What VCs want to see in a startup?

VCs prospection, at early stages, is like “Tinder hunting”: they look for the beautiful tall blondies, <25 years old, single, that attended good schools, successful, but not so independent to the point that they won’t need you… You can apply the same concept to men (tall, strong, 6-pack ab, successful, mysterious, excellent cook, help in the house chores, who want to have 3 kids…).

It’s sounds superficial and, to a certain point, it is. But, when you receive thousands of pitches, you need to establish more objective criteria so you can filter out the companies less likely to succeedYes, the first filters are not about finding good companies, but eliminating the potentially bad ones.

 

What’s the ideal startup profile for early stage VCs?

Understanding the ideal types VCs look for is crucial, so you can adjust your speech and tackle those initial weaknesses.

VCs tend to like the following characteristics:

Founding Team

  • 3-4 cofounders, < than 30 years old, with deep technical expertise and strong domain/ industry knowledge.
  • Founders should have worked before, in other projects, for at least 2 years, and must be 100% dedicated to the company.
  • Capital structure should be clear and formal, with balanced division of equity among founders. Any founder too diluted at early stage will end up with nothing down the road.
  • In terms of diversity, interesting enough, there’s a lot of movement to boost startups with female and minorities founders. That’s great, and you should take advantage of that if you can. Age-wise, though, I still see a lot of prejudice.
  • No freelances/ outsourced resources – if the company employs someone other than founders, make sure they are regular employees.

 

Market & Model

  • Product must tackle a consolidated market, with incremental evolution – deep innovation/ revolution is a harder sell.
  • If you’re not in a leading geography (US and, maybe, UK), VCs will prefer copycats. They usually don’t take geography and business model risks at the same time.
  • Scalability is the magic word: growing 10x shouldn’t require more than 2x more employees
  • Billion dollar markets: forget about small wins.
  • Exception is when a clear and shot term exit could be in sight – for example, your technology being acquired by a much bigger company.

 

Stage and Track Record

  • Startups should be less than 1 year old, and have raised some angel financing.
  • Product must be ready, at least its core. No buggy MVPs…
  • If makes sense, having some patents filed increase your value.
  • Company should be operating, generating (some) revenue, and growing at least 20%-30% MoM (month over month), no matter if you’re burning cash on each sale.
  • Actually, growth is the most important variable early stage VCs look at. Some companies even postpone launch, trying to to generate a “backlog” of users, so they can manage growth in batches. That’s the case, for example, with companies pursuing pre-registration or closed betas schemes.

 

What should I do if I don’t fit within the ideal profile?

As with our dating life, compromises need to be done. Some more than others… VCs know that, and are willing to make some trade-offs. But you got to help them out… There are some strategies you can follow, and I’ll write articles for each, but just as a teaser:

  • If you’re a single founder, get formal advisors who can challenge you. Also, have very explicit processes and back-up plans in case something happens to you
  • If your team lacks specific profiles (because you’re out of cash), you should interview and have the potential candidates lined up (including compensation), so when money comes you can just hire them.
  • If you don’t have technical background, hire someone who does. You should hire someone with deep technical expertise. If you cannot afford that, hire someone not so senior (and cheaper) and a technical lead part-time. Or have a very hands-on technical advisor.
  • If you don’t have a working product, make a prototype that people can navigate (you can do this even on Power Point or Excel). Invest on quality design from start!

 

The list goes on. Understanding what VCs want is crucial for you to understand what your company lacks, and how to compensate that. All in all,we all choose the perfect picture for our profiles, don’t we?

Speaking in public: 10 golden tips to dominate the stage

Fact: speaking in public sucks! All the preparation seems to go down through the drain when you pitch to a large audience. Some say it’s a gift… for those lucky 1%, they can just put their natural abilities to use. For the rest of us, mortals, we need to turn it into science!

Good news is that pitches are not public speaking competitions. There are tons of people like us, who get a bit shaken in front of a large audience, and that’s ok. There are a few tricks you can do that will make you sound like a pro:

1) Preparation is the biggest confidence booster you can have

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There’s no silver bullet when it comes to delivering your pitch… The closest thing, though, is preparation! Practicing your pitch to exhaustion will not only help you shape it, but also will bring you a lot of confidence!

I recommend you to record (video) yourself, always. When you start, you’ll probably be taking twice as much time as you have; don’t worry, that’s normal! Keep recording yourself and fixing/ adjusting your speech every time.

When you watch your recording, make a technical analysis of your presentation. The analogy I make is that you should manage time as if you were managing investments. Write down how much each segment is consuming of it and check if you’re investing time wisely. For example, Problem + Solution is the most important part of a pitch; if you’re taking more time to talk about business model than problem/solution, you have a yellow flag.

Once you have trimmed down your pitch to the needed time frame, it’s time to record yourself “in action”; standing up and simulating a real life presentation. If you’ll be using a microphone, hold something pretending to be one. Even walk the “stage”, so your training is as close to reality as possible.

One word of caution, though: do not expect to feel 100% ready; feeling 100% prepared is an illusion.

 

2) Redundancy will feel much safer!

redundancy

You should replicate your obsession about your company’s product to your pitch. Having backups and redundancy will make you feel much safer and will eliminate fears you don’t need to feel.

I remember 2 years ago when I was going to pitch at a competition organized by UKTI, UK’s trade and investment department. The event was happening in Campinas, a 1.5 hour drive from where I live (São Paulo, Brazil). I planned to get there 1 hour earlier, so I had plenty of time to check the projector, microphone etc. Travel took 2 hours, and I spent more 30 minutes trying to find the auditorium. No one I asked knew the place, the mobile stopped working… To make matter worse, I was supposed to be the first to pitch. Luckily I found the place and got there 5 minutes before it started. However, damage had been made: I was stressed, tired and didn’t have time to concentrate. It was a nightmare! Somehow, against the odds, I managed to deliver a perfect pitch, but I learned an important lesson: preparation in loco, backups and redundancies will remove the unknowns from your presentation.

Since that time I’m obsessed with checking everything, in loco, one day before. Since I use a Mac + Prezi, those tests usually find issues… but I’m always prepared, and that doesn’t affect me anymore.

More than this, I carry another laptop and have all the files in both computers, on the cloud and on a thumb drive. Oh, and I have a PDF version of my presentation as well.

Having so many redundancies allow me to not spend a single second worrying about what to do if something goes wrong; no matter the scenario, I’m covered! That makes me feel much safer!

 

3) Charisma is a powerful tool

Charisma is a gift, most people think… well, I kind of disagree. While some people are naturally charismatic, others, like myself, can shape their speech to sound more charismatic.

You need to position yourself at the same level of your audience. Let them put themselves in your shoes. People, however, tend go the other way, trying to show a more powerful/ stronger profile when pitching…

I always mention a real life case of a young group I was advising for an university-backed competition. One of the founders (an 18 years old student) was really confident and felt comfortable speaking in public. However, his presentation was too strong; so strong that he looked like to be on cocaine! He was trying to appear something he was not, and that was evident; excess confidence played against him!

On the other end, I like to mention the example of StayFilm‘s pitch at U-Start Brazil Conference (below). It was the company’s first public pitch, and the cofounder (Douglas Almeida) wasn’t a fluent English speaker. He started off by breaking the ice, sharing how hard this pitch was to him, in a very humble and funny way. That instant he won the audience! His presentation, after that, was tough… he was reading the text, had a poor accent… Truth to be told, it was awful! However, those first 30 seconds made sure everyone went an extra mile to understand him. He captivated the audience to a level we all were rooting for him!

 

Here are a few tips on exploring your charisma:

  • Put yourself at the same level of the audience;
  • Demonstrate energy and passion, but watch out to not be seen as arrogant;
  • Make jokes about yourself – a bit of self-depreciation is the easiest way to level out with the audience;
  • If you’re nervous, tell people about it and ask them for their patience and help;
  • Don’t call yourself CEO, CFO, CTO… odds are you work in a 5 people startup, so, at most, you’re the “janitor in chief”;
  • Share personal experiences and stories;
  • Don’t take yourself too serious and laugh!

 

4) Don’t read or memorize the exact words

If you follow our tips, you will be repeating your pitch dozens of times. Naturally, you’ll tend to repeat the exact same words. I recommend you not to try to memorize the exact sentences; instead, you should remember the topics and ideas.

When you’re pitching, you’ll probably get a nervous; we all do. That’s when mental blackouts happen. When you memorize sentences and you forget a part of it, even a small sentence, odds are it you won’t be able to recover. That happens because when you memorize sentences, they only make sense together.

cue cards

Instead, if you focus on remembering topics and ideas, you won’t feel that lost. You’ll be able to adjust your speech, even if you forget part of it.

If you’re afraid of forgetting things, you can have cue cards, with bullets for each topic, as most TV hosts do. Do not write sentences, but only keywords. They are all you need to remind the ideas.

 

5) Hacking time control

Unknown

Managing time is the biggest issue in pitches. If you finish it too early, it will look like you don’t have much to say. If you delay, part of your presentation will be cut off (yes, people turn off microphones on pitch competitions).

But you can hack time management so those issues never happen to you:

a) Know how your pace changes on live pitches

Some people tend to go faster, when compared to their training. Others, tend to add sentences, making the pitch slower. You need to know which of the 2 you are, so you try to control this deviation when the time comes.

 

b) Define 2 milestones/ time checks in your pitch

I usually define 2 time checks in my presentation: one half way through, and one on the last minute. I ask someone in the audience to raise a small banner to let me know when I reach those marks.

I know in which slide I should be at each time check, and that allows me to adjust my pace. The first one will give you the chance to speed up/ slow down. If that doesn’t work, the second time check, will tell you to go for “plan B”.

Do not use a smartphone or tablet with large timer in front of you. It will get you distracted. Go old school, and just ask someone to raise a piece of paper.

 

c) Have a “Plan B” in case your timing is off

I always prepare myself for both scenarios in case I’m running out of time, or if I have too much time left, after the last minute time check.

If I’m running out of time, I already know what information/ slide to skip. If I have more time than I expected, I know what to add there. By planning ahead, people will never notice when your pace is wrong.

