Digital Ventures

In my work with mentees at the London Business School, and in mistakes I have seen again and again from those presenting their early stage businesses, one thing stands out: the presentations almost always miss the point.

They often leave investors scratching their heads as they focus on the wrong things and this means they miss out on funding or opportunities as people just don’t get it..

You must deliver on two key objectives:

1. explain what you’re doing clearly and simply
2. explain why people will pay for it.

That might sound easy, but it’s not when you’re explaining technical matters to an audience that’s mostly non-technical. Also, startups almost always fall into the trap of talking endlessly about the company or the technology without clearly explaining what they are actually doing for real users of their product or service.

This situation is constantly repeated when startups present to investors: people who are bad at explaining, talking to people who are bad at understanding. Practically every successful startup has presented at some point to investors who didn’t get it and turned them down. Was it because the founders were bad at presenting, or because the investors were obtuse? It’s probably always some of both.

Explain what you’re doing.

Investors’ main question when judging a very early startup is whether you’ve made a compelling product or service. Before they can judge whether you’ve built a good x, they have to understand what kind of x you’ve built. They will get very frustrated if instead of telling them what you do, you make them sit through some kind of preamble.

Say what you’re doing as soon as possible, preferably in the first sentence. “We’re Jane and Bob and we’ve built an easy to use web-based widget. Now we’ll show it to you and explain why people need this.”

Get rapidly to demo or try to visualise what you are doing.

A demo explains what you’ve made more effectively than any verbal description. The only thing worth talking about first is the problem you’re trying to solve and why it’s important. But don’t spend more than a tenth of your time on that. Then demo.

When you demo, don’t run through a catalog of features. Instead start with the problem you’re solving, and then show how your product solves it. Show features in an order driven by some kind of purpose, rather than the order in which they happen to appear on the screen.

If you’re demoing something web-based, assume that the network connection will mysteriously die 30 seconds into your presentation, and come prepared with a copy of the server software running on your laptop.

Better a narrow description than a vague one.

One reason founders resist describing their projects concisely is that, at this early stage, there are all kinds of possibilities. The most concise descriptions seem misleadingly narrow. So for example a group that has built an easy web-based widget might resist calling their application that, because it could be so much more. In fact, it could be anything…

If you describe your web-based database as “a system to allow people to collaboratively leverage the value of information,” it will go in one investor ear and out the other. They’ll just discard that sentence as meaningless boilerplate, and hope, with increasing impatience, that in the next sentence you’ll actually explain what you’ve made.

Your primary goal is not to describe everything your system might one day become, but simply to convince investors you’re worth talking to further. So hit them with the core deliverable that offers users a real solution to a problem and if you need too explain that the widget also has the potential in other areas in the future – but make it a narrow description.

Don’t get too deeply into business models.

It’s good to talk about how you plan to make money, but mainly because it shows you care about that and have thought about it. Don’t go into detail about your business model, because (a) that’s not what smart investors care about in a brief presentation, and (b) any business model you have at this point is probably wrong anyway.

Yes, almost all businesses have to ‘feel’ their way into the market and will probably change directions a few times. So a short indication of your initial direction is fine.

If you’re solving an important problem, you’re going to sound a lot smarter talking about that than the business model.

Seem confident.

I have covered this many times before but here’s an interesting point: between the brief time available and their lack of technical background, many in the audience will have a hard time evaluating what you’re doing. Probably the single biggest piece of evidence, initially, will be your own confidence in it. You have to show you’re impressed with what you’ve made.

And I mean show, not tell. Never say “we’re passionate” or “our product is great.” People just ignore that—or worse, write you off as bullshitters. Such messages must be implicit.

Don’t try to seem more than you are.

Don’t worry if your company is just a few months old and doesn’t have an office yet, or your founders are technical people with no business experience. Google was like that once, and they turned out ok. Smart investors can see past such superficial flaws. They’re not looking for finished, smooth presentations. They’re looking for raw talent. All you need to convince them of is that you’re smart and that you’re onto something good. If you try too hard to conceal your rawness—by trying to seem corporate, or pretending to know about stuff you don’t—you may just conceal your talent.

You can afford to be candid about what you haven’t figured out yet. Don’t go out of your way to bring it up (e.g. by having a slide about what might go wrong), but don’t try to pretend either that you’re further along than you are. If you’re a hacker and you’re presenting to experienced investors, they’re probably better at detecting bullshit than you are at producing it.

Specific numbers are good.

If you have any kind of data, however preliminary, tell the audience. Numbers stick in people’s heads. If you can claim that the median visitor generates 12 page views, that’s great.

But don’t give them more than four or five numbers, and only give them numbers specific to you. Also very carefully note the source of all your quoted data, you will definitely be asked where you found out that a trillion widgets a year are sold to acme companies.

You don’t need to tell them the size of the market you’re in. Who cares, really, if it’s 500 million or 5 billion a year? What matters is can you enter a big market and dominate a niche that will show a 10x return for investors.

Tell stories about users.

The biggest fear of investors looking at early stage startups is that you’ve built something based on your own a priori theories of what the world needs, but that no one will actually want. So it’s good if you can talk about problems specific users have and how you solve them.

Greg Mcadoo said one thing Sequoia looks for is the “proxy for demand.” What are people doing now, using inadequate tools, that shows they need what you’re making?

Another sign of user need is when people pay a lot for something. It’s easy to convince investors there will be demand for a cheaper alternative to something popular, if you preserve the qualities that made it popular.

The best stories about user needs are about your own. A remarkable number of famous startups grew out of some need the founders had: Apple, Microsoft, Yahoo, Google. Experienced investors know that, so stories o
f this type will get their attention. The next best thing is to talk about the needs of people you know personally, like your friends or siblings.

Also, try and show that the problem has the properties more related to a headache tablet than a vitamin i.e. the need has an urgency about it that will compel people to buy it now not later.

Make a soundbite stick in their heads.

Professional investors hear a lot of pitches. After a while they all blur together. The first cut is simply to be one of those they remember. And the way to ensure that is to create a descriptive phrase about yourself that sticks in their heads.

In Hollywood, these phrases seem to be of the form “x meets y.” In the startup world, they’re usually “the x of y” or “the x y.” Viaweb’s was “the Microsoft Word of ecommerce.”

Find one and launch it clearly (but apparently casually) in your talk, preferably near the beginning.

It’s a good exercise for you, too, to sit down and try to figure out how to describe your startup in one compelling phrase. If you can’t, your plans may not be sufficiently focused.

I used some of some of Paul Graham’s great expertise with Start-ups in this summary.