{"id":9131,"date":"2015-06-29T16:17:53","date_gmt":"2015-06-29T23:17:53","guid":{"rendered":"http:\/\/foundersnetwork.com\/?p=9131"},"modified":"2018-09-20T17:11:47","modified_gmt":"2018-09-21T00:11:47","slug":"6-things-to-nail-before-you-pitch","status":"publish","type":"post","link":"https:\/\/foundersnetwork.com\/6-things-to-nail-before-you-pitch\/","title":{"rendered":"6 moves to nail before you pitch"},"content":{"rendered":"

An impressive list of institutional and angel investors advised Founders Network members over the last year: VCs Howard Hartenbaum from August Capital<\/a>, Annie Kadavy of Charles River Ventures<\/a> and Noah Lichtenstein of Cowboy Ventures<\/a>, and prolific angel investors Gil Penchina (Flight<\/a>) and Jason Calacanis (Launch<\/a>).<\/p>\n

They\u2019ve watched the best and the worst \u2013 and they\u2019re willing to share some of that brutal feedback.<\/p>\n

Whether it was headlining a mentoring event or offering one-on-one pitch feedback with members, they\u2019ve each advised Founders Network members on what entrepreneurs need to figure out NOW \u2013 as in, ahead of time \u2013 to stand out to investors.<\/p>\n

Here are the 6 tactics they say you need to nail before your 30 seconds in the elevator (or at the oyster bar, or crossing Market Street \u2026 )<\/p>\n

 <\/p>\n

Get an intro. Just do it. <\/b><\/p>\n

Every founder feels like an outsider when they start. The world of investors can look like a closed system that\u2019s hard to crack. That\u2019s not totally unintentional.<\/p>\n

\u201cIf you can\u2019t get a warm intro to me, do you really have the hustle to get out there?\u201d Lichtenstein asks. \u201cIf you\u2019re going to sell a product, you need to find more strategic ways to reach people you\u2019ve never met.\u201d<\/p>\n

Don\u2019t despair. There\u2019s a playbook, Lichtenstein points out. Groups like Founders Network have connections into the venture world. Go to meetups. Build rapport with partners like your lawyer or your accountant \u2013 often they\u2019ll have a connection.<\/p>\n

And don\u2019t forget that introductions can start to build on each other.<\/p>\n

\u201cIt\u2019s all about social proof,\u201d Penchina notes. \u201cThe more people you line up as advisors or investors who look legit, the more likely I am to believe that you ARE legit.\u201d<\/p>\n

\u201cI don\u2019t need to do too much research because when I get a referral, it is really vetted,\u201d Calacanis says. \u201cIf I\u2019m sitting at a poker table and Josh from DFJ says he has a founder who really wants to meet me, I wouldn\u2019t just meet him. If it\u2019s an incredibly beautifully designed product, I might think I\u2019d invest, after one minute.\u201d<\/p>\n

 <\/p>\n

Know your audience<\/b><\/p>\n

Not every investor is looking for the same thing \u2013 and you had better know what they want before you start talking.<\/p>\n

\u201cThe person on the other side of the table is going to see the world very differently depending on whether they\u2019re an angel or or a seed or a series A investor,\u201d Kadavy says.<\/p>\n

An angel might be asking, do I like this person? Is the market big enough? Is it worth making a bet? They might make the decision right there in the meeting.<\/p>\n

A series A investor has to ask, \u201cdo I want to be married to this company for the next 7-10 years?\u201d There\u2019s due diligence to do, and more digging into the tactical aspects of the business.<\/p>\n

At Charles River Ventures, they\u2019re looking to write fewer, larger checks for teams that have already raised a seed round.<\/p>\n

\u201cMaking investments at this stage is about the relationships as much as it is about the product.\u00a0You\u2019re literally wedding yourself to the people on the other side.\u201d<\/blockquote>\n

A founder needs to know a VC\u2019s interests and scale before that first conversation. If you do your homework and reach out in an authentic way, people will want to help, Kadavy says.<\/p>\n

\u201cIf you believe that there is an investor out there who is THE investor for you, tell them why.\u201d<\/p>\n

\u201cThe closer you can get to people with experience in your target segment or your product or your feature set the better, because you have less convincing to do,\u201d Penchina says.<\/p>\n

\u201cThere\u2019s a bunch of tags people can put on their AngelList profile page saying what they\u2019re interested in. I would find people in your sector who just became rich, and therefore think they\u2019re smart \u2013 those people are great as angels, because they\u2019re more likely to write checks.\u201d<\/p>\n

\u201cIf I were an entrepreneur, I would want a grinded out entrepreneur as my investor,\u201d Calacanis says. \u201cI know I can text them and they will talk me off a ledge, and explain the problem or at least be there for me.\u201d<\/p>\n

\u201cThe right investor can be the person standing at your side saying, \u2018yeah, this thing could fly off the rails and be a zero \u2013 but that\u2019s why we invested in you, because you could do something bold and fast,\u2019\u201d Calacanis says.<\/p>\n

\u201cAs I told Elon Musk when we were having dinner back in those days, anybody who successfully got into orbit blew up rockets along the way.\u201d<\/blockquote>\n

 <\/p>\n

Know your numbers \u2013 and why they\u2019re rock solid<\/b><\/p>\n

Too many investors have been burned on the vague promise of \u201cmonetizing the data,\u201d so if that\u2019s your plan, be sure you can back yourself up, Hartenbaum says. Please remember: \u2018data\u2019 and \u2018long tail\u2019 are four letter words. Know your customer acquisition costs (CAC) and what fraction of your customer lifetime value (LTV) they represent.<\/p>\n

Not every founder has to be an analytical whiz \u2013 but two out of five partners at a VC firm probably will be (or think they are). Know your audience, and demonstrate that you have real numbers and a solid grasp of what to do with them. Regardless of your product, key metrics are non-optional.<\/p>\n

\u201cCertainly, the scale for \u2018interesting to venture\u2019 on the consumer side has gone up,\u201d Penchina says.<\/p>\n

\u201cEvery mobile app has a million users now, so 10 million is the new bar for interesting. It makes sense when you figure there are a couple billion mobile internet users.\u201d<\/blockquote>\n

Harsh, but not the end of the story. Queuing off downloads or percent increase week over week isn\u2019t the right metric to show you\u2019ve built a sticky product people love.<\/p>\n

\u201cThere are teams out there that can get a million downloads in 4 weeks, and that\u2019s not interesting to me,\u201d Kadavy says. \u201cThere are a lot of ways to game the system. I\u2019m interested in cohort data, which is something you can really only collect over time.\u201d<\/p>\n

\u201cI would much rather see a company that had 200,000 subscribers and data on how they used the product for a month than a company that signed up a million subscribers in three weeks but no data on how they used the product.\u201d<\/p>\n

Show your work<\/b><\/p>\n

It\u2019s just like the old rule on math tests: you can\u2019t just show a number, you\u2019ve got to be able to explain how you got there. This is especially true if you\u2019re looking for seed funding based mostly on potential, not delivered traction.<\/p>\n

\u201cThe more you can demonstrate that you\u2019ve thought these things through and can back them up, the more confidence investors will have in you,\u201d Lichtenstein says. \u201cWe want to understand how you\u2019re thinking, whether you\u2019re making realistic assumptions.\u201d<\/p>\n

You\u2019re going to be pitching against industry benchmarks \u2013 and whether you know them or not, the VCs definitely will. So do your homework and know what product-specific metrics your pitch will need, Lichtenstein says.<\/p>\n

\u201cThere\u2019s a lot of information out there \u2013 so before you stick your head down building building building, take a couple of hours to sit back and ask: what are the goal posts I want to set, and the key metrics I actually need to track?\u201d Lichtenstein says.<\/p>\n

Don\u2019t wait until a VC asks for them to realize you\u2019re missing data that\u2019s standard to your sector.<\/p>\n

\u201cIt\u2019s less about the data that you have already, and more the framework for how you think about the data. How much does it cost you to acquire a user?\u201d<\/blockquote>\n

You may not know yet \u2013 that\u2019s part of why benchmarking is not optional. How much does it cost a comparable company? Why haven\u2019t you run a small test, acquired a few users, and measured what it took?<\/p>\n

\u201cA lot of people say, I need to get the money to launch and prove something out \u2013 it\u2019s a Catch 22. But you can demonstrate small indicators that this is going to work, that back up your projections.\u201d<\/blockquote>\n

