Start With a Strong Team. (Or Not at All)
Picture a meeting room with a lot of windows, early evening, early Spring, the Oregon landscape darkening outside. Twenty or so angel investors (me included) sit on tables arranged like a big U, with a table in the middle for a projector, and a screen in front.
An entrepreneur has just finished his pitch. He’s a man about 50, clearly smart, articulate, and knowledgeable. He’s proposing something he’s done before, but with a new angle. He did a good job on the pitch and the business looks like it has potential. But that was before the question and answer period after the pitch. As he answers questions, he’s been cheated before, twice; people have stolen his ideas. He’s a man who’s been right repeatedly, and wronged repeatedly. He’s a loner.
Now, as he leaves the room, carrying his laptop and props awkwardly, when the door closes behind him, the room sits in silence.
One voice breaks the silence:
“Okay, is there anybody here who wants to join him. Raise your hand.”
There’s laughter, some remarks, some chuckling … but no hands are raised. We go on to the next pitch.
Startups are a team sport. Investors want teams. I liked this from Steve Blank: The Startup Team, explaining why the team is so important:
“In a perfect world you build your vision and your customers would run to buy your first product exactly as you spec’d and built it. We now know that this ‘build it and they will come” is a prayer rather than a business strategy. In reality, a startup is a temporary organization designed to search for a repeatable and scalable business model. This means the brilliant idea you started with will change as you iterate and pivot your business model until you find product/market fit.”
He concludes that with the obvious: so that’s why you need the team, not just the idea, not just the market, not just the plan. You need a combination of skills.
What skills? Well it depends on the industry you’re in, but generally great technology skills (hacking/hardware/science) great hustling skills (to search for the business model, customers and market,) great user facing design (if you’re a web/mobile app,) and by having long term vision and product sense. Most people are good at one or maybe two of these, but it’s extremely rare to find someone who can wear all the hats.
It’s this combination of skills is why most startups are founded by a team, not just one person.
Obviously my story above – a true story – is just one example. And of course there are exceptions to this like there are for every rule. But still, questionable teams don’t attract investors. Exceptional teams do.
All opinions expressed are those of the author, and do not necessarily represent those of Gust.
Written by Tim Berry
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Take your choice (these are both real, honest-to-God pitches, and I’ve got the originals in my possession):
CluelessCo is an internet startup company seeking $2 million of equity financing to fund our company for at least one year. CluelessCo will become the main consumer outlet for the internet, digital cable and satellite TV, and cell phones and PDAs.
The most useful meetings with an investor are ones where going in everyone understands that there may actually be a rational reason for the investor to be interested. So even if my own mother asked me to meet with you, and you were pitching me a biotech opportunity for a $10 million investment at a $90 million valuation, I might
How will you make money (and no, advertising is not the answer)?
Who, specifically, is your first customer? Second? Third?
What is your contingency plan for when this seed round is exhausted, and you are unable to raise any more?
What is your API/platform/partnership strategy?
How are you going to sell the company, and to whom, within six years?
I’ve written on this topic previously, including David S. Rose’s answer to Startups: What is the worst startup pitch ever?. While I’ve never laughed outright during a pitch, I’ve certainly had quite a few occasions where I had to work hard not to wince. The problems with bad pitches tend to fall into the following major categories: