Do You Know What Your Startup Does?
"So, what does your company do?"That is the most dreaded question one can get from an investor immediately after you have made your pitch. I am in possession this week of a stack of pitches and executive summaries that leave that very question unanswered.The number one mission of pitching your company is to explain its engine of value creation. As my friend Charlie Paparelli says in his blog: “People invest in companies, not ideas.” If you have assembled a collection of shiny new technologies around an idea that you firmly believe has legs, it’s very tempting to make sure all those shiny bits are exhibited in your pitch. If you do that, it can often end up as a long list of buzzwords that never addresses exactly how your company will operate to make money. Contrary to consumer product advertising, you need to sell the steak and not the sizzle to investors. Otherwise you quickly lose the interest of any knowledgeable investor.
Crafting Your Pitch
First, explain the problem being solved. Then tell me why it is consequential, how big a market there is, and how you are going to create a scalable, crank-turning business to address that problem better than any known competitor. Talk about the competition and where you fit in the grand quadrants. You will always compete with inertia, if nothing else, but if you can show that others are in your space and collecting all the pioneering arrows in the back, you make a good case that there is in fact a market need. Then focus on why your entry is properly timed and how you have the engine to outrace those who have graciously warmed up the track for you.
Go To Market Strategy
Building the best product is only a part of starting a company. The hardest part is often determining your go-to-market product specifications, calculating the optimal price points that meet your revenue needs yet are still irresistible to customers, finding a way to identify and reach those paying customers, and turning perceived demand into buying decisions. The same theories that apply to an investor pitch apply to your messaging to your target customer audience. If they don’t quickly get what you are doing and why they should act, you will have no business. Customers don’t buy ideas, they buy products or services from companies that pitch the value offered to them. They don’t pay for the aforementioned shiny bits, although they may well do some due diligence around them; they buy into your company as a reliable and sustainable vendor. And, investors who hear your pitch expect you to have figured out how to invent such a company
Identify and Claim Your IP
Intellectual property may or may not be your major advantage, but, if it is, be transparent about where and how it was developed. Investors in particular will want to know specifically what you have done to claim and protect the ownership of your IP. I have seen some major deals fall through because the IP management along the way wasn’t solid. Do you own your product, or did you use contractors without work-for-hire agreements who might rise up just when you hit the big time? Did any of your employees come from prior companies where they signed agreements that might conflict with what they are doing for you? Trust me, these problems only come up when there’s real money on the table, so don’t think you can skate along in the early days without doing all the prophylactic legal work to be sure you own and can sell what you think is yours. Everybody gets along fine during the struggling startup phases, but when you have a hit and start to scale, or when you are about to close your first major Series A funding, bad things will inevitably come out of the woodwork. Your success will suddenly have the proverbial thousand fathers that all want to share in the wealth.
Find Your Audience
Whether you are pitching to investors or to prospective customers, take your show on the road to where you will find the best odds of a good reception. Back to the blockchain example, if you are talking to a local audience the covers a broad range of technology interests, you may have only one person in the room who can spell blockchain. You are merely providing free entertainment to the curious but not reaching a crowd with whom you can do business. The more specialized your plan, e.g. chemistry-based life sciences, the more you will have to seek out those who have enough background knowledge to grasp what you are doing.Curate your audiences to those with the basic background knowledge to comprehend your terminology and your market space. If you have a genomics breakthrough, it’s better to fly to San Diego to present to one person who understands that field than to spend your time at any broad spectrum “health” event which may include hundreds of wellness apps and other purely digital and nonclinical offerings. Or, for a concept not so specialized, you still need to choose cities and venues where you are in the “birds of a feather” realm. Come to Atlanta for anything fintech, but go to Austin to introduce a new vodka.
Make Sure They Get It
One final point is that you should not let your creative team drive the content of what you are pitching. I’ve repeatedly seen messaging obscuredby pretty visuals that happen to be handy but aren’t showing the steak and pay too little attention to the precise wordsmithing of videos or slide presentations. The more polished any presentation the better, but when that fails to answer unequivocally the question that is the title of this essay, you are creating art for art’s sake.At the end of every pitch, a viewer almost reflexively says: “great presentation.”What you really want to hear is this:
“Aha! I get it.”
This post is guest written by Ben Dyer and was first published on his blog here. Ben is an Entrepreneur in Residence at Morris, Manning & Martin, LLP in Atlanta, GA and a Mentor at Atlanta Tech Village. The founder and president of Peachtree Software, Ben Dyer is a serial entrepreneur and leading technology advisor. He continues to partner and consult with innovative companies to deliver a better future.