The worse you can do is try to speak faster, in order to cover all slides if you’re going late. People just won’t understand what you’re saying and you will look like unprepared. Unfortunately, that happens every time. If you plan ahead, and know what to skip, it won’t damage your presentation.

 

 

6) Choose 4-5 people to look at, and rotate clockwise

This sounds silly, but those who’ve pitched in front of a large audience knows what I’m talking about: you never know who to look at. Sometimes you end up trying to look at everyone, which makes you look like someone with a deep mental disorder. Other times, you end up staring at a single person, making everyone uncomfortable.

You shouldn’t have to think about this! But solution is easy:

  1. Pick 4-5 people in the audience, spread geographically;
  2. You will only look at those people;
  3. At every 20-30 seconds you switch, rotating clockwise.

This way, you won’t need to think about it and won’t look weird.

Combine this rotation with 3-4 stage crossing (side by side), and people will think you’re a pro!

 

7) Made a mistake? Don’t mention it!

No matter how many times you revise your presentation; sometimes you will end up leaving an error behind, just to realize in front of everyone. But don’t worry; odds are no one will notice it! So just pretend everything is ok and move forward.

 

8) Water bottle: your best ally

deer-park-bottles-1478083-640x480

When you’re presenting, every second seems to last 10x more. The adrenalin released in your body makes you more alert, in such a way things seem to be in slow motion. Thus, any pause you take will look like eternity, for good or for bad.

You can use that to your advantage. If you’re too nervous and feel your voice shaking a bit, I recommend you to take a small pause, and there’s no better excuse than drinking some water. Those 3-5 seconds will feel like a minute, and will help you get back on track. That’s why I always carry a plastic bottle of water when pitching.

Having said that, avoid plastic cups! If you’re really nervous, your hands will be trembling you will probably end up spilling water all over you!

 

9) Say no to laser pointers

laser pointer

On the shaking matter, laser pointers are “no-go’s”: if you try to point at something, they will show everyone you’re trembling. If you need to use it, the best tip is to never try pointing at an specific point; rather, make circles around it, never leaving the pointer stopped.

That said, pitches and pointers don’t match. If you have 7 minutes, each slide (15-20 seconds) should be self explanatory; each slide must carry only one information. As such, you shouldn’t need to use a laser pointer. If you do, odds are your slide is not right…

 

10) What to wear?

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You’re not alone: those who haven’t been to pitch events always have that sort of doubt. Rules here are: blend in and don’t pretend to be someone else. Ok, I know I haven’t helped much, so I’ll explore those points.

Each business circle has its own dress code. If you’re an investment banker, you will always be wearing tight suits and expensive ties. Luckily, on “startupland” you’ll only need to wear jeans and t-shirts.

Don’t mistake this dress code and as a “lazy pass”; no one want to watch the “Unabomber” present. You’re still expected to shower, shave, comb your hair… You cannot use that 1997 t-shirt and, of course, no flip-flops and shorts. Believe me, I’ve seen people wearing flip-flops on pitch events… more than once!

You should maintain your personality, though. If you’re 60 years old, wearing a mad Einstein t-shirt will just make you look ridiculous.

Here I can share my own experience. I’m 36 and had an executive career before; so I had a more formal wardrobe. My networking was used to see me like that. However, in startup events I’m older than average. In one hand I don’t want to look like the dinosaur in the room; on the other, I just don’t want to look ridiculous. To me, jeans + shirt + blaser combination is the perfect solution. It won’t shock anyone and it feels like myself!

Use some common sense: don’t overdress; don’t look like a beggar; don’t pretend to be someone else!

 

Public speaking is part of your job, so suck it up and work on it. With a bit of science and the “street” tips above, I bet you’ll nail it!

What’s addressable market anyways?

An important part of a pitch is describing your market. Audience needs to know how big of a problem you are solving; how common it is, and to what extent of population it is appealing.

“The bigger the better” you might think… well, think again! On the urge of making the opportunity look bigger, we tend to generalize the target audience; that’s a mistake.

What really matters (specially to VCs) is to know your addressable market; what portion of the entire vertical/ industry you’re addressing is really your target.

tam-sam-market

Source: Wikipedia

 

Real life example

I’ll take AgendaPet‘s pitch again as an example. As you know, AgendaPet is a pet services marketplace, so people can book the best professionals for their loved animals. Yes, we’re that cool!

In that sense, our overall market are the 1 billion pets all over the world. However, we believe AgendaPet’s focus will be on the #1 and #2 markets, US and Brazil respectively. That’s the served market. More than this, we understand our target (addressable market) will really be those people who are responsible enough to visit a veterinarian regularly; they will be the ones to whom our service will be more appealing. We could even take it one step further, and drill it down again to only the urban areas we plan to service roughly 50% of the market).

Instead of 1 billion pets we would be addressing “only” 30 million dogs and cats, or 3%. But hey, that’s still a shitload of potential customers!

Side note: if after making the math behind the addressable market you are left with an irrelevant ($) potential, well, that’s a perfect time to rethink your business.

addressable mkt

AgendaPet’s Pitch excerpt

 

Why bother all the trouble?

