the eye when talking, be focused on your audience and fully engaged in the conversation without any distraction. When’s the last time you saw a keynote speaker take out his cell phone and check a few messages during the middle of his presentation? Unless you’re expecting a call from the President, the Pope, or your 9 month pregnant wife, don’t have your phone out or anything in front of you that could be a distraction. BTW, the under the table covert phone checking doesn’t trick anyone.
DO talk about the competition. It’s okay to have competition, direct or indirect, and there’s no harm in acknowledging that. There’s a reason our government doesn’t allow monopolies, because competition encourages innovation. It’s almost impossible for any start-up to come up with a totally revolutionary idea that has no direct or indirect competitors. There are many intelligent people out there, and odds are if you’ve seen a market imperfection that presents an interesting new business opportunity, someone somewhere on planet Earth probably has too. You might not know of every single competitor in the market, but you should know the landscape and where you fit in. Be smart enough to acknowledge the indirect competition, and confident enough to show how you are differentiated from the direct competition, and why you and your team can and will win. In this day and age of the internet, blogs and Twitter, even if you don’t have direct competitors today, you certainly will soon after you launch. That’s okay – again, early stage investors bet largely on the team and their ability to execute in a market and against competitors.
DON’T waste your time doing a 5 year P&L showing gross and net margins and FCF. If you’re in an early stage startup, particularly one that is tech/web based, you might not even have a ready to ship product or service to sell yet. Lots of people get advice from business schools and advisors about the importance of having a 5 year P&L projection. But if your startup is pre-revenue, and in some cases even pre-product, unless you’re Nostradamus - you won’t have any clear idea what your margins in year 1 will be, less in year 3 or 5. Now, you should have an idea of what the unit economics might look like, what the total addressable market is, and be prepared to discuss those. But if you’re raising an early seed round, don’t fret the 3rd or 4th year FCF. Estimate what capital you need to reach meaningful milestones and what the capital will be used for (infrastructure, hires, marketing/PR, etc). Then focus on building your product or service and creating something that customers will love and want to have and use. Figure out the margins later when you have more traction and data from the market. 5 year financial forecasts are nice to have, but don’t sweat them.
DO practice your pitch ahead of time. Yes, we’re talking about practice. Please do it. Practice with other startups, friends, and friendly investors as often as you can. It’s also helpful to practice in front of folks who aren’t native to the space your startup is in; if you can communicate effectively to a stranger from off the street whereby they understand what you’re doing, you’ve succeeded in creating and honing a simple story. Practice certainly doesn’t guarantee perfect, but it will give you a better sense of what content works, whether you are articulating your vision well, what slides aren’t resonating with your audience, and what types of questions are being asked. That favorite, soft comfy t-shirt from college wasn’t born that way, it evolved through many cycles of wash, rinse, repeat to become your go-to lazy Sunday shirt. Your pitch will also get more comfortable, easier to deliver with repetition.
DON’T deliver a pitch if you’re sick. Investors admire hustle and can-do-it attitude, but when you’re sick your pitch is impacted. Every start-up is eager to get going and hopes to raise/close capital quickly, but the fact of the matter is that it takes time. Better to be at the top of your game, lucid and on point for your pitch. Think about it - if you don’t ingratiate yourself with your friends or family when you insist on showing up to a dinner gathering when sick, do you think you will really ingratiate yourself with potential investors if they don’t want to shake your hand or sit near you? Odds are probably not.
Eso es. Feliz Cinco de Mayo!