Ice the Cake<\/b><\/p>\n

That tip above \u2013 about using small tests to backup all your predictions and projections of success \u2013 it\u2019s a basic piece of legwork you can\u2019t skip.<\/p>\n

\u201cIt seems depressing to me that you need to raise money from me before you’ve convinced anyone to buy the product,\u201d Penchina says. \u201cEspecially given how easy it is now to get on Kickstarter and \u00a0show that there is actually latent demand for a new product.\u201d<\/p>\n

\u201cYou can validate my fear that no one wants the shit you’ve built,\u201d as Penchina puts it.<\/blockquote>\n

\u201cIt seems kind of a dumb statement, but it’s about how much icing you can put on the cake. \u00a0The more icing you have, the more interested people are.\u201d<\/p>\n

Founders have to show more data and more traction than they use to, and at very early stages \u2013 but that\u2019s partly because the cost to do so has gotten so low.<\/p>\n

\u201cIt\u2019s embarrassing to show up without it,\u201d Penchina says. \u201cIt takes $500 or $5,000 to put up a website, a\/b test it and buy some google ads. Figure out your funnel and your viral coefficient. Show me something that makes your idea better than the other 50 PowerPoints I saw with no data.\u201d<\/p>\n

Just showing that people are willing to use your product is worth a lot. Usage beats no usage, and usage with revenue beats usage. Demonstrate that your product doesn\u2019t need funding to survive \u2013 it needs funding to accelerate growth.<\/p>\n

\u201cWe\u2019re all optimists who are going to be skeptical,\u201d Hartenbaum says. There is nothing like success to silence the skeptics.<\/p>\n

Remember that \u201cno\u201d is not the end<\/b><\/p>\n

Rejection is a bitch. You\u2019re going to go to VCs, and they\u2019ll give you the soft no \u2013 \u201ckeep me posted.\u201d<\/p>\n

\u201c\u2018Keep the dialogue open\u2019 means you suck. If they say, \u2018keep them posted,\u2019 your design is dog shit,\u201d Calacanis says.<\/p>\n

Hartenbaum has a slightly less brutal gloss on the same advice. Because most investors will take a pass (true for almost ANY product), you need to make sure you\u2019ve got a second ask ready.<\/p>\n

Do you want an introduction to a potential customer, or some advice? If you\u2019re only asking for money, you\u2019re likely to leave the conversation empty-handed.<\/blockquote>\n

Don\u2019t spend time trying to just sell a half-baked product to VCs who want something exceptional, Calacanis says. Do what it takes to get to exceptional. That includes sitting through some vicious rejections.<\/p>\n

\u201cIt\u2019s hard to not make it personal, but we always try to give feedback on why we\u2019re not looking to invest,\u201d Lichtenstein says.<\/p>\n

\u201cIf you can talk to them early on, it\u2019s always good to be learning \u2013 what are the things they as an investor would like to see?\u201d<\/p>\n

Next Steps<\/b><\/p>\n

So you\u2019ve heard the brutal truth and you want to start practicing all of the above. Where do you start? You\u2019ve got a lot of homework to do on your own. But also start accepting the help that\u2019s out there \u2013 if you can find it.<\/p>\n

\u201cI love meeting with entrepreneurs, but I have to weigh time constraints,\u201d Lichtenstein says. \u201cI like going to events and meetups because I can chat with a lot of people. I used to go to a lot of events when I started my first company because I had never studied any of this stuff, and that\u2019s how I would learn. \u201d<\/p>\n

Drop into an investor mentoring session like Prashant Shah and Marlon Nichols\u2019 upcoming Early Stage Fundraising Panel<\/a> (July 15, 12-1 p.m.) to get advice tailored to your product, sector and stage.
\nAnd seek out the mix of input you get when founders and investors mingle, at events like the upcoming Funded Founders Summer Art & Cocktail Reception<\/a> (July 21) and the Summit in Calistoga<\/a> (Oct 22-23).<\/p>\n","protected":false},"excerpt":{"rendered":"

An impressive list of institutional and angel investors advised Founders Network members over the last year: VCs Howard Hartenbaum from August Capital, Annie Kadavy of Charles River Ventures and Noah … <\/p>\n

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