Well, simply put, the addressable market numbers are the only ones you should (certainly VCs will) use to make your projections; at least you should use those numbers to check what portion of overall market you plan to dominate. That will give a reality check on your predictions.

 

The fallacy of the “1% of the market”

You probably heard that before: “if we get only 1% of the market… we would be rich”.  To me, when I hear that, it triggers a mental response: “if I dated only 1% of the Victoria Secrets Angels I would definitely be a very happy man”.

The fallacy of the 1% of the market is a huge red flag in pitches. It means that you either haven’t done your homework on market analysis, or that you’re incredibly naive.

Getting to your expected market share should be a result of your business levers (conversion, CPA, investment…), not the starting point. The result could even be higher than the 1% (of the addressable market). Take Uber, as an example: if you were the entrepreneur behind it, would you have ever guessed you would reach 40% of NYC’s individual transportation market? I bet you wouldn’t.

 

To conclude, let’s all repeat out loud, in cult like unison:  “addressable market is the only market number it matters; it shows the market you’re really competing for.” Or keep thinking about 1% of Victoria Secrets Angels…

Financial Projections

Financial projections: 5 reasons not to add it in your pitch

Cast the first stone… Yes, I did that mistake with my very first pitch in AgendaPet.

I had a management consulting + MBA background, and my relationship with Excel had always been better (and more fruitful) than with some close relatives; and I have a really nice family! So, on my pitch to “Sua Ideia Vale 1 Milhão” competition I decided to share the flawless projections I had prepared. Well, I have to say that we didn’t spend 15 seconds on that slide! Later on, with other companies I noticed a similar disdain… until I put it all together the 5 conclusions below:

1) If your an early stage startup, they just won’t believe in you!

Yeah, no matter if you made a very solid projection (and I recommend that you do it), your numbers will lack a reality check. To investors, it will be much more important, at this stage, to have a deeper understanding of your addressable market and unit economics (CPA, ticket, margin, conversion…).

During the MBA, a professor at Columbia Business School, who was also partner of a major VC fund, told us that whenever he got projections from startups he would, without much thinking, “cut revenues in half and double the costs”; if the numbers still made sense, then he would look into.

Acknowledging that fact, though, most entrepreneurs tweak their spreadsheets so revenues are twice as big, and costs are the half, of what they really expect. It’s a disturbing “cat and mice” kind of cycle.

2) If you’re not that early on, results will be your best advocate

If you’re a little bit later down the road, well, actual results (specially growth rate!) will give a better indication of your capability to deliver.

In addition, odds are that 80% of your future revenues will come from markets/ products/ verticals you’re not addressing yet. That’s normal, since you’re probably starting small. That happened with a couple startups I advised. They were addressing the B2C market, with solid results, growing 3x a year. However, B2B was 20x bigger, and, on their projections, as expected, it dominated their future revenues.

Sharing projections (without being asked) would only point that most of future value would come from an area they didn’t dominate, nor had the skills for yet. That would throw away the amazing job and growth on B2C they had been doing to date.

3) Projections drive away attention from what really matters: problem + solution

What really matters in your pitch is the problem you are solving and how you’re doing that. Those are the “must-have” of any pitch. Exploring the business model (how you make money), team, and traction, will support that picture. That said, going through your projections will only divert attention. It’s just not productive.

4) Explaining your numbers would consume a lot of time (which you don’t have)

Startup projections are not straightforward. You have several disclaimers and caveats; you need to go through the rationale behind the numbers and your assumptions. You need also to go thorough some sensitivity analysis, to demonstrate it’s solid enough. Presenting it all would consume a lot of time to be properly done; and if you don’t do it properly, people will find gaps, putting your entire presentation (and credibility) in check.

5) That’s VC’s job, so let them feel smarter!

After writing this I believe my chances of ever raising VC money for AgendaPet or any other startup I’m involved with will be blown away…

Fact: VC guys love math. They’re proud of making complex calculation in their heads, just for “fun” (side note: though I can, I prefer to save my “CPU” for something more important). So, when you share your projections with them, they will be mentally crunching data to “control check” your numbers; and I bet they will spot issues pretty easy. I have already played that role, and can tell you always find gaps.

I suggest that you to trick them! Instead of sharing your projections, give them all the elements to get to the numbers you want: addressable market, conversion, average ticket, conversion/ CPA, gross margin and voilà, there’s a P&L. They will be happy to get to the numbers themselves and, in doing so, will have wasted time and “CPU” doing the math, rather than finding holes in your assumptions. Jokes aside, that’s pure psychology: if they get to the number themselves, they’ll have to believe in them!

I said “not to share without being asked”… that doesn’t mean you shouldn’t have a solid financial projection

After raising all the previous points, I risk “feeding” a bad startup mentality: “financial projections are useless and, as such, I shouldn’t spend time on it”. I feel sorry whenever I hear something like that…

Making projections is crucial to a proper planning; and planning (against some misguided entrepreneurs love to claim) is critical for any company, no matter its size. It forces you to put, in writing and in objective terms, all expectations and ideas, compare them with reality, and prioritize things.

