Category Archives: Power Pitches

Power Pitches

How important is a video pitch to investors for an early stage start-up?

There is no one thing (aside from integrity) that is an absolute, and what you need to have when fundraising for a startup will depend to some extent on how you are managing your funding process.  A good list of just about everything you could possibly want to have in your arsenal is listed in the answer to What materials or software should I use to pitch a VC?

If you are going around personally to talk to potential high net worth investor to whom you have an introduction, you probably don’t need a video. On the other hand, if your initial contact with a potential investor is online, then (at least in the US, although I assume elsewhere as well) a video can be very helpful. In the context of an organized group of angel investors, it is even more important.

The reason for this is that despite all protestations to the contrary, angel investors to a large extent react on a somewhat intuitive basis, with their faith in the entrepreneur personally being one of the most important factors in their decision process. And whether it is true or not, most people will tell you that they believe they can tell much more about a person from watching them face to face, than they can purely from their writing.

So when reviewing 20, 50 or 100 submissions for funding during the screening process, I have found that it is incredibly helpful to be able to watch a quick (2-3 minute) video elevator pitch so that I can get an instant gut feel for the entrepreneur and the company. I’ll be looking for all those same clues that I’d be watching for during an in-person meeting.

*original post can be found on Quora @ : http://www.quora.com/David-S-Rose/answers *

Power Pitches

3 Essentials for Selling Your Marketing Plan to Investors

Somebody asked me in email what investors look for in the marketing portion of a business plan and/or business pitch. What works? What’s credible? What are investors looking for? 

Caveat: generalizations are dangerous. And I’m generalizing here from what I’ve seen in the three dozen or so pitches and plans I’m exposed to in a year, plus my discussions with other angel investors in my group, and investors I meet as fellow judges in business plan competitions. 

I see three essentials: 

1. The market-defining story

The market defining story explains the need, or want, or why-to-buy factor, defines the target customer, leads to credible market numbers, generates the marketing messages, and communicates a market to investors, so that they can visualize it, and sense it’s potential, in their own imagination. I have a commented example here. It’s a story that makes product-market fit come alive. Investors don’t want to be force fed large numbers for potential market; they want to be able to imagine the numbers for themselves.  

2. Believable  paths, triggers, and channels

If and only if that potential market seems to come alive, it needs credible plans to move from ideas and messages into media and concrete marketing programs with some backbone and metrics to them.

Nobody buys the hand waving at “online marketing” and “we’re going to be big in social media” anymore. For online marketing, as a common example, you should be able to talk realistically about your search engine budget, pay-per-click budget, social media experts on staff or available as contractors and budgeted into the plan, targets for page views, unique visitors, and conversions. You should be able to explain your Facebook, Twitter, and/or LinkedIn, and/or Pinterest or other social media plans in terms of numbers such as follows and followers, tweets and retweets, topics, engagements, likes, and so forth. 

For physical products supposedly moving through channels, you need to show that you understand the margins through channels, the difficulty in getting through distributors with new products if that’s relevant, the process for getting accepted, and what it takes in push or pull marketing to get sell-through in channels. 

For business-to-business and direct selling, be able to show that you understand the expenses involved and the sales cycle selling to large organizations. 

Not all of these details need to go into the pitch with slides; but they should be in your plan, and you should be able to pull them up in an instant when asked, during a pitch, for more detail. 

3. Defensibility

Investors will be thinking, as they watch your pitch or read your plan, about how easily some future competitor can jump into your marketing plans, co-opt your tag lines, jump on your topics, pre-empt your channels, and use your own marketing against you. Don’t trust trademark or copyright to defend you by themselves. A brilliant marketing plan that others can easily jump on isn’t as interesting as a good marketing plan that’s exclusive and defensible. 

Conclusion: These are necessary but not sufficient conditions. Looking good on all three doesn’t guarantee anything, but looking less than good on any one of them is going to hurt your prospects to attract investors. 

Tim Berry , Founder, Palo Alto Software
August 29th, 2012 0

Power Pitches

True Story: We Didn’t Buy The Victim Pitch

Most of us know not to complain about the previous employer during a job interview. Fair or not, it just doesn’t work, right? The new job never want to hire somebody with that kind of chip on a shoulder.

More so with investor pitches.

I was at one once, as an investor member of a local angel investment group, when this happened. The pitch had been intriguing, the product/market fit looked attractive, and the guy in charge seemed to know his stuff. The pitch went well. The general feeling in the room was positive. We wanted to hear more. 

But one of the post-pitch questions set him off. Why had it taken so long to get from A to B? He launched into a Job-like story of unscrupulous partners, unethical investors, and ineffective lawyers. When he was done, maybe two minutes later, the room settled into quiet. 

There were no more questions. And there was no more interest. 

The moral of the story is obvious: maybe you are a victim, maybe they did screw you, but if that’s the case, then get over it. Never take that up as a banner. Suffer that in silence and maybe your potential investors will discover that in due diligence. Let them find out. Don’t tell them. 

(Image: istockphoto.com)

Tim Berry , Founder, Palo Alto Software
June 26th, 2012 1

Power Pitches

Read ‘Painting with Numbers.’ Please.

If you’re doing investment pitches, you should read this book. If you’re doing a pitch I’m going to see, I want you to have read this book. And if you’re a startup CFO, finance lead, bean counter, or presentation slide deck preparer, then you should read this book. Painting with Numbers, by Randall Bolten. And it has a subtitle that exactly explains why I recommend it: 

Presenting Financials and Other Numbers So People Will Understand You. 

The bad news: it’s produced like a textbook, and laid out like a textbook, and priced like a textbook, $28.00 for the hard copy and $19.99 for the Kindle edition. 

The good news: 

  • It includes a good practical treatment of how to do it with spreadsheets and slide decks. It has lots of tips and lots of examples. 
  • It also includes some really important discussion of why terms and details matter. 

I’ve deal with people who think GAAP (generally accepted accounting principles) and terminology are nits that only nit pickers care about. Numbers are numbers, after all. But in the real world, when you get to business numbers, sales are not accounts receivable and revenue isn’t income and people who read financial projections need to know that an apple is an apple, and not an orange. 

Bolten does a really good job on why, what, and how to present numbers, just as in his subtitle, so people will understand you. And I think this topic matters. 

Tim Berry , Founder, Palo Alto Software
June 13th, 2012 1

Power Pitches

10 Things I Look for When Reading a Business Plan

It’s the end of May as I write this so I’ve just finished my annual April-May business plan marathon reading more than 100 business plans for my angel investment group and four different business plan contests. This seems like a good point to summarize here what I look for in a business plan. 

  1. Don’t push adjectives. Let me assign my own. This year for every plan that really looks like it might be disruptive or game changing I saw 20 or so that claimed to be. 
  2. Tell stories. A story tells market need way better than general market numbers. Write about problems you solve and who has them, how you solve them, and why you do it better than anybody else.  
  3. I want a forecast that starts with specifics like channels or traffic and conversions or segments and builds up. I hate the forecast that assets some huge market and takes a small percentage of it. It seems like every time I read “this is a $X-billion-dollar market” the surrounding discussion lacks depth and credibility. 
  4. I want unit economics. Often this is part of a good forecast. Tell me what it costs to produce one unit, what the channel pays for it (if channels are relevant) or what the buyer pays for it, what it costs to ship, and so on. 
  5. I want realistic expenses. Most plans are pretty good about estimating direct costs but bad about underlying expenses. You can’t have a $20 million sales estimate with 10 employees in the company and a few hundred thousand dollars of marketing expense. It just doesn’t happen. 
  6. Never write that you have no competition. Having no competition means one of two things: either your business sucks, or you haven’t done your homework and you don’t know your business. Even the most amazing disruptive game-changing plans have competition. If not now, then tomorrow. Who’s going to enter this market?  
  7. I want good positioning. Don’t try to please everybody. Start with a relatively narrow product-market fit and, if you can, move it gradually up to more markets and more segments. Explain in your plan which segment is first and why. Explain who you’re leaving out of your market and why. 
  8. I want to see basic numbers. I expect projected monthly income, balance, and cash flow for the next year and annual projections for the second and third year. And I want to see them, as in useful business charts, but I want to be able to see the numbers in detail too. 
  9. I want to see milestones: dates and deadlines. And progress made. What have you actually done in the recent past? Write about achievements. 
  10. By far the best validation of a plan is actual sales made already. People have written checks. Second best are letters from future customers promising future business. 
  11. (Bonus point) Don’t muck it up with too much science. It’s not a research plan, it’s a business plan. Summarize the science so I have some idea and then tell me about the business. 
  12. (Bonus point) Don’t let the document get in the way. I don’t want to think about formatting or editing, I want to read your stories and imagine your future. Keep it moving and keep my mind on the business, not the misspellings or repetitions. 
Tim Berry , Founder, Palo Alto Software
May 29th, 2012 2

Power Pitches

What do Investors Want? Maybe What the World Needs?

Try this: take a step back from your phone, your FaceBook, and your daily routine, clear your mind, and think about the large-scale institutions that need change. What markets to disrupt?

It’s going on three years since Fred Wilson of AVC did this excellent Google talk on disruption. What markets really need disruption? He said consumer finance, energy, education, and health care.

I’ve read more than 100 business plans in the last 8 weeks, and considerably more than half of them promised either “disruptive” or “game changing.” One or two of them might me.

I’d say there’s been movement in consumer finance over the last three years, and maybe in energy, but not much at all in education and health care. A lot of sound and fury, perhaps, but signifying nothing. Lots of online courses, especially for adult education. Lots of universities offer online courses, led by the likes of Harvard, M.I.T, and Stanford, including a lot of online institutions and new ideas like Kahn Academy and udemy. But not of this does much to change the basic model of one teacher and two or three dozen students in a classroom.

To me it seems like nobody’s dealt well with the problem of keeping younger kids engaged and learning by some other means than the traditional model. Or the validation and certification that comes from diplomas and lots of hours sitting in seats. Do you agree?

And then there’ s politics. In the U.S., at least, politics doesn’t work. Wherever you stand on the political spectrum, I bet you agree that our system is totally obsolete on fund raising, advertising, issues discussion, partisan politics, and the actual voting mechanisms themselves. Do you agree with the need for disruption there too — the business of politics, if not the core of politics and political parties. And the business of political discussion, and issues?

What is still true today, as it has been for a couple of generations, is that truly disrupting a market can mean a huge business win. For startups and whoever invests in those startups.

Tim Berry , Founder, Palo Alto Software
May 15th, 2012 1

Power Pitches

TED Talk 2007: David S. Rose on Pitching to VCs

It’s pretty amazing that the video is from five years ago and has been viewed something like 500,000 times.

Even though in the years since, I’ve done a lot more pitch coaching with a lot higher production value, it turns out that there is not much I would change in the content all these years later. Good luck with your fundraising.