đ§ Deep dive â 5 pitching mindset shifts (and 5 mistakes to avoid)
By avoiding common mistakes and thinking like the founder of a fundable startup, you can dramatically increase your chances of getting capital.
Hey friend đ
Last week, I had the privilege of speaking to portfolio companies in the Valley Ventures Accelerator about pitching to investors.
Rather than the usual clichĂ© of âhere are the 10 slides you needâ or the minutiae of vehicles and cap tables, I chose to talk about the mindset of pitching.
I thought youâd enjoy the key takeaways.
Letâs dive deep đ
5 mindset shifts to adopt
The most important part of a winning pitch isnât the slides or the script.
Itâs one square foot of real estate that sits atop your neck.
What separates founders who successfully raise a round from those who donât is how well they understand the process, how realistic their expectations are, and how well they grok how the people on other side of the table hear what theyâre saying.
Here are five ways to change how you think about fundraising:
Shift 1: Shark Tank isnât real.
When you pitch for investment, youâre actually not pitching for investment.
Youâre pitching for another meeting.
The idea isnât to give a pitch and leave with a check â or even with a commitment that youâll get a check. The first pitch is to get sufficient interest and to prove you have sufficient credibility to warrant the win, which is:
âLetâs talk more.â
In subsequent meetings, youâll meet more people, talk in more detail, and, if itâs a good fit for all involved, begin the due diligence process â which is roughly equivalent to having your prospective mother-in-law rifle through your underwear drawer looking for any possible reason to call off the wedding.
But when you pitch, itâs just a first date.
And both of should define success the same way: knowing by the end of the first date whether you want a second one.
Shift 2: Fundraising is a process.
And a long, arduous process to boot!
To start with, it takes longer than you think:
The average Seed takes 3-6 months from start to close, and it only goes up from there: Series A takes 6-9 months.
In fact, one of the reasons investors want startups with more than one founder is because fundraising alone often becomes a full-time job for one of them, and someone has to, yâknow, run the company.
For that Seed round, youâll be pitching 50+ times. Series A? 100+.
Youâll be networking with hundreds of potential investors, prospecting and pursuing dozens of them at a time.
Most serious fundraisers even have a CRM and a defined process.
Fundraising is a skill that founders have to develop. It takes practice, and it doesnât happen overnight.
So, I guessâŠ. plan your runway accordingly. đ
Shift 3: Pitch performance matters less than you think.
Itâs not that performance doesnât matter; it absolutely does.
But itâs nowhere near the top of the list.
Honestly, most of the time, youâre not even pitching in front of a crowd â but to a few people across the table from you.
Heck, your first âpitchâ is most likely not presenting to a group, but talking with one person, standing casually somewhere, on the edge of a crowd, drink in hand.
And even in a âformalâ pitch, youâre likely to get interrupted with questions, and to need to bounce around in slides, and so forth.
Because of that, turning it into a performance can actually backfire. A really common mistake?
Call and response.
âShow of hands, how many of you have everâŠ?â
Ick.
Youâre not doing a set at the Improv. It feels sus, it can backfire, and it ultimately doesnât matter if the people in the room are your customers â thatâs not why youâre talking to investors.
These kinds of performance tricks just donât work in an investment pitch.
In fact, want a good rule of thumb?
Donât say anything in your pitch you wouldnât say sitting across from one person at a coffee shop.
Shift 4: No one funds the B team.
âAâ teams with âBâ ideas are preferably to âBâ teams with âAâ ideas.
Itâs hardly an original thought, but itâs worth internalising:
A strong team will pivot that âBâ idea into a successful business, while a weak team will flub the âAâ idea into a costly failure.
Team begins with the founders:
Do you have relevant experience or expertise in this market?
Do you have a successful track record as founders?
Do you have an unfair advantage?
Less obviously, though, the team investors look at is much more than founders and co-founders.
Founders have help along the way â formal and informal advisors, board members, other investors, etc. If serious people are taking you seriously, weâre more likely to, as well.
In fact⊠startups with a formal advisory board are 29% more likely to succeed.
Eventually, itâs even more than founders and advisors â itâs your ability to attract and retain talent. You may not have a rockstar CTO as a co-founder, but were you able to deploy your reality distortion field hire one?
Holistically, the idea of team is simple: why are you the right people to pull this off?
Shift 5: Investors have a business model, too.
As you likely know, youâre not the hero in the story.
Telling your customers how awesome you are doesnât make them buy. What does is telling them how awesome theyâll be by using you.
Ditto for investors.
This is where you have to understand their business model.
Awesome idea + Ability to Scale â Success
In the early days, investorsâ business model is dependent on you reaching the next round of funding â not a distant exit!
So donât spend so much time on your awesome idea that you neglect to mention:
how much money you need;
what exactly it will be used for; and
how that money will help reach key milestones.
This is a two-way street.
They have cash, but it doesnât do them any good sitting idly in a bank account. You have a business, but it doesnât get anywhere without some seed.
Investors arenât doing you a favour. Nor you them.
5 mistakes to avoid
Honestly, making a list of only 5 mistakes was much harder to curate!
Itâs not because there are just so many mistakes I see founders make â though there are enough that I did a whole YouTube video about them â but itâs because many mistakes are dependent on stage and strategy.
Also, because bitching is more fun. đ
But⊠here are 5 mistakes I see every week:
Mistake 1: Breaking with tradition.
Pitches are stories, stories have structure, and structure creates predictability.
Potential investors hear a lot of pitches â hundreds, maybe thousands.
They all start to sound alike, and thatâs where you might think itâs best to stand out; be different.
But itâs actually the time to blend in.
As I said above, the goal of a pitch isnât to get a check â itâs to get a second meeting. Ultimately, investors trying to answer a single question: is this worth further discussion?
To that end, the audience is trying to get information as quickly as possible, so that we can digest, evaluate, and compare.
For that efficiency to work, the âheavy liftingâ is actually done by the pitch format: it creates expectations and allows for shorthand.
When you break that convention, you increase the cognitive burden on the audience, which means we surprisingly hear less of what youâre saying.
Frankly, we donât applaud your creativity here. We find it frustrating.
And we just lose interest.
Mistake 2: No compelling opportunity.
By definition, a company is âventure-backableâ if itâs scalable. Itâs only scalable if itâs using potential economies of scale to solve a problem in a big (and growing) market.
But a âbig marketâ doesnât just mean there are a lot of people in it.
There also has to be desirability:
Lots of potential customers; AND
A big, unsolved (or poorly solved) problem; AND
A scalable, lovable, truly differentiated product that solves it; AND
An eagerness to pay for it.
When looking at your addressable market, donât just consider the people and problem. Consider their eagerness to solve it.
A pitch must include the size of the market, the severity of the pain, the urgency to solve it, and the evidence for why this is the right solution to it.
Thatâs what makes an opportunity compelling.
Mistake 3: You have no competition.
There are few things more cringeworthy than a founder saying they have no competition.
Because youâre confessing one of three things:
You donât know the market well enough to understand who else is trying to solve this problem;
You havenât found a problem important or urgent enough for anyone to solve for money; or
You donât understand the problem in the context of your customers.
The first two are obvious. Letâs zero in on that third one.
If youâre solving a problem worth solving â one of those problems that causes pain severe and urgent enough to warrant solving â then the customer must be doing something to try to address it.
If the customer is doing nothing to even try to make the situation better, then how could it possibly be important enough to spend time and money for you solve it for them?
So letâs assume they are doing something.
Whatever that something isâŠÂ itâs competition.
Even if itâs not a competitor.
Founders often define âcompetitorâ so narrowly as to remove any value: theyâre only the competition if theyâre a product roughly the same as ours that is roughly as good as ours.
But even if the alternative is neither a product (or even a product of significantly lower quality), itâs still competition.
Competition â competitors.
Mistake 4: Lightweight go-to-market strategy.
Go to market is the intersection of three things:
An early adopter that gets you into the market;
An efficient means of getting a message to them; and
A business model that makes it pencil out.
The biggest mistake founders make is to keep this high level: weâll run Instagram ads; weâll use influencers; weâll do network outreach; etc.
Itâs a magic wand, and magic wands are lazy. We hate them.
And you should, too.
Instead, use the âhowâ shovel â dig deeper by asking how. Donât stop until you get mired in detail only the experts care about.
After all, if you canât get to that level, how can we expect you to execute on it?
Mistake 5: Unclear value proposition.
Vagueness in your value prop is a solid predictor of failure.
As the founder of a fundable startup, you should be able to clearly articulate for whom you are creating value, what value you are creating, how you create that value, and why youâll be able to capture enough value in exchange to make this whole thing interesting.
But itâs not enough to just point in the direction of potential value.
Things like âfasterâ and âeasierâ are neither clear nor compelling value propositions. They are almost never sufficiently motivating to warrant switching to a new solution.
If you donât understand your customerâs experience well enough to articulate precisely where the pain is, you need to find out. Until you doâŠ
Do not pass GO. Do not collect $200.
To put it all togetherâŠ
Investors are looking for a credible theory of hugeness.
By avoiding common mistakes and thinking like the founder of a fundable startup, you can dramatically increase your chances of getting capital.
In this deep dive, you learned:
5 mindset shifts that increase your chances of success:
Shark Tank isnât real.
Fundraising is a process.
Pitch performance matters less than you think.
No one funds the B team.
Investors have a business model, too.
5 mistakes to avoid flubbing the pitch:
Breaking with tradition.
No compelling opportunity.
No competition.
Lightweight go-to-market strategy.
Unclear value proposition.
And thatâs it for now. Have a fantastic rest of your week!
âjdm
PS: if youâre the founder of a fundable startup, and if youâre located in the Sacramento area, weâre accepting applications for Cohort 2 of our Founder Mastermind. Check it out â