Warning: Half a Truth is Three Times a Lie
Entrepreneurs: think of yourself in a pitch situation. You’re talking to a small collection of people you don’t know. They’re taking notes. You’re talking and showing slides from your pitch deck.
I think you assume that on any subject you cover, there is at least one person sitting quietly watching you who knows a whole lot about that subject. Which means that a single half truth can sink an entire pitch.
I’ve seen this happen far too often. After the pitch is done, the pitchers exit, one of the investors still in the room points out a half truth. For example, somebody who knows about physical product distribution points out that the plan to get into channels ignores the power of the key distributors who feed the retail chains. For example, the conversion rate projection is way too high, or pay-per-click estimate way too low. For example, marketing costs as percent of revenue are about a fifth of the industry average. For example, competitive comparisons that have bad information in them.
What reminded me of this today was this piece on buying friends in Facebook. How do you look if you hinge one of your pitch points on success in Facebook against the background of spreading knowledge about way to manufacture that particular statistic. Which is also true of Twitter followers, with different techniques and even software packages to increase the number.
So how do you handle interruptions, and specific questions, when you’re pitching? What happens when somebody challenges you on a specific point? My suggestion is: Whatever you do, don’t pretend you know when you’re guessing. Ideally, break your assumptions down into their component pieces, explain where they came from, and be open to suggestions at that moment.
The worst option is to hide a guess with bravado and the face of certainty. Reasonable doubts are okay, assumptions are even better.
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: