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 workshop insper

Pitch Workshop at Insper for the Global Entrepreneurship Week + Empreenda 2015

It’s always refreshing to be among young (in age or soul!) entrepreneurs!

Last night I was at Insper, one of the most respected universities in Brazil, giving a pitch workshop to a crowd of students and entrepreneurs, as part of the Global Entrepreneurship Week program. Among them were the groups shortlisted on Empreenda 2015, Insper’s students startup competition.

For 2.5 hours we talked about how to present their projects, the different types of pitch and which topics should contain.

For the groups competing at Empreenda’s competition next, I wish you the best of luck!

Below you can find the link to the material I presented (it’s in Portuguese, sorry!). enjoy it!

Pitch Workshop at Insper - Prezi

video pitch

Video Pitching: It’s not just a webcam!

It became standard to use video pitches (recorded or live) in selection processes for accelerators, competitions or even to be considered in a traditional VC deal flow. For them, advantages are straightforward: it’s faster to watch a 3′-7′ video than reading a complete application or meeting in person, you get to see the other people (so you know they, supposedly, are not maniacs), and forces entrepreneurs to focus on main points. Well, and you can have all of that wearing flip flops…

For entrepreneurs, however, it brings an additional complexity: a video pitch is not just a recorded version… you need to adapt your speech, material and even preparation is different.

Live (videoconference) Pitch

A live pitch over videoconference (Skype, Hangout, BlueJeans, Go to Meeting…) it’s a different game; in my opinion, it’s much more technical.

1) You won’t be able to use too many resources

It’s almost like a face to face presentation… but worse! You will be talking, presenting slides and, depending on the conference system used, might do a demo. Using different resources increases the odds of something going wrong.

2) Technology issues

On a pitch over videoconference, technology can bring additional challenges:

  • Make sure you have a stable and fast internet connection. You should use a cable and dedicated connection. Sorry Starbucks! Also, you should have a plan B in case connection goes down before/ during your presentation.
  • Make sure to extensively test the conferencing software. Check the compatibility with your computer (no, you cannot use your table of Facetime) and the other systems you might need (Power Point, Prezi, Video, Browser…);
  • Having a backup (previously shared) PDF is important, in case things go south.
  • Check how you look (lights) and how you sound beforehand. Test the microphone before and watch for the noise caused by headsets scrubbing your shirt or beard.

3) There will be delay… so prepare yourself with it

My pitches are usually fast paced, with 3 slides per minute. Over video, though, it’s almost sure you will face 2-3 seconds delay (at least), and this could be disturbing with a fast paced pitch. You need to slow things down: less slides, with more information on each.

Also, what I do is to prepare myself with the delay: I change slides a couple seconds before I’ll talk about them, so it compensates the delay. Record yourself on the other computer to check and adjust your strategy. I also like to use a second computer during the official pitch itself, so I can monitor if there’s any change in delay.

4) Be (really) prepared for a Plan B – you will probably need it!

Things go wrong over videoconference pitches more often; much more! As such, you need to be prepared in case something goes wrong and, for example, you need to switch to telephone pitch (and it sucks!).

Share your deck before your presentation. If you need to switch to a voice only, they will be able to follow your presentation. One tip when you cannot show your slides (as when you’re over the phone) is to announce every transition, with the slide number: “Slide 23”, “Slide 33″… This way you make sure everyone is (literally) on the same page.

Also, for cases like this you should restrain from using animations: it will be extremely annoying to tell people to click through them, a few times per slide. So, if video doesn’t work, ask people to open the PDF files shared previously.

Recorded Video Pitch

They say production value doesn’t count… BS!

That’s a tricky one; investors are not expecting you to produce a Steven Spielberg movie. And if you do, that will raise questions on your money management skills. Having said that, a structured and well finished video will get you extra points.

I remember the first time I made a recorded pitch: it was a traditional VC player, and they had asked me a 12 minute video pitch, which would be used at their weekly investment committee. “Production value is not important”, they said… and I called BS! I prepared the video, with smooth transitions between my presentation with slides on a large TV screen and slides/ demo videos themselves on the screen; well finished introduction, cohesive flow. A week later they said I was moving to their next phase; they were impressed with the pitch and decided to use it as a reference for other entrepreneurs. The extra mile paid off!

Take advantage of the format: mix resources!

One great advantage of recorded pitches is that you’re able to use different types of resources: your image, presentation, video demo etc.

What I like to do is to present over a flatscreen and make transitions between my image presenting and slides. Making transitions every 5-10 seconds is important, as it gives a good pace to the video. Just for reference, action movies cut scenes at every 3 seconds… so what we’re suggesting is reasonable.

Having said all of that, we advise you to be sober on animations and resources, specially with music/ soundtrack, which I advise against… and believe me, I’ve made that error before (check below).

Recorded elevator pitch

Some processes request you to make an even shorter video, just presenting yourself and the team. In this case, it will be hard to use slides or other resources. You should focus on you and the team.

See, since this will be a self presentation only, you got watch out not to look a narcisistic douche, as I did on the video above, to a Techstar selection process. No wonder I never heard of them!

I was the only founder of AgendaPet and had a team of contractors at the time. For this reason, I decided just to present myself. Looking back now I realize what a big mistake that was! I should have explored my model, and team, even if they were contractors!

Video pitching is here to stay. It brings many benefits os a face 2 face presentation, but without spending all that time in addition to the presentation. Be ready, prepare yourself and go the extra mile!

Unicamp Pitch Workshop Prezi

Pitch Workshop for non-startupers – Unicamp

What a delight!

Last Monday 80 of the brightest minds of Unicamp (one of the largest and most influential universities in Brazil) joined me for a full day Workshop on Pitch Techniques for non-startupers. Those 80 people are finalists at Prêmio PAEPE, Unicamp’s most important award, which selects the projects that contributed the most for the university development, ranging from water saving initiatives to improving access for the hearing impaired students.

The goal was to prepare those groups to pitch their projects at Prêmio PAEPE’s finals and, some of the had never made presentations, not say speak in public. But, given their enthusiasm and effort throughout the intense day, that won’t be a problem!

We also had 2 guest speakers, Amauri Sousa from Virtual Avionics (flight simulation solutions), and Everton Nadalin from DSP Geo (computational solutions for Oil & Gas). Amauri and Everton are founders of 2 worth watching rising startups, and made their pitches so people could see “professionals in action”.

Below you can find the presentation (sorry, but it’s in Portuguese…) we used. Enjoy it!Workshop Pitch Unicamp - Complete Prezi Workshop Pitch Unicamp – Complete Material

Presentation Blueprint

Presentation blueprint: what’s the ideal slide structure?

What’s the ideal slide structure? I hate when people do that, but… I have got to say: it depends! 😦

Now the longer version: depending on the pitch type, on the audience, on the room, and on the medium (live x video), you will need to adapt you slide structure. Yes… it means you will need to make a whole new presentation!

Competition Pitches

As we talked on the Pitch Types article, competition pitches are those you make in front of a large audience, usually on a stage, etc. Based on that, we can assume:

  • You will have a short time, usually 6-7 minutes to present. Thus, pace is fast;
  • It’s a unidirectional: people won’t interrupt you to ask something in the middle;
  • Audience level of understanding of your business/ market/ model might vary a lot. You will need to set the bar at the lowest point;
  • Some people will be far away, when seating on the last row;
  • If your not a native speaker, or have a stronger accent, people might have a hard time understanding what you say.

Those assumptions are crucial to determine how your slides should look like. There’s not an specific structure, but some rules you should follow:

Rule #1: one information per slide

Example of competition pitch slides: company description

Example of competition pitch slides: company description

Example of competition pitch slides: 1 info per slide

Example of competition pitch slides: 1 info per slide

Rule of thumb for “normal presentations” is 2’30″/3’00” per slide. On competition pitches, though, it’s completely different. The last pitch I gave, at 43North competition, I had 24 slides for a 7 minute pitch; that’s almost 3.5 slides per minute!

For that to work, you need to use the slides to support you, without the need to explain them. And to guarantee that, you must have only one information per slide, period.

Rule #2: more images, less text

Example of slide with supporting graph

Example of slide with supporting graph

Example: image supported slide

Example: image supported slide

With 15-20 seconds per slide, people won’t be able to read full sentences. But don’t worry: images and graphs are to support you! On competition pitch slides you use much more visual elements in detriment of text. That’s a rule.

Images must support your point, and not just be an aesthetic element. Having said that, choose high quality, good taste pictures. It’s worthing investing a few bucks and buy professional images from stock image sites such as Shutterstock, Getty Images etc.

Finally, pictures won’t speak for themselves; I recommend using some words to reinforce the message and guide people towards the expected conclusion.

Rule #3: make it large enough so people on last row can read it comfortably

Rule #3 speaks for itself. Elements on slide must be large so to guarantee that everyone will be able to comfortably read it.

If an information is on the slide, people must be able to read it. Otherwise, just remove it. A common example is the scale on legends on graphs; they’re usually too small to read. An information that cannot be read is just noise. I recommend removing all the possible noise.

On exception is when you mention the source of an information. In this case, you need to trick the audience: people won’t be able to read it, but they will know you haven’t just invented the numbers.

Exception - add the source of information even if people won't be able to read it

Exception – add the source of information even if people won’t be able to read it

Rule #4: easy on the animations, big boy!

First time I used Power Point I remember how cool I thought those animations were. I used as much as I could… thinking about it right now gets me dizzy.

Animations, as pictures, must serve a purpose: emphasize a point, especially when the slide is a bit too dense, as on the example below:

Example of Animation: 1example animation - 2example animation - 3

example animation - 4example animation - 5example animation - 6

Exaggerating on animations will just add noise to the message, since it makes people confused or annoyed. 

Remember also, that you will need to click on each step of the animation, and it might be a a bit overwhelming if your not an experienced presenter. Oh, and don’t even consider using automatic transitions. The odds of something going wrong are huge.

Rule #5: quality design matters

All we’re talking here with those pitch techniques is about how to better communicate yourself and leave a good lasting impression. A bad company, with an awesome pitch will still be a bad company. The opposite is true as well. Some early pitches from very successful startups such as LinkedIn, BuzzFeed and Youtube, as you can see on this cool FastCompany article, will make you wonder why you’re reading this article at all. They sucked big time.

Having said that, quality design matters; it increases your odds! To make matter worse, good taste is something you cannot learn… If you don’t have a designer or someone with good aesthetic/ design skills, I recommend you that you hire a freelancer to help you. Make the full presentation and then hire someone on Fiverr, Upwork (former Odesk), 99Designs to make it presentable.

Investor Pitches

Let’s now reset what we just read… Investor pitches are totally “different beasts”:

  • You have much more time, from 30 minutes to one hour;
  • You will be presenting to a couple (2 to 5) people, probably in a room;
  • They will ask you questions and interrupt your presentation;
  • You will probably use the presentation as a handout as well.

In that sense, slides will contain much more information; you will probably spend 2-3 minutes on each, and you’ll need to add some text to it, in case presentation becomes a handout.

Rules #4 and #5 still apply for Investor Pitches. Good design is important and you should be sober about animations. Remember that people might print (yes, on a thing called “paper”) your slides to take notes. This way, animations must be done in such a way so contents do not overlap each other.

Having said that, we have a few other rules to share:

Rule #6: use header to tell a story

Example of slide structure

Example of slide structure

People usually use the upper title section poorly,with generic and repeated titles. It’s a big mistake. As in your website, that’s the premium section and you should use it to the most.

I remember my days as consultant and the lesson I remember when the senior partner taught me how to use this section: “the title should contain the conclusion of the slide. You should be able to understand the entire presentation only by reading the titles”. That’s a powerful tip, and I add two others:

  • The limited space of the title will actually help you: If space is not enough to conclude all the information presented on that page, you should break it in two;
  • To make sure we have a continuous flow, I use “…” at the beginning and at end of the phrase, as if they were part of a larger sentence

flow 2 flow 1

Rule #7: we love bullets

Yes, we love bullets and we’re not ashamed! Using bullets is a great way to make information flow more linear. It also helps you to be come out with concise sentences. It’s also very easy to change the order of ideas… we love everything about it!

Rule #8: the magical “3 key messages”

To me that’s like physics elemental rules, such as gravity, time etc. Everything in the world can (and should) be concluded in 3 points; everything! If you define this as a mandatory rule it will force you to think about priorities/ hierarchy of ideas, extracting what really matter about it.

Again I remember my consulting times when I learned the power of 3 key points. We were developing a very complex project to a multinational CPG company; there were more than 20 consultants in the project and, if you know consultants, the growth of slides and presentations are exponential. The “project buyer” (the person in charge for the project in the client) defined one rule I took for the rest of my life: the first slide of all presentations should contain the “3 key messages” of the entire presentation. Not only that forced us to be objective about what we were trying to tell them, but it also helped to set the context of the presentation; if people already knew the “answer”, they could spend their time understanding it and challenging it, instead of understanding.

Slide structure is not art; it’s science. Similarly as with the content, you need to adjust it according the audience, environment and purpose; “one size doesn’t fit all”! If you follow the above rules (and common sense) you will be able to build slides that people will feel comfortable reading and “processing it” (understanding). That’s our goal on this blog.

Pitch types: from 1 to 30 minutes, what changes?

We define pitch as a single presentation structure… but in reality, you will need to prepare different presentations, depending on the type of pitch you’re giving. To make matter worse, a 7-minute pitch is not just a summary of a 30-minute one. It’s a totally different “beast”.

In summary, you will need to prepare the following types of pitch:

1) Elevator pitch (1′):

That’s where it all started; writers in Hollywood wanted to sell their scripts to producers/ studios and would take any opportunity to sell their ideas, including riding along with people in charge in the elevators. All they had was until reaching the destination’s floor, which took from 30 seconds to 1 minute.

Simply put, a 1′ minute pitch is what you say when people ask what you do; the pitch must be simple and clear enough so even your relatives understand. 

You will be using this type of pitch a lot in networking/ social events and, as such, don’t be pushy; don’t try to sell something or get that so desired funding. Instead, your focus must be on explaining what you do and trigger curiosity around it. Your goal here is to get a follow up question or an invitation to grab a coffee with him/ her; only that.

2) Competition pitch (7′ + 2′):

Startup competitions usually work with 6′-7′ pitches. When you’re presenting to a large audience, dynamics is different. You need to focus on the problem and how you solve it, business model and your team. On this post I go through the topics that you should cover in a pitch.

Competition pitches usually happen on a large stage, so your slides should be clean, with large elements, and one information per page. Make sure that someone sitting on the last row should be able to (comfortably) read the content. In a later post I’ll explore slide structures and give other tips.

Time management is also crucial. When time is up organizers will cut your mic. A (much) shorter presentation will give the idea that you don’t have much to say; you should have problems summarizing everything rather than filling in time. Some tips on time management:

  1. Record yourself on video to an exhaustion, until you find the proper content and pace of the presentation. Also, you should be wary of your issues when speaking in public; some people will talk faster, others slower. Knowing what type you are will help you to better manage your pace.
  2. Define two time milestones on the presentation and ask someone in the audience to raise a small piece of paper when those milestones are reached. By doing this you will be able to know when you need to speak faster/ slower. I usually leave one of those milestones for the last minute, so I’m comfortable with the final presentation sprint.
  3. Have a “Plan B” to correct time. Many things can happen during the presentation that might disturb your pace plane: you might need a glass of water, you can have problems switching slides, you might forget to say something… possibilities are countless. I plan myself ahead so I know what I wouldn’t say (or slide I’d jump) in case time is running out. I also plan myself for the other scenario, and prepare how I could fill in 30 seconds of pitch time in case I go too fast. Check Preemadona’s pitch at TechCrunch Disrupt SF 20015; she does exactly that around 5’25”.

