Every company will need to pitch itself from time to time. Usually we
think of pitches in the context of raising money, but that is only one
of many pitch situations. We pitch to potential partners, vendors,
publishers, conferences, employees, and even lawyers. It’s different
from selling a product, because it is not part of our regular business
practice, is not something that relates to our core competence, and
tends not to happen in a repeatable and scalable way. (I’ll exclude
those non-lean startups who basically exist for the purpose of raising bigger and bigger sums of money. You’re not one of those are you?)
Most
of the times I have seen pitches fail, it is not because they are
poorly written, or that the entrepreneur lacks passion. It is because
they don’t answer the right question. My favorite example of all time
comes from students in an entrepreneurship class. Their idea was to
build a next-generation autonomous robot, that could be used by defense
and security agencies around the world. The whole pitch was about how
valuable robots could be in the future. They even included a slide with
The Transformers on it. Now there was nothing wrong with their
analysis: anyone who invents a technology as sophisticated as The
Transformers is definitely going to make a lot of money. But these
students completely failed to address the one and only question on
their audience’s mind: can you three guys really build the robots of
the future? (Turns out, they were incredibly well-credentialed graduate
students who had, in fact, developed some interesting new robotics
technology. But you wouldn’t have known that from their pitch.)
I
have come to believe that there is a hierarchy of pitches, and that
understanding where your pitch falls on this spectrum can assist in
making decisions about what information to highlight. Pitches higher in
the hierarchy tend to be more successful, and so if you can fit your
company into one of those categories, you can get better results or
better terms. Now, just because you can do a thing, doesn’t mean you should – and there are plenty of other great resources out there that can help you think through whether and when to raise money (or do other kinds of deals).
With that disclaimer out of the way, here’s how I order the hierarchy of pitches:
Printing money
Key questions: are those numbers real? how big is the market? can your team execute the growth plan?
Most important slide: valuation
Promising results
Key
questions: can you monetize that traffic? (or drive traffic to that
profitable destination?) do you know why you’ve achieved those results?
Most important slide: hockey stick
Micro-scale results
Key questions: who is the customer, and how do you know? what is the potential market size? what are the business economics?
Most important slide: lessons learned
Working product
Key questions: what does the product do? what’s the launch plan? who’s on the marketing team?
Most important slide: live demo
Prototype product
Key questions: what will it take to ship a working product? how do you know anyone would want it? who’s on the engineering team?
Most
important slide: demo (if the product solves an obvious problem),
engineering resumes (if the product is nearly impossible to build), “day in the life of a customer” (if neither of the above)
Breakthrough technology
Key questions: who owns the patents? can we make a product out of this technology? are there any good substitutes?
Most important slide: barriers to entry
All-star team
Key
questions: has the team made money for their investors in the past? are
they domain experts? are they committed to an idea in their domain of
expertise?
Most important slide: problem we are trying to solve
Good product idea
Key
questions: what kinds of risk does this company need to mitigate
(technology risk, market risk, team risk, funding risk)? is it a
revolutionary and novel idea? is this team the one to back? can the
team bring the product to market? who is the customer? who is the
competition? will they fail fast?
Most important slide: about the founders
In
a pitch meeting, try to spend as much time as possible talking about
the key questions for your pitch. If you find yourself getting asked
non-key questions, try to use your answers to steer the conversation
back to the key questions. But here’s the most important part: if you
keep getting non-key questions over and over again, something is wrong with your pitch.
Either you misunderstand where your pitch fits into the hierarchy, or
you are not using the early part of your pitch to establish it. Don’t
keep banging your head against the wall – if you can’t convince your
potential partners that your startup is printing money, try to figure
out why. Experiment with different narratives. If you still can’t do
it, move one level down the hierarchy and see if you can make that
story stick.
One last piece of advice: don’t forget that
potential partners are evaluating the strength of your pitch, not you.
It’s not true that companies with pitches further up the hierarchy are
better, in some absolute sense, than companies further down. It’s just
that they have an easier time closing these kinds of deals. If you
can’t close the deal, maybe your company is at the wrong stage of its
development, and it’s time to try a different tack.
