As a member of the Mighty Capital Product Executive-in-Residence program, I have had the incredible opportunity to see two pitches each week from early-stage startups for nearly a year now. I wanted to distill some of my observations about what founders and CEOs of early-stage startups can do to make a pitch extraordinary. This article isn’t a comprehensive overview of how to create a founder pitch. Instead, I’d like to spotlight a few high-value areas that are commonly left out or overlooked in product pitches.
The delivery really matters
While it is important to show proof points about your product, don’t forget that investors factor in your passion, drive, and determination when they consider whether your business will succeed in the long run. At the early stage, I’d argue that this is especially true, since the product is new, and traction could be early. Investors will be looking to see that you have what it takes to drive the product forward.
Some things to consider:
- Show that you are all-in on your company and your vision. If you don’t fully believe in it, or if you’re not fully committed to it, then the audience might doubt whether you’re going to be able to execute in the long run.
- Tell the story of why you started the company. A strong story helps connect your passion with your skills, and shows why you are qualified to run this business.
- Avoid second guessing yourself out loud, being self-deprecating, or understating the value of your product to be humble. You don’t have to oversell your startup, but try to keep the confidence steady.
Remember that investors aren’t only investing in the product, they are investing in the founder. As a founder, you have to show everyone that you have what it takes to propel your product forward despite massive obstacles. If in the act of pitching you sound unconfident, irresolute, or too aloof, then investors might wonder if you’re up to tackling the challenges of your business going forward.
Glossing over uncomfortable details
It might seem tempting to focus only on the bright spots of your business and avoid talking about the less than ideal metrics that might spook investors. But hiding the challenges you face, or omitting the areas where you haven’t quite figured things out, or trying to cover up failures, is a dangerous strategy.
First off, spotting omitted failures is easier than you might think. If your company has super strong user growth, but you are struggling to monetize, most investors will ask about revenue in the Q&A session. If the answer hints at some weakness in this area of your business, this could make you look less trustworthy as an investment. It might beg the question: “If this was hidden, what other disappointing details are we not seeing?”
My advice is to address challenges head-on in your pitch. It’s nearly impossible to have everything go perfectly as planned in early-stage startups. What is unique is to show that you have the awareness to identify the challenges and that you’re proactive at addressing them. You’ll show them that you can learn and adapt to challenges, which is a great way to instill confidence in the future growth of your company.
Also, addressing them in a pitch (as opposed to in an answer to a question) will also give you an opportunity to show upside: If you lack revenue, for example, you can speak to the proof points that show you’re on the road to revenue. If you had to go through a strategic pivot, explain how your learnings led to a better strategy than the one you had previously.
Including too much industry jargon or technical complexity
One mistake I see founders make is that they try to demonstrate authority by being super technical. Unless you are sure that your audience is highly specialized, I’d lean toward the assumption that the audience doesn’t know the industry dynamics as well as you do. If the investors can’t follow along easily, leave out the complex technical slides, and stick to a story that is intuitive and compelling.
Here’s why: An investor pitch is not an opportunity to wow investors with the minutiae and complexity of your domain. The main goal is to make sure your product resonates, and that your plan to scale it is viable. If anyone is confused, it will cloud that product vision, and ultimately make the investment decision a lot more difficult.
This breaks down in two ways. First, make sure you aren’t relying on industry jargon (especially acronyms). Again, this might look authoritative, but technical charts with tons of acronyms can often be hard to process in several seconds and can distract from the key selling points of your company.
Second, make sure the dynamics of your industry are laid out clearly. This is especially true if you have a B2B product that seeks to innovate within a specific industry. Your product needs to deliver unique value within the industry ecosystem, and that value might be unclear if investors don’t understand how your startup interfaces with key players in that ecosystem.
Offering up excessive product detail
A good pitch should easily convey what your product is, how it’s used, who uses it, and why it’s innovative, and the best pitches can articulate this in 1-2 sentences. A good pitch can fall flat if the pitcher spends a lot of time going through the various examples of their product — and a litany of cool features — but doesn’t have a succinct way to define what their product is. Figure out the core innovation of your product, and find a way to articulate this simply and powerfully.
The other problem with excessive product detail is that it eats up precious time that could be spent talking about traction or revenue. At the end of the day, investors want to see ROI and are less interested in each and every feature of the product (even if the features are really awesome). If the product detail gets in the way of the traction/revenue slides, then that will undoubtedly detract from the viability of your startup as an investment. Which leads me to my next point…
Show traction, have a bold vision, and a clear exit strategy
Many pitches focus 90% of the slides on the problem, solution, market, and product details, and leave traction, revenue, and exit strategy to a quick couple of slides at the very end. This is a big mistake. Investors want to see that you are planning to scale your business and that you have the ambition to deliver massive returns. If you don’t talk about the endgame, investors might wonder what they have to gain from investing in your startup.
Spend time creating a detailed picture of where you are traction-wise (especially when it comes to revenue), and create a compelling story for how your current traction will translate into revenue in 1 year, and 5 years from now. (If you are pre-revenue, talk about how your early customer pilot, or learnings, will validate your revenue strategy in the long run.) Along with this, paint a qualitative vision for how your product will grow, and how your bold vision will win over the market and your customers in the long run.
After this, be as clear as possible about how you plan to make an exit. Do you plan to exit via M&A? If so, what about your company would make your startup a viable acquisition? If you are thinking about an IPO, explain how you plan to get there. To quantify your exit potential, multiply your projected revenue by your industry multiple. A 2-3 year projected revenue is enough for an M&A; a 5-7 year projection is ideal for an IPO (and also works for an M&A).
Wrapping Up
To build great investor pitches, you need to convince investors that you have an awesome team that is capable of actualizing your vision, an innovative product with great traction, and a business with great exit potential. Along the way, don’t forget to show passion and confidence, address key challenges head-on, and make sure that you avoid overly technical slides or excessive detail about your product. If you follow these guidelines for your pitches, you’ll be on your way to winning over investors and closing funding rounds.
If you’re a founder and you’d feedback on your pitches – or if you’re interested in pitching in a Mighty Capital Product Executive-In-Residence session – feel free to reach out to me at [email protected] I’m happy to help out in any way I can!