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12 Ways to Blow

Your Investor Pitch

Do we really need a guide that points out how to fail?
Even though there’s no shortage of information about “how to pitch for funding” making its way around,
from what we can tell, a lot of what’s written just isn’t soaking in too well. So we figured we’d try a
more unconventional approach.

Here’s a collection of some knowledge (and scars) we’ve accumulated over the years to point out the
noteworthy wipeouts, awkward moments, and empty handshakes of new venture pitching.

Maybe seeing what doesn’t work will help you head in the right direction. Ready?

The K-Mart Template Business Plan

Over 500,000 business plans float around the internet attached (by a fishing line and a bobber usually)
to a hopeful entrepreneur dreaming that some day their 53 page (single-spaced) doc will be
downloaded by a wealthy investor who will find their idea so damn compelling that they’ll call frantically
asking for the ABA routing number so they can wire you a suitcase full of cash immediately.

Well, if your first move is a long winded template style business plan you purchased from the digital
equivalent of K-mart, chances are you’re fishing with the Rocket Fishing Rod. We hate to play dream
crusher, but you aren’t on a TV commercial, and these ponds aren’t stocked with starving fish.

Sexy Materials Get Noticed

One thing that book publishers know is that in order to convert a browser into a customer, you must first
capture their attention at the shelf. Don’t fall into the trap of thinking that just because your business has
sound financials and a good product that investors will plow through a long boring document and
uncover the genius inside.

An investor’s belief in your ability and your concept’s strength starts with the very first time they lay eyes
on your business materials. Seriously, how is one to believe that your business will inspire consumers if
your materials look like like they were pulled together on a Commodore 64?
Talking Up Your Awesome New Product

One surefire way to lose your audience is to jump right into talking about your amazing product. Yep,
without the proper context your long winded rant about the crucial need for a rapid charge system for a
14.4 volt lithium ion battery is going to fall on deaf ears.

Chances are the person you are speed pitching isn’t the target consumer. Think it through, if most
investors aren’t currently feeling the exact itch your product scratches, you need a different approach.

Talk About Solving a Real Problem

Instead of talking about your solution, start by explaining the consumer’s needs. While it’s essential that
you bring the investor to a point where they understand your product, understanding the buyer’s needs
is more important. Try telling a story about a real person who needs your solution. Take the audience to
a place where they can see the world through that person’s eyes. Help them feel that customer’s pain.

Talk up the need for big holes first and then everyone will want to hear all about your six-ton super drill.

Showing Off A Feature Bloated Demo

Okay adrenaline junkies, here is your big chance to see if you can get lucky with a live demo. Chances
are if you’ve made it this far, you’re excited, so geeked up that you’ll probably veer off down a path that
nobody else wants to go where you’ll leave the listener confused and dizzy..

We call this the tilt-a-whirl demo… a dizzying array of irrelevant features and functions. Don’t worry,
everything that plugs in will usually crash anyway, so be sure to have an audible up your sleeve.

Weave a Memorable Story Into The Demo

While your product demo is important, how you get the audience to that point is often the true
difference-maker. So it’s up to you to take investors on a journey into the life of your consumer and
explain how exactly they would use your solution. Help us feel their pain.

Let us experience their joy when you save the day and chop the big bad wolf in half with an axe. And
don’t get distracted by all the pretty things to talk about (or look at) along the way, just get to the payoff
in a clear and concise manner.

Touting Top-Down Market Data

Search is a multi-billion dollar market, so you conservatively project to capture a measly .001% of the
search market and make tens of millions per year? Sounds pretty reasonable…if there is a multi-billion
dollar market then there has to be some room for a niche player to squeeze out a little of market share,
right? Wrong.

Make sure your assumptions aren’t wildly off base either, or you’ll be hard-pressed to last long enough in
a pitch to actually get the opportunity to defend them.

Build a Bottoms-Up Business Model

When you talk about the size of the market, and how you plan to capture market share, start at the
ground floor with your team and work your way up. How many consumers need what you have right
now? Are within range for your team to contact and have the budget to buy? Assuming you can
convince a percentage of those truly addressable consumers to pull out their wallets, what kind of
growth can you realistically project? Tie it back to your sales team’s individual contributions if possible.

Your Business Has Users, But No Revenue

“No margin? We’ll make it up in volume!” Who could ever make that mistake again? Admittedly there
are still a number of ventures that don’t have a real revenue model, but are media darlings. Don’t be
fooled, the media also loves a good train wreck.

Are you able to demonstrate that there is a thirsty crowd willing to pay for what you are offering? Yep,
we said pay. Or are you living a K-Fed fantasy?
Show a Clear Economic Model
Okay, this is important. If it takes a complex chart and excel to explain how you make money, you’ve
missed the mark. We love to see a simple unit economic model for each stage of the business. Oh,
don’t be afraid to show year to year percent changes in costs, revenues, and profit (loss) so we can get
a handle on how you see things changing over time. Are your prices realistic, or based on a hunch?

Bonus points if your data is based on actual sales…

You Disappear In a Sea of Sameness
“But my idea is groundbreaking.” You should think this way, it’s your baby. Your belief in your concept is
what gets you out of bed in the morning. Unfortunately, the odds are that somebody is already working
on something similar to you. And guess what, that competition probably has a nice head start.

Psst, you can develop the best, most innovative product or service, but if nobody knows about it nor is
inspired to give it a try, then you’re just swimming around aimlessly in crowded waters.

Bottom line: if your brand isn’t differentiating and motivating, it’s game over.
There Can Only Be One
If you’re going to inspire consumers to buy your product, you have to nail your customer-facing brand.