I believe that the reason behind such aversion to projections is based on wrong expectations: people feel frustrated when actual results are very different from plans; they shouldn’t! To me projections are decision-making tools. They help me see the direct and indirect impacts of business levers. For example, if your acquisition costs are higher than expected, it gives you a framework to understand what’s wrong and what you need to do (raise price, reduce churn…) not to go broke.

All in all, in a pitch, time is your most important asset. Dedicating time to your projections would be just a bad investment. Making smart investments should be your top skill as a successful entrepreneur!

Recommended Books

Books every entrepreneur should read: they will help not only on your pitches

Ok, that’s kind of a small deviation on this blogs editorial line, but it’s really worth it… and it’s only a small deviation: understanding the bigger picture on the startup scene, hot topics, and war stories will help you guide a better pitch.

Also, I’ll make this a live post, adding new worth reading books from time to time.

1) The Lean Startup (Eric Ries)

The lean Startup - Eric RiesTo me, that’s the #1 bible that every entrepreneur should read. Eric Ries gives a feet on the ground approach on how to launch a startup in a smart way. By applying lean methodology, every step is tested; every small iteration is planned and tested.

2) Venture Deals: be smarter than your lawyer and venture capitalist (Brad Feld / Jason Mendelson)

Venture Deals: be smarter than your lawyer and venture capitalist This the the ultimate guide, specially for the more hardcore stuff, including M&A minutes etc. You should go through Venture Deals and keep it close to be checked when the need shows up.

3) The hard thing about hard things: building a business when there are no easy answers (Ben Horowitz)

Hard thing about hard thingsThe war stories kind of narrative is great about this book. Ben Horowitz is really a no BS type of guy – if you haven’t already, watch his “don’t follow your passion” commencement speech at Columbia University’s Engineer Class of 2015. On this book he goes through real life situations an entrepreneur faces and what to do on those cases.

Horowitz runs one of the most respected VCs, Andreessen Horowitz, and was the magic that launched and then pivoted Opsware, a company sold to HP for $1.6 billion, after almost going burst no long before. It kinds of give you hopes, when you’re desperately going broke!

4) Zero to One: Notes on Startups, or How to Build the Future (Peter Thiel / Blake Masters)

Zero to One - Peter ThielTo me, Zero to One really made me rethink my business and my pitch (I told you it was only a small deviation!). Peter Thiel is an entrepreneur (cofounder of Paypal and Palantir) who became investor; he’s Managing Partner at one of the coolest VCs in the world, Founders Fund, which, in its soul, is more to an entrepreneur house than a bank.

The most interesting question I answer in my pitches I extracted (not to say copied!) from here: “what you know that no one else understands”. It takes the competition and differentials question to a whole new level!

5) Trust Me, I’m Lying: Confessions of a Media Manipulator (Ryan Holiday)

Trust Me, I'm Lying: Confessions of a Media Manipulator

It sounds controversial… and it is! I watched Ryan Holiday, former American Apparel Marketing Director, on The Nex Web event in Brazil and I couldn’t believe! Ryan tells stories about how he manipulated media (including the New York Times), in order to create buzz for his company. It’s the precursor, sometimes, on the “dark side of the force”, of growth hacking.

In one case, he placed an outdoor ad and then destroyed himself, pretending it was a protest from some minority right’s group. With that, he got attention to the (fake) protest, and his client position on the topic. Evil, but genius!

I like this book because it shows the mindset, drivers and processes of media outlets, from independent blogs to century old newspapers). By understanding the untold rules of the game, you learn what to do when relating to them.

6) Steve Jobs: Walter Isaacson

Steve Jobs: Walter Isaacson

Yeah, Steve Jobs biography is a must read, and Walter Isaacson made the writing so enjoyable, that you’ll probably want to devour it in a week.

For pitches, it’s worth noticing the obsession about perfection (preparation) and what he did to create impact. The famous “on more thing” slide at the end is the perfect example of “Punch Line” I describe in the pitch contents article.

A disclaimer on his biography is required, though; specially for younger entrepreneurs: Steve Jobs was a genius, but he was an assh**e, at least from stories we read about him. It’s one of the worst role models someone should use in terms of leadership. Be advised.

7) The Everything Store: Jeff Bezos And The Age of Amazon (Brad Stone)

he Everything Store: Jeff Bezos And The Age of Amazon

I have always been a huge fan of Amazon and Jeff Bezos’ biography told it all. The company’s history goes from bubble times to today, and it’s amazing.

To me, the most fascinating part is the fact that Amazon was born to be the giant they are today, even when they created as an online book store. They master the “start small, think big” idea. For your pitch, it’s insightful to see how he positioned Amazon in the early days.

Unfortunately, though, Bezos is a controversial dude as well, bordering the ethical limits sometimes. As a role model he sucks as well, so be advised again.

8) Innovator’s Dilemma (Clayton M. Christensen)

The Innovators Dilemma

In case you haven’t read The Innovator’s Dilemma and you’re in a startup meetup when someone brings the book up, lie! Lie your way out, because you’ll look bad for not having read it!

Yes, the book is a bit old (1997) for startup time concept, but it tackles some of the basic structural issues and economics behind innovation.