Usually, together with the presentation itself there’s a Q&A session of 1′-2′. It’s as important as the presentation itself. We will dedicate an entire article for the Q&A, but you must anticipate what questions judges might ask and be prepared for them. On 43North, the last competition I participated with AgendaPet, my pitch had 24 slides and I had 60 others just for Q&A. When judges asked me a question and I opened a slide to answer, they got impressed. We will talk about Q&A and the difference of a “good question” and a “great question” in another article.

I also recommend watching as many pitches as possible. This way you will be able to develop a better understanding of which style suits you better. Just search pitch competition finals on TechCrunch Disrupt, The Next Web, Web Summit, etc.

3) Investor Pitch (30′ + 30′):

Investor Pitch

It’s a good sign being called to a face-to-face pitch with investors. You called their attention, and now you’re close to hitting a home run. But it’s a totally different game now…

An investor pitch is much more detailed and will demand both control and flexibility from you. The problem is that they rarely allow you go through a “sanitized” presentation flow; They will interrupt you and ask questions that will force you to adjust the sequence. That’s the tricky part. For this issue, I recommend 3 things:

  1. Set the presentation expectations before you start: before start I like to ask how much time I have, and to share with them my game plan for the meeting: what topics I’ll cover, how long it will take, how much time I plan to leave for Q&A etc. I also like to start by asking how much they know about the business (they might have analyzed a competitor already, read an executive summary…) and whether there are specific points they would like me to give an special attention. By doing that, in on hand you will be able to have a much deeper understanding of the expectations, which topics to give more emphasis etc. On the other hand, you will be reducing their anxiety by acknowledging their expectations.
  2. Answer on the spot: standard presentation techniques would tell you to “write down” the question and tell the audience you will get back to that later into the presentation. I advise you the completely opposite; answer on the spot. An investor pitch should be more of a “guided conversation”, and having this back and forth dynamics is actually a good sign; it means they’re interested! Thus, jump to the slide answering the question and try to come back to your sequence.
  3. Feel the audience: on these types of pitches people give a lot of indicators on when you’re loosing their attention or on which part they want you to focus. You need feel the audience and adapt; go with the flow. investors are time managing your presentation when they give you cues on what they would like you to explore. Use those cues! Remember: your goal is not to go through all slides; it’s to make sure they know what cool aspects your business can bring to the table. Having said that, if you feel they’re a missing one crucial point in the presentation, do impose yourself and make sure to cover that point.

To have this sort of flexibility, you will need much more complete presentation deck. If on competition pitches people are more interested with the problem + solution + business model, on investor pitches they (supposedly) know that already. The focus will be more on the execution capability/ history your company has. They will go through detailed financials, go to market strategy and numbers (acquisition costs, conversion, lifetime value), team composition (including cap table and contract details), legal/ financial contingencies and liabilities, and cash requirements and use.

Notice also that slide structure will be different from competition pitches. As you will be presenting to a only a few people, in a room, slides can be more dense and contain more information (they will work also as handouts). We will talk about that in a dedicated article.

If they’re interested, they will ask you to share the presentation package, including excel spreadsheets etc. Assuming you will have to share your materials will save you time later; do things well organized on the first time already. Don’t forget the usual M&A documents, such as NDA and LOI (Letter of Intent).

Finally, whatever you do, avoid answering about expected valuation. They will ask the question but you should only get to it when they’re completely “sold” on your company; until that happens, stall, divert from the issue. Just say: “that’s not critical now; we’re looking for a long term partner who’s going to offer us more than money, and who wants to make a fair deal.”

Yes, that’s a lot of work. In pitches, “one size fits all” never happens. However, understanding the purpose of those 3 pitch types is crucial; it will help you tailoring the message to that audience, taking you one step closer to success.

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!