Is it compelling? Does it stand out? Does it resonate with your desirable target? Be able to confidently
describe how you can connect with your consumer because your understanding of their emotional and
rational needs is unmatched. No one said pimpin’ was easy. It’s a competitive game. So step yours up
and show investors that you know how to bring your brand to life in a relevant and inspiring way.

We Have No Serious Competitors

Our offering is so revolutionary, that there is no “real” competition. Really? Okay, if you solve a serious
problem, then you have competition.

If you don’t solve a serious problem, then consumer inertia (an object at rest tends to stay at rest) is
going to be a formidable foe. While you should have a solid plan to out maneuver your competitors, to
assume you have none is flat out foolish. That’s when someone will emerge from the shadows to show
you how the game is really played.

Out Think & Out Execute The Competition

The game plan that you lay out should inform investors that you not only understand your strengths, but
you can see your opponents weaknesses and have some ideas how to exploit them.

From understanding the needs of the consumer you should be able to work backwards and position
your business to dominate the competition. In a competitive arena, devising a clever strategy is only one
half of the equation. Successful start ups out execute others by accomplishing more with less.

A Really Uninviting Marketing Plan

“Our product is so good that consumers will find us. They’ll be searching the internet day and night for
us. All we really have to do is hang up a sign and they’ll come running.” Seriously?

Chances are consumers have no idea what you offer, and their first reaction will likely be suspicion,
doubt, and fear. Before you can motivate someone to buy, it’s critical you take the proper steps to
excite and educate your target consumer on the front end.
Grow Your Brand With The Right Fertilizer

If there are consumers that need what you’ve got, then you should be able to get some early adopters
to jump on board and champion your cause. Even a small group of early adopters can go a long, long
way towards building out an army of virtual sales reps who leverage their independent voice and
supreme credibility to champion your solution to the masses.

First rule of marketing Fight Club? Recognize that your consumer is in charge. Authentic brands earn
respect, they don’t purchase it.
You’re Going Into Battle… All Alone

When you look in the mirror you see a one man army ready to take on the entire universe. But there’s
one small problem. You work alone and your team consists of nothing more than your hosting provider
and your cat named Boba Fett. Investors look for businesses with strong leaders. If you’re really a
“leader” and nobody’s behind you, than maybe you’re just out for a walk (in the wrong direction).
Give Your Dream Team Some Exposure
Ordinarily name-dropping is seen as “trying too hard”. However, if you have some impressive individuals
on your roster, don’t be afraid to show them off to investors. While conversations about capital are best
kept in a small circle, meeting the dream team is a great way to showcase your company.

If you don’t have all the roster spots filled, you should do some homework and line up a few more all
stars to come on board as the company scales up. Go out and secure the best of the best at every
position on the team. This includes key customers, strategic partners, and expert advisors.

Needing Cash Yesterday (do you validate parking?)

Don’t assume that raising capital is like a pit stop where you can re-fuel your balance sheet in less than
three seconds. Investors never like to be rushed, and telling them that you’re in a position where you
can’t make payroll on the first date isn’t usually a confidence builder.

Try to balance off your desire to get back in the race with the cautious nature of the person being asked
to pay for the race car. They have a right to make sure you know what you are doing, and that the race
is one worth entering.

Reasonable Timelines For Moving Forward

Want to build momentum? Surface a timeline that shows you’ve been progressing and hitting a series
of milestones that have created exponential growth in the value of your business. Then propose the
timeline that your financing would like to move along and see if that might fit within the timeframe for
the investors.

Enthusiasm is great. Hastiness is not. Take a breath and make sure you’re building out a high level
roadmap to explain not only each phase and milestone, but also the timeline and budget requirements.

Stretching The Truth (and then some)

There’s nothing more of a turn off to investors than entrepreneurs who spin and spin until they’ve
created their own web of untruths and inconsistencies. Being pitched over and over has it’s advantages.
It gives investors an extremely high bullshit radar.

Listen up, the fundraising process is built on trust. So it’s probably not wise to begin the courting process
by throwing out wild over-exaggerations and clearly inaccurate data.

Honesty Isn’t The Best Policy… It’s The Only

We know, it seems like the most “master of the obvious” part of the pitch. But if that’s the case, why do
so many entrepreneurs fail this part of the exam? Investors see and hear success-oriented pitches and
financial models all day long. Make sure you stand out in a good way.

Trust is earned by being open and honest, not by tossing out delirious valuations. It’s understandable to
have passion and enthusiasm for your concept. But when selling your vision, keep your hype under
control. If you are asked a question that you don’t know the answer to, it’s okay to say, “I don’t know.”

Not Being Prepared = Prepared To Fail

“We haven’t really been thinking about outside investors just yet, so I’m going to need some time to pull
a few documents together.” (insert three weeks here). You absolutely never know when or where the
right strategic partner or capital investor may cross your path.

You need to be ready for anything. Who knows…maybe a little dribbler down the baseline could make
or break your entire career, and cost your team a World Series title. (Sorry Red Sox fans)

Make The Most Of Your Opportunity

You’ve worked too hard on your concept to just watch it slowly flame out. Get your materials into a fully
functional state right away, so you’re truly “investor ready.” You’ll want to make sure to leave the
structure open and flexible as your documents are likely going to change time and time again.

Execute the brilliant basics first; a good overview presentation (30 min), a basic demo (live or video), and
very basic financial model. A strong pitch is your best move at accelerating investor confidence. If you’re
fortunate to get this far, failure is not an option (don’t be pitchy, dawg). Time to step up to the mic.
Additional Resources & Inspiring Links
Breaking Through the Broken (A North Whitepaper)
North Venture Partners
Other goodies: (funny stuff)
Customer Development (Eric Ries/Steve Blank)
Seth’s blog (Seth Godin Blog)
Futuristic Play (Andrew Chen Blog) 1729 Telegraph Ave.
Oakland, CA 94612
(510) 465-0800

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