Christensen explores a lot the microprocessor’s market, since it’s one of a few (if not the only) businesses in modern time that we can analyze full innovation cycles: disruption, growth, competition, commoditization, and new disruption.

For your pitch, it gives you an important background on how to look at your business.

9) The Innovator’s Prescription: A Disruptive Solution for Health Care (Clayton M. Christensen)

The Innovator's Prescription

I’m fascinated about health tech and I believe it could change our lives in the next 3 decades. So, for me, I liked the Innovator’s Prescription even more than the Innovator’s Dilemma.

Christensen not only explores the structural mess we got into with our healthcare system, but also gives his powerful insights on what kind of disruption we will have to do to keep things running. Yes, healthcare is going bust, and we will need to change everything about it.

For pitches… well, if you read The Innovators Dilemma and don’t work with health tech, there’s not much. But I recommend it anyway, as a person.

9) Competition Demystified: A Radically Simplified Approach to Business Strategy (Bruce Greenwald / Judd Kahn)

Competition DemystifiedTo start, I got admit: I hate Porter. His framework on strategy is not objetive nor current; it’s too complex and lacks “real life” perspective. It’s an academic paper, not a business manual.

On the complete opposite, we have Greenwald – whose classes I had the opportunity to take while attending Columbia Business School (MBA). His approach to strategy is brutally simple and straightforward. His financial mindset enables him to discard intangible BS.

For pitching, specially Q&A, I highly recommend this book. People will ask you about strategy and having read Competition Demystified will give you mental framework.

10) Startup Growth Engines: Case Studies of How Today’s Most Successful Startups Unlock Extraordinary Growth (Sean Ellis / Morgan Brown)

Growth Engines

Growth Hacking is the hottest topic in startupland, and, as such, you need to explore it. Growth hacking is a methodology/ mindset to generate growth in the 21st century. Using code (yes, marketers now should know how to code!), analytical tools, A/B testing, usability, SEO and PR, you devise a series of tactics to attract customers, maximize their values (conversion, ticket) and reduce churn.

Odds are that in the Q&A someone will ask you about your Go To Market strategy, and knowing/ applying growth hacking techniques will show that you’re in the right direction.

11) Games of Strategy (Avinash Dixit / Susan Skeath / David H. Reiley Jr.)

Game of StrategyNegotiation is science, not an art. It’s a skill you learn and develop. With that mindset you should read this book. Games of Strategy is a dense book about game theory (yes, same thing you saw on the Russell Crowe on the movie Beautiful Mind).

Game theory will change your life when defining strategies, negotiation, or even picking up a girl/ boy in the bar (ok, the movie stretched reality a bit on this part). Understanding the kind of game you’re playing and the (untold) rules, will help you get a desired outcome; yes, lesson one: negotiations are not zero sum games (meaning that to win, someone else must loose).

It won’t help your pitch, though.

12) How to Lie with Statistics (Darrell Huff / Irving Geis)

How to lie with statisticsPlease don’t stop at the title. How to lie with statistics show how people (newspaper and politicians, mainly) lie to you every single day, without needing to fake numbers or facts.

This book explores how some misguided aspects of an analysis (e.g.: defining a sample in a survey) can completely change the outcome.

Why I like this book? Exactly to not make those mistakes; to make sure that when I present a conclusion, it’s solid enough.

13) Say It With Charts: The Executive’s Guide to Visual Communication (Gene Zelazny)

Say it with chartsMcKinsey dudes, wipe your tears of joy. Say it with Charts is a manual on how to present information in order to guarantee maximum understanding.

It brings no brainer stuff like “if you want to show an evolution, use a line chart”, and other not that obvious, such as the issues with using 3D graphs,

It’s worth browsing and keeping it on your shelf… correction, on your Kindle.

To be continued…

Pitch stages

Which topics should a pitch contain?

10 in 10 entrepreneurs ask me that. Answer is not so straight forward, though. More than checking items on a list, when deciding what to cover in your pitch you should be worried about building a solid/ clear storyline and manage the different stages of the presentation. Having said that, I like to split a pitch into 5 big segments:

Pitch stages

Pitch stages

1) Opening:

I shouldn’t have to write this… but people do mess up right in the beginning. You must start by presenting yourself, professionally:

  • Hello…”
  • First and last name: “…my name is John Doe…”
  • Position: “…I’m cofounder of Company X…”
  • Thank for the opportunity: “…and first of all I’d like to thank you for the opportunity… we’re really thrilled…”

It’s impressive, but people just forget those simple things. They present themselves without their last names, or using nicknames. Startup pitches are supposed to be informal, but those 4 points are just basic etiquete.

I also recommend that your name + position + name of company are clearly stated in the first slide, so people can write it down properly.

Example of first slide

Example of first slide

On telling what you do in the company I have one personal preference: C-level titles (CEO, CFO, CMO…) are a huge stretch to describe someone working on a 5 to 10 people startup. It’s the same as calling the janitor of your building “Head of Infrastructure”. When telling what you do, you need to transmit 2 informations:

  1. Are you a member of founding team (meaning you have equity – founder, cofounder)?
  2. What kind of tasks you handle the most (“I’m take care of marketing and sales…”)?

Calling yourself CEO just make my eyes roll.

2) BAAM

Audience will decide on the first 30 seconds whether to pay attention to you or check their e-mails, update their Facebook status, watch the latest cat video on Youtube etc. You need to convince them from start that you are worth their attention; you need to make a blast (that’s why I call it “baam”, like a bomb). The video above, from the movie “Guilt Trip”, with Seth Rogen and Barbra Streisand, shows us exactly what a “BAAM” should look like.

For making a blast we use “grabbers“; really common in sales pitch techniques. These are structures that help you emphasize an specific aspect of your business, whether it’s the size of the market, how common is the problem you are trying to solve, or how cool your numbers are. We will dedicate an article only to grabbers, but to anticipate there are four main types:

  • Story telling: one of the most used by startups. You tell a story of a (real or fictional) character, exploring the problems you are trying to solve: “meet Ane. Ane is…”. Check an example on Preemadona’s pitch at Techcrunch Disrupt SF 2015.
  •  What if: this is a really effective grabber, and good to be used when you can assume your audience has some deeper understanding of the problems you are trying to solve: “what if I told you…. and what if there was…”. Check a personal example, of a Pitch I with AgendaPet did at the U-Start Conference in Brazil.
  • Numbers game: sometimes numbers behind your business/ opportunity are so interesting (and surprising) that you start by exploring them. With this grabber you present the audience with 4/5 numbers, which will be complemented in the next seconds: “I’d like you to remember those numbers: 4, 30, 5 and 200. We have more than 4 million users, 30% active…”
  • Props: props (or physical elements) alone are more rare to see. It consists of making use of a physical product, prototype, or even magazines/ newspapers to attract the attention to the problem you’re solving. People are naturally drawn to physical elements. The example is the movie above (you can click here to open in another window).

3) Main Content

Ok, you started off like a rocket and audience is hooked up. Now, it’s time for you to tell your story and cover the following topics:

  • About you: what does your company do?
  • Problem: what problem do you solve?
  • Solution: how do you solve this problem?
  • Market: how big is the opportunity (addressable market)?
  • Business Model: how will you make money?
  • Differentials: what you understand that your competitors don’t?
  • Team: who’s behind?
  • Credentials: what gives you credibility?
  • Traction: how well have you been performing?
  • Call to Action: what do you need?/ why you are here?

We will explore those point in dedicated posts, but I’ll lay down already few remarks:

3.1 About you: what does your company do?

A common mistake I see in the pitch courses is delaying to tell your audience what you do. Business communication rules contradict the structure we learned as kids (introduction > content > conclusion). In business (and pitches) you start with the conclusion. By doing this you are setting the context and making it easier for your audience to understand the whole presentation ahead.

In that sense, I like to add a quick summary (smaller than a tweet!) of what I do right after the first slide:

Example of quick description slide

Example of quick description slide

3.2 Financial projections

You may have noticed that I didn’t add financial statements/ projections on the content list; I didn’t forget that. If you are a later stage startup for sure you should add your estimations. However, if you are in the early moments of your company, audience usually just won’t believe your numbers! 

When I was in Columbia Business School I remember one professor (which was also a top executive in one of the world’s largest VCs) saying: “when I receive startup projections I cut revenues in half and double expenses, and only then start looking at the numbers”. Audience will be so skeptical at your projections that it will be just a waste of time adding them to your pitch.

Also, if you’re pitching to financial investors bear in mind that they love to make the math themselves; it makes them feel smarter! In this case, I recommend that you trick them into getting to your numbers! If you provide them the market numbers (focus on addressable market, not total market!), unit revenues (price/ margin per user, per product…) and burn rate they will get to your projections and feel smart doing the math in their heads. Rather, if you provide the end numbers already, their “skepticism chip” will activate and drive them to look for gaps in your calculations. Don’t fall into that trap. It sounds bad, but that’s real life.

4) Punch Line

Example of punch line: traction

Example of punch line: traction

Covering the content above will be dense and it’s expected (as shown on the first graph) that energy levels will fall. Try not kill your audience of boredom and keep a high energy level (in another post I’ll give you some tips on how to dominate the stage). With that in mind, I suggest building your pitch flow in such a way to save the “best for last”. That’s probably what audience will remember of your pitch, so choose carefully.

Ideally, a punch line should be the traction you’re having: growth, number of users, amazing conversion, closure of a critical contract, important client, patent authorization, test results etc. The message must be SURPRISINGLY positive, preferably with a growth line.

The image above, from an older AgendaPet Pitch, is a good example. At that time, traffic was our best variable, so I leveraged on it as much as I could.

5) Closing Remarks

Example of last slide + takeaway points

Example of last slide + takeaway points

Time is up and you should end your pitch. Punch line brought attention to a higher level again, so you need to take advantage of that to leave a final message.

If you haven’t do so already, you should make a call to action; tell people what you need/ want, and then close presentation with a brief summary of the main points you want your audience to remember.

If you are worried about the time, you may leave those takeaways in the last slide, together with your contact information (as on the example above). This way, if you run out of time, people will still be able to read your final messages. In some cases, this final message will sound almost like a slogan, reinforcing what you do, the problem you solve and how well you do it.

