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PITCH Perfect: How to pitch your startup

The document is a guide on how to effectively pitch a startup to potential investors, focusing on the essential elements that make a pitch successful. It emphasizes the importance of understanding the target audience, articulating the business model, and showcasing key metrics and milestones. The author, Dave Kochbeck, shares insights from personal experiences and stresses that a good pitch should ultimately secure funding while maintaining a positive relationship with investors.

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Become Pitch Perfect: How to pitch your startup Dave Kochbeck | July 8th, 2014
About me Dave Kochbeck! • Serial entrepreneur • Former Head of Technology for Live Nation, Friendster, Howard Dean’s presidential, commerce for Blue Mountain • Currently CTO funded by Samsung Accelerator • Many bad investments • Coach for Women 2.0 PITCH Competition
About PITCH • Over 80 very early stage (idea to seed) have been finalists from a pool of over a thousand • Most companies selected from “napkin” pitches • Around half became funded after pitching onstage • Much of this webinar is about those experiences
Disclaimer IANAL / FA! This is not legal or investment advice, nor should you treat it as a substitute for legal counsel or the services of a certified financial advisor.! Also…! My “About Me” slide is the nicest slide in the entire deck. Don’t make your pitch this ugly.
For more information… To layout the best slides and be your best in front of the room, I recommend:! • slide:ology: The Art and Science of Creating Great Presentations by Nancy Duarte • Resonate: Present Visual Stories that Transform Audiences by Nancy Duarte • You’ve Got to Be Believed to Be Heard by Bert Decker
This isn’t the webinar you were expecting • We’re not going to do slides. • I’m not going to go in-depth about specifically what to say. • I’m only going to scratch the surface on how to target a pitch to an audience. My goal: to leave you with sufficient direction to make yourself confident in talking about your potential investment.
There is no single way to pitch early stage startups The perfect pitch is the one that raises money:! • In the amount that you’re seeking; • At terms that you find agreeable and motivating; • From investors with whom you can forge a working relationship.
Even a blind pig finds a truffle now and then… • Pitching is a numbers game - you have to get in front of investors to get a yes. • Even the worst, most misguided, ill-targeted pitch will get a bite if you try hard enough. • Crafting good pitches isn’t about being exactly right. It’s about using your time wisely and applying your effort efficiently. • Being good at pitching means you have more time in your life when you’re NOT pitching.
Who is the appropriate audience for this talk? • Founders seeking seed-stage funding; • Predominantly tech startups intending to be venture- or angel-fundable; • New(-ish) founders; • Companies seeking early institutional money; • People who need to be coached out of pitching a new venture to the wrong investor. <— this is most people
Topics we’ll cover • What a pitch is, when you should / should not be pitching, and what goes into your pitch • How to evaluate your pitch for suitability to your target audience • Things founders overlook that damage the results / credibility of the pitch
Topics we won’t cover • In-depth financial analysis of deals • Sourcing and qualification of leads • Terms and negotiation • Closing process and next round • Where to look to understand the current state of the early stage capital markets • Having your stuff together (e.g., legal, accounting, recruiting) • Making slides • Knowing when to go ahead and go (hint: you’ll never be done, so get someplace you’re 50% confident of, and go) But you still need to know all of these!
What is a pitch? (your life) A pitch is a way to present to potential and existing investors:! • where you’ve been, • where you are, • where you’re going, • that you know how to run a business, • that you’re producing relevant performance (traction), • that you can run the meeting gauntlet successfully.
What is a pitch? (their life) A pitch is an offer to sell equities (or other business-activating financial instruments such as convertible debt or bank debt) evaluated against:! • preference for type of instrument, • risk-reward, • preference for market, • existing portfolio contention, • expected demand on the public or M&A markets during your likely exit window, • ordinary human emotional reactions and irrational behaviors that you would expect in anyone.
Why are you pitching? • An infusion of money will fuel momentum or lock up marketshare • There is significant market proof of your business • You have a clear picture of what your upcoming needs are and what they’ll cost • Investors are already offering money, and it makes sense to take it • You really need a salary • You’re out of runway and you haven’t accomplished what you wanted • You think your thing is brilliant, you’re in love with / obsessed with it, and you’ve convinced yourself the world should know • You have an idea but want to limit your personal risk Yes! No
If you’re a NO, don’t pitch. • Pitching uses up your goodwill with the investors you meet whose time you burn through • Friends and colleagues consume their social capital making introductions for you that you use poorly • You will quickly gain a reputation for pitching junk, and in the long run it will be harder and harder to get meetings Instead? Women 2.0 provides pre-funding support.
Who hears your pitch? Under US securities laws, the only people who can invest in ultra-high risk investments such as yours are: • Funds (and funds-of-funds) such as VC funds, • Corporations operating some kind of investment practice, • Financial services companies, • Accredited investors. Under the new JOBS Act, you can solicit equities sales from the general public, but it triggers a bunch of really onerous compliance requirements. The rule is: if they can’t afford to lose the money, you shouldn’t be asking them.
Your venture needs to match the economics of your investors • VC: Must return above 5x, says 10x, wants 20x+ • Angel: Says 10x, wants someone to follow-on, fears cram down, can’t follow-on with additional funds • Bank: Says they’re easy, must match underwriting perfectly to play, harder than ever before • Micro-VC: Can return 2.5x, wants 10x+
For more information… • How VC economics work: https://blog.wealthfront.com/venture-capital-economics/ • Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist by Brad Feld • Term Sheets & Valuations: A Line by Line Look at the Intricacies of Term Sheets & Valuations by Alex Wilmerding • How big VC transacts for large amounts: http://techcrunch.com/2013/11/02/ welcome-to-the-unicorn-club/ • Day-to-day funding news: http://mattermark.com/blog/ • News on where your investor’s investors come from: http://pitchbook.com/ Subscribe_to_PitchBook_News.html • On the anatomy of seed: http://www.slideshare.net/brendanbaker/anatomy-of- seed-7753824
So let’s get to what goes in the guts of a pitch…
How I get started 1. Explore how your business ends to know where to start looking for money; 2. Determine what’s most likely to kill you soonest and what’s keeping you alive today to know where the next money is going; 3. Identify key business milestones to wrap your fundraising around, and know the metrics that signal that you’ve reached those milestones; 4. Tell a vivid story about your company that begins with clarity of vision and leads to the obvious conclusion that the listener should invest.
1. Explore how your business ends
To find your first money, consider your last Your investors today don’t want to be your investors forever. Eventually they want to sell their position for an outsized profit. To do this, they look at your:! • Expected exit type (acquisition, IPO, acqui-hire) • Expected multiple on money invested • Expected demand for buying your shares later
Exercise: Describe your potential acquirers 1. Make a list of ten possible acquirers for your business, excluding usual suspects like Google, Microsoft, or anybody else who could just buy you by accident. Be creative and insightful! To know this is to know your market. 2. Look at similar deals that your list has already done and what they paid for the deals. 3. If you sold to them in a similar way, where would you have to be as a company to make such a sale plausible? What are they buying, when and why? Is there some other way they could generate that other than buying you? 4. Look at the common aspects across all ten. Is there a valuable core to your business that you’re creating that someone will later want to buy?
Remember this? Your venture needs to match the economics of your investors • VC: Must return above 5x, says 10x, wants 20x+ • Angel: Says 10x, wants 30x, fears cram down, requires that you have a next-act • Bank: Says they’re easy, must match underwriting perfectly to play • Micro-VC: Can return 2.5x, wants 10x+ To know who your pitch is targeted to, you need a good idea how it comes out for your investors.
This is how you figure out how big a deal you are to your investors. ! Your milestones and metrics need to reflect being a deal of the size you’re shooting for.
2. Determine what’s most likely to kill you soonest and what’s keeping you alive
Exercise: Identify your major existential risk Access to capital • Ability to raise this round • Ability to raise next round • Reaching investable milestones Team risk • People who work together to produce results • Results are of great enough magnitude to invest • Teammates maintain their roles under extreme pressure Market demand • Ability to know and reach your target market • Customer acquisition • Engagement to a future Execution risk • Know which metrics make a difference • Producing results to the limit of resources • Ability to do what you say
Identify your major existential risk Access to capital • Ability to raise this round • Ability to raise next round • Reaching investable milestones Team risk • People who work together to produce results • Results are of great enough magnitude to invest • Teammates maintain their roles under extreme pressure Market demand • Ability to know and reach your target market • Customer acquisition • Engagement to a future Execution risk • Know which metrics make a difference • Producing results to the limit of resources • Ability to do what you say We will turn your! investment into results! others will invest in This team is our! primary asset, and it’s! a stable win-maker Our customers are! going to eat our product! up and beg for more We know how to run! a business with integrity! and efficiency
Two most common risks Access to capital • Ability to raise round • Ability to raise next round • Reaching investable milestones Team risk • People who work together to produce results • Results are of great enough magnitude to invest • Teammates maintain their roles under extreme pressure Market demand • Ability to know and reach your target market • Customer acquisition • Engagement to a future Execution risk • Know which metrics make a difference • Producing results to the limit of resources • Ability to do what you say
Whatever your biggest risk is, that’s what your pitch is proving you can get a grip on.
Exercise: What’s giving your company life? Team • Leading subject matter experts • Financial wizards • People out there visibly causing something big Assets • Intellectual property • A valuable customer base • A mortal lock on consistent, growing rev Relationships • An exclusive partnership • Hard-to-get customers • Exclusive, powerful sales or marketing channels Performance • A really killer product that’s already delivering • Traction in the form of numbers people are into • Offloading your risk
Whatever is giving your company life, that’s probably why they’re investing in spite of your risks.
3. Identify key milestones and metrics
Relationship of your biggest risk, your best assets and this funding round… Biggest Risk Best Asset + Build on assets Investor Money + Before This! Investment Using This! Investment New Best Asset Investable Milestone After This! Investment Biggest Risk + +
Milestones Most funding rounds are raised at key business milestones:! • A launch • An expansion into a new market • A new distribution partnership • Meeting a new growth or revenue target
Metrics Milestones are a confluence of improving metrics that tie to your business model:! • Total addressable market • Segmented addressable market • Total or active userbase • Cost of goods sold • Cost of service and retention • Cost to acquire the customer • Time it takes to effect important actions in your business
10 Possible Acquirers 1.ADP 2.Trinet 3.Ogilvy 4.(no usual suspects)… ! 3 Things Giving Us Life 1.Novel IP 2.Huge market demand 3.Active channel partners ! 3 Things Killing Us Now 1.Difficulty hiring 2.High acquisition costs 3.Low conversion Summarize for yourself Capital Consumption Plan Seed: $1m in Conv Notes $250k committed Series A: $10m VC Series B: $20m VC Series C: $40m VC Exit form: IPO Returns 22x to Series A ! Comparable Deals abc.ly: $30m by NEA 8/13 def.com: $5m by KPCB 7/13 MyCo Logo Major Stats CAC = $15, $2 by 14Q4 ARPU = $.25/mo, $1 by Q2 LTV = $10, $45 by 2016 Churn = 5%, 10% by 2016 COGS / COS negligible ! Metrics We Live By % returning MUA mo/mo % conversion to sale Viral coefficient (kn ln(n)) Ratio best v worst buyer
Develop an in-depth understanding of where your business applies force From The Startup Owner’s Manual by Steve Blank, p.400
…and reduce it to a bottom-up analysis of how money comes in and goes out. Cost to Acquire a Customer Cost of Goods / Services Sold Cost to Retain a Customer Other Costs Ongoing and Subscription Revenue One-off Sales and Setups Ads, Partnerships, and Other Revenue Sources More Valuable Company If they put in money here… show how it comes back out.
Construct an explanation of your business model Designed for: Designed by: Date: Version: Lean Canvas is adapted from The Business Model Canvas (BusinessModelGeneration.com) and is licensed under the Creative Commons Attribution-Share Alike 3.0 Un-ported License. Problem What need does your customer have? What causes them pain? What would they pay you to solve? What do they already overpay to solve? Existing Alternatives How are these problems solved today? Do competitors exist in this market? Is inaction an alternative? Solution What are your solutions to these problems? How do you remove the pain? How are you necessary? How are you desirable? Key Metrics What numbers tell how business is going? What numbers should be going up? What numbers should be going down? What drives the up and the down? Cost Structure What is your cost to acquire a customer? What is your cost to retain a customer? What is your cost to service a customer or cost of goods? What fixed costs and capital service costs do you have? What R&D costs do you have? Revenue Streams What is your primary revenue source? Does your main revenue source cast off secondary revenue sources? Do you have indirect revenue sources? Do you provide benefit that does not appear directly on your P&L? Unique Value Proposition What is your clear, compelling offering? What turns a stranger into a prospect? What are your key benefits? What is your “reason to believe?” High-level Concept What is the short description of your offering? What is your “X for Y” analogy? (ex.: Youtube is “Flickr for videos”) Unfair Advantage What do you have or do that cannot be easily duplicated, circumvented, or bought? Do you have goodwill advantages? Do you have brand equity advantages? Channels What are the paths to your customers? Do you do direct sales? Do you do channel sales? Customer Segments What are the attributes of your customers? Do your customers have customers? What part of who your customers are drives differences in decision making among them? Early Adopters Who will buy your offering first? What is the profile of your “perfect” buyer? For whom have you exactly matched their needs and their ability to purchase?
…and reduce it to a short, memorable explanation of how your company works Designed for: Designed by: Date: Version: Lean Canvas is adapted from The Business Model Canvas (BusinessModelGeneration.com) and is licensed under the Creative Commons Attribution-Share Alike 3.0 Un-ported License. Problem What need does your customer have? What causes them pain? What would they pay you to solve? What do they already overpay to solve? Existing Alternatives How are these problems solved today? Do competitors exist in this market? Is inaction an alternative? Solution What are your solutions to these problems? How do you remove the pain? How are you necessary? How are you desirable? Key Metrics What numbers tell how business is going? What numbers should be going up? What numbers should be going down? What drives the up and the down? Cost Structure What is your cost to acquire a customer? What is your cost to retain a customer? What is your cost to service a customer or cost of goods? What fixed costs and capital service costs do you have? What R&D costs do you have? Revenue Streams What is your primary revenue source? Does your main revenue source cast off secondary revenue sources? Do you have indirect revenue sources? Do you provide benefit that does not appear directly on your P&L? Unique Value Proposition What is your clear, compelling offering? What turns a stranger into a prospect? What are your key benefits? What is your “reason to believe?” High-level Concept What is the short description of your offering? What is your “X for Y” analogy? (ex.: Youtube is “Flickr for videos”) Unfair Advantage What do you have or do that cannot be easily duplicated, circumvented, or bought? Do you have goodwill advantages? Do you have brand equity advantages? Channels What are the paths to your customers? Do you do direct sales? Do you do channel sales? Customer Segments What are the attributes of your customers? Do your customers have customers? What part of who your customers are drives differences in decision making among them? Early Adopters Who will buy your offering first? What is the profile of your “perfect” buyer? For whom have you exactly matched their needs and their ability to purchase? For people with a problem we solve it by reaching them and selling them which makes things better for us growing us so
How does that go together? When soliciting investment, consider thinking from this context:! ! “By applying your investment to _____ (key action), we will be able to make today’s ______ (milestone) a huge success by growing ______ (metric) which will propel us to ______ (investable milestone), and activates _______ in our business model.”
For more information… Constructing milestones and metrics is a really long topic worthy of entire texts. Check these out:! • The Startup Owner’s Manual by Steve Blank • The Lean Startup by Eric Ries • Business Model Generation by Alexander Osterwalder • The Personal MBA by Josh Kaufman
4. Tell a vivid story
The circle of life 1. What does your company do, for whom, and how? 2. Why should I (the investor) care about that? 3. What makes you (the founders) think you’re the person(s) to succeed at that? 4. What are you asking for and why? Taken as a whole, does what you’re asking for make sense? 5. Repeat 1-4 until you win or you die.
Who we are… In order of importance: 1.Made them money in the past; 2.Made someone they know money in past; 3.Successfully applied money in past; 4.Did something your customers would know What we do… • A solution for an identifiable problem (what) • Big market (who) • Something that fits market (how) • Has model that will return investment (why) Why that matters to you… 1.Fear: This is a big deal, and if you miss it, your LPs will think you’re a failure 2.Greed: This is going to be so much money, you should beg us to put in more than we’re asking 3.Continuity: This is consistent with your investment thesis, and you don’t have one in your portfolio What you should do about it… 1.Invest 2.Tell us who, specifically we should talk to next, and intro us 3.Tell us what you’d do to improve the pitch, improve the business or generally be more awesome The meat of your story
Perception is Everything • A sense of immediacy and urgency • Fear of missing out or of being left behind • Fear of losing control of the deal • An opportunity to be greedy about • Beating out other firms • Striking at the peak of ripeness of your business
For more information… I’m not going to get into slides here. For examples, check out:! • http://bestpitchdecks.com/ • http://www.slideshare.net/hnshah/mintcom-prelaunch-pitch-deck • https://www.crowdfunder.com/is34/about/ • http://www.slideshare.net/UTR/how-to-pitch-a-vc-dave-mcclure • http://onstartups.com/tabid/3339/bid/98034/The-Pitch-Deck-We- Used-To-Raise-500-000-For-Our-Startup.aspx • http://reidhoffman.org/linkedin-pitch-to-greylock/
Seriously?! After all that, no slides?
Yes, seriously • Most wantrepreneurs never do the underlying work required to get to the stage where they need slides • If you do the work first, you’ll have all the material to put together great slides • If you already have a pitch and are still asking, “Does my pitch work?” then you skipped steps • The slides are not your pitch. They’re the prompt that keeps your audience with you.
For more information… These are some of my favorite make-a-deck guides:! • http://www.slideshare.net/slidesthatrock/how-to- pitch-a-vc-redesigned • http://www.slideshare.net/dmc500hats/how-to- pitch-a-vc-or-angel • http://www.slideshare.net/Sky7777/the-best-startup- pitch-deck-how-to-present-to-angels-v-cs
Okay, a FEW pointers to avoid weird things people do in pitches…
! ! MyCompany
 ! ! … makes taglines to help everyone remember me! Team Person Name, CEO Brief about-me @twitter ! Person Name, CTO Brief about-me @twitter ! Person Name, … Brief about-me @twitter ! Other team members / Relevant things that make team valuable MyCo Logo 1st Custs, Advisors, or Stats Advisor Name Credential ! Marquee Customer Significance ! STATISTIC Significance Other key information highlighting why this is a deal worth participating in and recalling STAR moment Partners or Social Proof Partner name Significance -or- “It’s so fantastic I’m putting it in the State of the Union!” – President Obama Founded 2011 Headquarters NYC Employees 10 Funds Sought $500,000 Contact me@my.co Cust Logo 98% Part Logo We make company taglines that reliably boost customer conversion by 300%. Our patent-pending FairyDust Platform makes the magic happen. Our mission is to never let a company have a bad tagline again.
Solution • Describe your solution in simple, clear, concise terms. The worst feedback you can get is, “I can’t really tell what you do.” • Show the actual product in a way that makes it real for the entire audience (i.e., not an idea) • Clearly and concisely explain how you are going to make money. When in doubt, pick one of Kaufman’s 12 Standard Forms of Value (http://book.personalmba.com/12-standard- forms-of-value/)
Validation • Provide provable, non-anomalous metrics showing why you are successful • If you can’t get excited about your validation metrics that prove the validity of the meat of your product’s approach (versus just sales or rev model), no one else will be excited either. • Your founding story is part of your validation. Make sure it’s short and attractive.
Competition, Defensibility or
 Key Market / Mega Trend • Describe a clear, defensible advantage. Do not be tempted to claim you can out-execute a successful, entrenched leader unless you already know for certain that you have an unbeatable, exclusive advantage over them (e.g., “I can out-eVite eVite.”). • Mention potential partners (esp. those who might be acquirers) • Explain why you will be the market leader – why is your advantage unfair and insurmountable to the competition and your product irresistible to your customer? How can you lock up 85% of your total market? • If you find yourself claiming you have no competitors, your competitor is the status quo. What special leverage do you have over existing customer behavior that will make them choose / force them to change their behavior?
Team • Describe the team as the main company asset – Relevant information only - shorter is better – 1 successful product > 20 graduate degrees – Include past companies, titles and achievements showing a track record of delivering returns – Big bonus for having worked together before • Why does the team care about this problem? • Why is this team particularly well-suited to solve this problem?
Plan • What still needs to be done? • What are your specific milestone dates? • What do you need to get it done? Make a clear ask here—say the specific amount of money you’re raising. • Be sure that everyone in the room gets asked to do something for you.
More to come…
Become Pitch Perfect: How to pitch your startup Dave Kochbeck | July 8th, 2014

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PITCH Perfect: How to pitch your startup

  • 1.
    Become Pitch Perfect: Howto pitch your startup Dave Kochbeck | July 8th, 2014
  • 2.
    About me Dave Kochbeck! •Serial entrepreneur • Former Head of Technology for Live Nation, Friendster, Howard Dean’s presidential, commerce for Blue Mountain • Currently CTO funded by Samsung Accelerator • Many bad investments • Coach for Women 2.0 PITCH Competition
  • 3.
    About PITCH • Over80 very early stage (idea to seed) have been finalists from a pool of over a thousand • Most companies selected from “napkin” pitches • Around half became funded after pitching onstage • Much of this webinar is about those experiences
  • 4.
    Disclaimer IANAL / FA! Thisis not legal or investment advice, nor should you treat it as a substitute for legal counsel or the services of a certified financial advisor.! Also…! My “About Me” slide is the nicest slide in the entire deck. Don’t make your pitch this ugly.
  • 5.
    For more information… Tolayout the best slides and be your best in front of the room, I recommend:! • slide:ology: The Art and Science of Creating Great Presentations by Nancy Duarte • Resonate: Present Visual Stories that Transform Audiences by Nancy Duarte • You’ve Got to Be Believed to Be Heard by Bert Decker
  • 6.
    This isn’t thewebinar you were expecting • We’re not going to do slides. • I’m not going to go in-depth about specifically what to say. • I’m only going to scratch the surface on how to target a pitch to an audience. My goal: to leave you with sufficient direction to make yourself confident in talking about your potential investment.
  • 7.
    There is nosingle way to pitch early stage startups The perfect pitch is the one that raises money:! • In the amount that you’re seeking; • At terms that you find agreeable and motivating; • From investors with whom you can forge a working relationship.
  • 8.
    Even a blindpig finds a truffle now and then… • Pitching is a numbers game - you have to get in front of investors to get a yes. • Even the worst, most misguided, ill-targeted pitch will get a bite if you try hard enough. • Crafting good pitches isn’t about being exactly right. It’s about using your time wisely and applying your effort efficiently. • Being good at pitching means you have more time in your life when you’re NOT pitching.
  • 9.
    Who is theappropriate audience for this talk? • Founders seeking seed-stage funding; • Predominantly tech startups intending to be venture- or angel-fundable; • New(-ish) founders; • Companies seeking early institutional money; • People who need to be coached out of pitching a new venture to the wrong investor. <— this is most people
  • 10.
    Topics we’ll cover •What a pitch is, when you should / should not be pitching, and what goes into your pitch • How to evaluate your pitch for suitability to your target audience • Things founders overlook that damage the results / credibility of the pitch
  • 11.
    Topics we won’tcover • In-depth financial analysis of deals • Sourcing and qualification of leads • Terms and negotiation • Closing process and next round • Where to look to understand the current state of the early stage capital markets • Having your stuff together (e.g., legal, accounting, recruiting) • Making slides • Knowing when to go ahead and go (hint: you’ll never be done, so get someplace you’re 50% confident of, and go) But you still need to know all of these!
  • 12.
    What is apitch? (your life) A pitch is a way to present to potential and existing investors:! • where you’ve been, • where you are, • where you’re going, • that you know how to run a business, • that you’re producing relevant performance (traction), • that you can run the meeting gauntlet successfully.
  • 13.
    What is apitch? (their life) A pitch is an offer to sell equities (or other business-activating financial instruments such as convertible debt or bank debt) evaluated against:! • preference for type of instrument, • risk-reward, • preference for market, • existing portfolio contention, • expected demand on the public or M&A markets during your likely exit window, • ordinary human emotional reactions and irrational behaviors that you would expect in anyone.
  • 14.
    Why are youpitching? • An infusion of money will fuel momentum or lock up marketshare • There is significant market proof of your business • You have a clear picture of what your upcoming needs are and what they’ll cost • Investors are already offering money, and it makes sense to take it • You really need a salary • You’re out of runway and you haven’t accomplished what you wanted • You think your thing is brilliant, you’re in love with / obsessed with it, and you’ve convinced yourself the world should know • You have an idea but want to limit your personal risk Yes! No
  • 15.
    If you’re aNO, don’t pitch. • Pitching uses up your goodwill with the investors you meet whose time you burn through • Friends and colleagues consume their social capital making introductions for you that you use poorly • You will quickly gain a reputation for pitching junk, and in the long run it will be harder and harder to get meetings Instead? Women 2.0 provides pre-funding support.
  • 16.
    Who hears yourpitch? Under US securities laws, the only people who can invest in ultra-high risk investments such as yours are: • Funds (and funds-of-funds) such as VC funds, • Corporations operating some kind of investment practice, • Financial services companies, • Accredited investors. Under the new JOBS Act, you can solicit equities sales from the general public, but it triggers a bunch of really onerous compliance requirements. The rule is: if they can’t afford to lose the money, you shouldn’t be asking them.
  • 17.
    Your venture needsto match the economics of your investors • VC: Must return above 5x, says 10x, wants 20x+ • Angel: Says 10x, wants someone to follow-on, fears cram down, can’t follow-on with additional funds • Bank: Says they’re easy, must match underwriting perfectly to play, harder than ever before • Micro-VC: Can return 2.5x, wants 10x+
  • 18.
    For more information… •How VC economics work: https://blog.wealthfront.com/venture-capital-economics/ • Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist by Brad Feld • Term Sheets & Valuations: A Line by Line Look at the Intricacies of Term Sheets & Valuations by Alex Wilmerding • How big VC transacts for large amounts: http://techcrunch.com/2013/11/02/ welcome-to-the-unicorn-club/ • Day-to-day funding news: http://mattermark.com/blog/ • News on where your investor’s investors come from: http://pitchbook.com/ Subscribe_to_PitchBook_News.html • On the anatomy of seed: http://www.slideshare.net/brendanbaker/anatomy-of- seed-7753824
  • 19.
    So let’s getto what goes in the guts of a pitch…
  • 20.
    How I getstarted 1. Explore how your business ends to know where to start looking for money; 2. Determine what’s most likely to kill you soonest and what’s keeping you alive today to know where the next money is going; 3. Identify key business milestones to wrap your fundraising around, and know the metrics that signal that you’ve reached those milestones; 4. Tell a vivid story about your company that begins with clarity of vision and leads to the obvious conclusion that the listener should invest.
  • 21.
    1. Explore howyour business ends
  • 22.
    To find yourfirst money, consider your last Your investors today don’t want to be your investors forever. Eventually they want to sell their position for an outsized profit. To do this, they look at your:! • Expected exit type (acquisition, IPO, acqui-hire) • Expected multiple on money invested • Expected demand for buying your shares later
  • 23.
    Exercise: Describe your potentialacquirers 1. Make a list of ten possible acquirers for your business, excluding usual suspects like Google, Microsoft, or anybody else who could just buy you by accident. Be creative and insightful! To know this is to know your market. 2. Look at similar deals that your list has already done and what they paid for the deals. 3. If you sold to them in a similar way, where would you have to be as a company to make such a sale plausible? What are they buying, when and why? Is there some other way they could generate that other than buying you? 4. Look at the common aspects across all ten. Is there a valuable core to your business that you’re creating that someone will later want to buy?
  • 24.
    Remember this? Yourventure needs to match the economics of your investors • VC: Must return above 5x, says 10x, wants 20x+ • Angel: Says 10x, wants 30x, fears cram down, requires that you have a next-act • Bank: Says they’re easy, must match underwriting perfectly to play • Micro-VC: Can return 2.5x, wants 10x+ To know who your pitch is targeted to, you need a good idea how it comes out for your investors.
  • 25.
    This is howyou figure out how big a deal you are to your investors. ! Your milestones and metrics need to reflect being a deal of the size you’re shooting for.
  • 26.
    2. Determine what’smost likely to kill you soonest and what’s keeping you alive
  • 27.
    Exercise: Identify your majorexistential risk Access to capital • Ability to raise this round • Ability to raise next round • Reaching investable milestones Team risk • People who work together to produce results • Results are of great enough magnitude to invest • Teammates maintain their roles under extreme pressure Market demand • Ability to know and reach your target market • Customer acquisition • Engagement to a future Execution risk • Know which metrics make a difference • Producing results to the limit of resources • Ability to do what you say
  • 28.
    Identify your major existentialrisk Access to capital • Ability to raise this round • Ability to raise next round • Reaching investable milestones Team risk • People who work together to produce results • Results are of great enough magnitude to invest • Teammates maintain their roles under extreme pressure Market demand • Ability to know and reach your target market • Customer acquisition • Engagement to a future Execution risk • Know which metrics make a difference • Producing results to the limit of resources • Ability to do what you say We will turn your! investment into results! others will invest in This team is our! primary asset, and it’s! a stable win-maker Our customers are! going to eat our product! up and beg for more We know how to run! a business with integrity! and efficiency
  • 29.
    Two most commonrisks Access to capital • Ability to raise round • Ability to raise next round • Reaching investable milestones Team risk • People who work together to produce results • Results are of great enough magnitude to invest • Teammates maintain their roles under extreme pressure Market demand • Ability to know and reach your target market • Customer acquisition • Engagement to a future Execution risk • Know which metrics make a difference • Producing results to the limit of resources • Ability to do what you say
  • 30.
    Whatever your biggestrisk is, that’s what your pitch is proving you can get a grip on.
  • 31.
    Exercise: What’s givingyour company life? Team • Leading subject matter experts • Financial wizards • People out there visibly causing something big Assets • Intellectual property • A valuable customer base • A mortal lock on consistent, growing rev Relationships • An exclusive partnership • Hard-to-get customers • Exclusive, powerful sales or marketing channels Performance • A really killer product that’s already delivering • Traction in the form of numbers people are into • Offloading your risk
  • 32.
    Whatever is givingyour company life, that’s probably why they’re investing in spite of your risks.
  • 33.
  • 34.
    Relationship of yourbiggest risk, your best assets and this funding round… Biggest Risk Best Asset + Build on assets Investor Money + Before This! Investment Using This! Investment New Best Asset Investable Milestone After This! Investment Biggest Risk + +
  • 35.
    Milestones Most funding roundsare raised at key business milestones:! • A launch • An expansion into a new market • A new distribution partnership • Meeting a new growth or revenue target
  • 36.
    Metrics Milestones are aconfluence of improving metrics that tie to your business model:! • Total addressable market • Segmented addressable market • Total or active userbase • Cost of goods sold • Cost of service and retention • Cost to acquire the customer • Time it takes to effect important actions in your business
  • 37.
    10 Possible Acquirers 1.ADP 2.Trinet 3.Ogilvy 4.(nousual suspects)… ! 3 Things Giving Us Life 1.Novel IP 2.Huge market demand 3.Active channel partners ! 3 Things Killing Us Now 1.Difficulty hiring 2.High acquisition costs 3.Low conversion Summarize for yourself Capital Consumption Plan Seed: $1m in Conv Notes $250k committed Series A: $10m VC Series B: $20m VC Series C: $40m VC Exit form: IPO Returns 22x to Series A ! Comparable Deals abc.ly: $30m by NEA 8/13 def.com: $5m by KPCB 7/13 MyCo Logo Major Stats CAC = $15, $2 by 14Q4 ARPU = $.25/mo, $1 by Q2 LTV = $10, $45 by 2016 Churn = 5%, 10% by 2016 COGS / COS negligible ! Metrics We Live By % returning MUA mo/mo % conversion to sale Viral coefficient (kn ln(n)) Ratio best v worst buyer
  • 38.
    Develop an in-depthunderstanding of where your business applies force From The Startup Owner’s Manual by Steve Blank, p.400
  • 39.
    …and reduce itto a bottom-up analysis of how money comes in and goes out. Cost to Acquire a Customer Cost of Goods / Services Sold Cost to Retain a Customer Other Costs Ongoing and Subscription Revenue One-off Sales and Setups Ads, Partnerships, and Other Revenue Sources More Valuable Company If they put in money here… show how it comes back out.
  • 40.
    Construct an explanationof your business model Designed for: Designed by: Date: Version: Lean Canvas is adapted from The Business Model Canvas (BusinessModelGeneration.com) and is licensed under the Creative Commons Attribution-Share Alike 3.0 Un-ported License. Problem What need does your customer have? What causes them pain? What would they pay you to solve? What do they already overpay to solve? Existing Alternatives How are these problems solved today? Do competitors exist in this market? Is inaction an alternative? Solution What are your solutions to these problems? How do you remove the pain? How are you necessary? How are you desirable? Key Metrics What numbers tell how business is going? What numbers should be going up? What numbers should be going down? What drives the up and the down? Cost Structure What is your cost to acquire a customer? What is your cost to retain a customer? What is your cost to service a customer or cost of goods? What fixed costs and capital service costs do you have? What R&D costs do you have? Revenue Streams What is your primary revenue source? Does your main revenue source cast off secondary revenue sources? Do you have indirect revenue sources? Do you provide benefit that does not appear directly on your P&L? Unique Value Proposition What is your clear, compelling offering? What turns a stranger into a prospect? What are your key benefits? What is your “reason to believe?” High-level Concept What is the short description of your offering? What is your “X for Y” analogy? (ex.: Youtube is “Flickr for videos”) Unfair Advantage What do you have or do that cannot be easily duplicated, circumvented, or bought? Do you have goodwill advantages? Do you have brand equity advantages? Channels What are the paths to your customers? Do you do direct sales? Do you do channel sales? Customer Segments What are the attributes of your customers? Do your customers have customers? What part of who your customers are drives differences in decision making among them? Early Adopters Who will buy your offering first? What is the profile of your “perfect” buyer? For whom have you exactly matched their needs and their ability to purchase?
  • 41.
    …and reduce itto a short, memorable explanation of how your company works Designed for: Designed by: Date: Version: Lean Canvas is adapted from The Business Model Canvas (BusinessModelGeneration.com) and is licensed under the Creative Commons Attribution-Share Alike 3.0 Un-ported License. Problem What need does your customer have? What causes them pain? What would they pay you to solve? What do they already overpay to solve? Existing Alternatives How are these problems solved today? Do competitors exist in this market? Is inaction an alternative? Solution What are your solutions to these problems? How do you remove the pain? How are you necessary? How are you desirable? Key Metrics What numbers tell how business is going? What numbers should be going up? What numbers should be going down? What drives the up and the down? Cost Structure What is your cost to acquire a customer? What is your cost to retain a customer? What is your cost to service a customer or cost of goods? What fixed costs and capital service costs do you have? What R&D costs do you have? Revenue Streams What is your primary revenue source? Does your main revenue source cast off secondary revenue sources? Do you have indirect revenue sources? Do you provide benefit that does not appear directly on your P&L? Unique Value Proposition What is your clear, compelling offering? What turns a stranger into a prospect? What are your key benefits? What is your “reason to believe?” High-level Concept What is the short description of your offering? What is your “X for Y” analogy? (ex.: Youtube is “Flickr for videos”) Unfair Advantage What do you have or do that cannot be easily duplicated, circumvented, or bought? Do you have goodwill advantages? Do you have brand equity advantages? Channels What are the paths to your customers? Do you do direct sales? Do you do channel sales? Customer Segments What are the attributes of your customers? Do your customers have customers? What part of who your customers are drives differences in decision making among them? Early Adopters Who will buy your offering first? What is the profile of your “perfect” buyer? For whom have you exactly matched their needs and their ability to purchase? For people with a problem we solve it by reaching them and selling them which makes things better for us growing us so
  • 42.
    How does thatgo together? When soliciting investment, consider thinking from this context:! ! “By applying your investment to _____ (key action), we will be able to make today’s ______ (milestone) a huge success by growing ______ (metric) which will propel us to ______ (investable milestone), and activates _______ in our business model.”
  • 43.
    For more information… Constructingmilestones and metrics is a really long topic worthy of entire texts. Check these out:! • The Startup Owner’s Manual by Steve Blank • The Lean Startup by Eric Ries • Business Model Generation by Alexander Osterwalder • The Personal MBA by Josh Kaufman
  • 44.
    4. Tell avivid story
  • 45.
    The circle oflife 1. What does your company do, for whom, and how? 2. Why should I (the investor) care about that? 3. What makes you (the founders) think you’re the person(s) to succeed at that? 4. What are you asking for and why? Taken as a whole, does what you’re asking for make sense? 5. Repeat 1-4 until you win or you die.
  • 46.
    Who we are… Inorder of importance: 1.Made them money in the past; 2.Made someone they know money in past; 3.Successfully applied money in past; 4.Did something your customers would know What we do… • A solution for an identifiable problem (what) • Big market (who) • Something that fits market (how) • Has model that will return investment (why) Why that matters to you… 1.Fear: This is a big deal, and if you miss it, your LPs will think you’re a failure 2.Greed: This is going to be so much money, you should beg us to put in more than we’re asking 3.Continuity: This is consistent with your investment thesis, and you don’t have one in your portfolio What you should do about it… 1.Invest 2.Tell us who, specifically we should talk to next, and intro us 3.Tell us what you’d do to improve the pitch, improve the business or generally be more awesome The meat of your story
  • 47.
    Perception is Everything •A sense of immediacy and urgency • Fear of missing out or of being left behind • Fear of losing control of the deal • An opportunity to be greedy about • Beating out other firms • Striking at the peak of ripeness of your business
  • 48.
    For more information… I’mnot going to get into slides here. For examples, check out:! • http://bestpitchdecks.com/ • http://www.slideshare.net/hnshah/mintcom-prelaunch-pitch-deck • https://www.crowdfunder.com/is34/about/ • http://www.slideshare.net/UTR/how-to-pitch-a-vc-dave-mcclure • http://onstartups.com/tabid/3339/bid/98034/The-Pitch-Deck-We- Used-To-Raise-500-000-For-Our-Startup.aspx • http://reidhoffman.org/linkedin-pitch-to-greylock/
  • 49.
  • 50.
    Yes, seriously • Mostwantrepreneurs never do the underlying work required to get to the stage where they need slides • If you do the work first, you’ll have all the material to put together great slides • If you already have a pitch and are still asking, “Does my pitch work?” then you skipped steps • The slides are not your pitch. They’re the prompt that keeps your audience with you.
  • 51.
    For more information… Theseare some of my favorite make-a-deck guides:! • http://www.slideshare.net/slidesthatrock/how-to- pitch-a-vc-redesigned • http://www.slideshare.net/dmc500hats/how-to- pitch-a-vc-or-angel • http://www.slideshare.net/Sky7777/the-best-startup- pitch-deck-how-to-present-to-angels-v-cs
  • 52.
    Okay, a FEWpointers to avoid weird things people do in pitches…
  • 53.
    ! ! MyCompany
 !! … makes taglines to help everyone remember me! Team Person Name, CEO Brief about-me @twitter ! Person Name, CTO Brief about-me @twitter ! Person Name, … Brief about-me @twitter ! Other team members / Relevant things that make team valuable MyCo Logo 1st Custs, Advisors, or Stats Advisor Name Credential ! Marquee Customer Significance ! STATISTIC Significance Other key information highlighting why this is a deal worth participating in and recalling STAR moment Partners or Social Proof Partner name Significance -or- “It’s so fantastic I’m putting it in the State of the Union!” – President Obama Founded 2011 Headquarters NYC Employees 10 Funds Sought $500,000 Contact me@my.co Cust Logo 98% Part Logo We make company taglines that reliably boost customer conversion by 300%. Our patent-pending FairyDust Platform makes the magic happen. Our mission is to never let a company have a bad tagline again.
  • 54.
    Solution • Describe yoursolution in simple, clear, concise terms. The worst feedback you can get is, “I can’t really tell what you do.” • Show the actual product in a way that makes it real for the entire audience (i.e., not an idea) • Clearly and concisely explain how you are going to make money. When in doubt, pick one of Kaufman’s 12 Standard Forms of Value (http://book.personalmba.com/12-standard- forms-of-value/)
  • 55.
    Validation • Provide provable,non-anomalous metrics showing why you are successful • If you can’t get excited about your validation metrics that prove the validity of the meat of your product’s approach (versus just sales or rev model), no one else will be excited either. • Your founding story is part of your validation. Make sure it’s short and attractive.
  • 56.
    Competition, Defensibility or
 KeyMarket / Mega Trend • Describe a clear, defensible advantage. Do not be tempted to claim you can out-execute a successful, entrenched leader unless you already know for certain that you have an unbeatable, exclusive advantage over them (e.g., “I can out-eVite eVite.”). • Mention potential partners (esp. those who might be acquirers) • Explain why you will be the market leader – why is your advantage unfair and insurmountable to the competition and your product irresistible to your customer? How can you lock up 85% of your total market? • If you find yourself claiming you have no competitors, your competitor is the status quo. What special leverage do you have over existing customer behavior that will make them choose / force them to change their behavior?
  • 57.
    Team • Describe theteam as the main company asset – Relevant information only - shorter is better – 1 successful product > 20 graduate degrees – Include past companies, titles and achievements showing a track record of delivering returns – Big bonus for having worked together before • Why does the team care about this problem? • Why is this team particularly well-suited to solve this problem?
  • 58.
    Plan • What stillneeds to be done? • What are your specific milestone dates? • What do you need to get it done? Make a clear ask here—say the specific amount of money you’re raising. • Be sure that everyone in the room gets asked to do something for you.
  • 59.
  • 60.
    Become Pitch Perfect: Howto pitch your startup Dave Kochbeck | July 8th, 2014