Finally, just thank people; a simple “thank you: will suffice. I have seen cases where people thank their families, teams, God… please don’t! Another common (and awful) mistake is finishing with: “ok, that’s all I had for today…”. It’s so melancholic! Again. just say:  “thank you”.

Remember to leave the basic contact details on the last slide. Make it big enough so people can take a picture with their phones.

Pitches are all about telling a story. The flow must be logic, following a “cause-consequence”/ macro-to-micro dynamic. A successful presentation will not only tell the story, but will manage the differences in energy level. People won’t retain all the information provided, so you need to point them out to what matter the most. If you deliver a pitch and the only time audience picks the phone is to take a picture of your contact details, believe me, you nailed it!

using demos for pitches

Using Props and Demos: always, but prepare carefully!

You have been working 80-hour weeks for the past months and now it’s time to pitch your idea/ business. The end product isn’t completely finished up yet. Should you show a demo anyways? YESSSS!

Using props (physical elements), demos or prototypes is one crucial aspect of a successful pitch. Not only it allows people to see and feel where your solution is headed to, but also it shows everyone that you have more than a nice slide or a promising idea.

For physical products it’s a must

pitch Preemadona Techcrunch Disrupt 2015

Preemadona Pitch Techcrunch Disrupt SF 2015

If you are pitching a product is absolutely necessary that you show it to the audience. On the video above from Preemadona, a TechCrunch Disrupt SF 20015 finalist you can notice the impact it causes when the presenter shows the product working, live.

But that’s not always the case. Sometimes you don’t have a finished product or prototype; what do you do? You trick the audience with a dummy! I’ll mention 2 real life cases I advised in my pitch courses:

  1. Sensor for diapers: this startup was developing a sensor for diapers that would connect wirelessly to an NFC-enabled hardware  and let now parents when was time to change diapers (based on humidity). They didn’t have a working prototype yet (it was expensive to build one), so I advised them to use a dummy tape (as a band-aid) with same size and similar material so audience could get a grasp on how comfortable to babies it would be.
  2. Chemical enhancer for industrial fats: it sounds complex, and it was! This startup was developing a chemical component used to enhance the usage of some types of fats in the food industry. They didn’t have the product ready, so we just took a small glass filled with salt! It would look like the real chemical and would allow them to make comparisons with existing solutions (how much less volume was needed, how many small bottles you could buy with one of the existing product etc…).

The point here is to close the gap between theory and reality and using props, or prototypes are perfect in that sense.

How do I demonstrate an algorithm?

matrix screen

This real life case happened in the first startup competition I participated. One startup was developing a system that used web crawlers and artificial intelligence to map social media posts, categorize and understand whether it was a positive/ negative comment about a product. The applications could stretch far beyond this example, but it wasn’t finished yet.

In cases like this it’s important to show (even if it’s a simplified version) examples of the algorithm results. But more than showing original social media posts and results in an excel sheet, this group did something really cool: they opened the computer, with the raw code and hit play. A really cool (for nerds) matrix-like screen started to show the algorithm in action, interpreting the results. Boom, audience got hooked!

Software Demos: watch for bugs… they’ll happen when you least expect!

The classic “Blue Screen of Death” during Microsoft’s presentation is just one of many fails in software demos. Systems, specially those under development, do crash… a lot! Several things can happen: you’re using a different machine/ device, last minute updated not properly tested, unstable internet connections and even instability on the servers. Still, demos are crucial!

Keywords here are prevention and redundancy:

  1. Prevention: you can prevent most of those potential issues but using a locally hosted demo, exhaustedly tested.
  2. Redundancy: have a more static version (a PDF file) of the screens you intend to navigate. In case something goes wrong, you can alternate windows and move on with your pitch.

A demo is not a full system presentation, though. It must show actions/ results related to the problems you’re trying to solve. You focus on the main features, mimicking a real user. The video below, from Agrylist, 2015 TechCrunch Disrupt SF Winner, is a good example of software demo:

Agrilyst pitch - Demo

Agrilyst pitch at TechCrunch Disrupt 2015 SF

What if I don’t have the software yet?

You can still make a demo. In this case, though, you could use a wireframe (the draft screens of your system) same way we mentioned about the dummy prototypes. Making a fake navigation through wireframe will give put the audience on the same page in terms of the desired solution and show you know what you’re doing… in details.

example of wireframe

example of wireframe – source: http://www.balsamiq.com

There are many online tools to make wireframes. I use Moqups: it’s simple, web-based, and cheap.

If you don’t have a designer to give the wireframe a more professional look, I’d recommend spending a few bucks on Fiverr and hiring a freelance designer to make your screens look less like a high school home project. High quality design is crucial.

Doing demos is one of the most (if not the most)important things you must do in a pitch. I learned this the hard way: on the first startup competition I participated, AgendaPet was not ready yet. I had even hired a second tech team to make an MVP for that competition, but I was insecure with the unfinished product, so I chose to go with static screens on a Prezi. The feedback I got from judges was that the lack of an MVP brought doubts about whether I was capable of delivering my vision. Tough lesson!