How to Pitch to Investors
Keeping it short and simple
Over the past two years, I have listened to over five hundred entrepreneurs try to pitch me their startup. Most entrepreneurs come into the meetings, talk for twenty minutes about their product in a very complex manner, and then leave with minimal interest from my end. Therefore, I decided to write this blog to share my perspective on the how founders should pitch their company.
When you are pitching, keep it short and simple. I recommend that you should have only two types of pitches: a 30 second pitch and a two-minute pitch. That’s it! After that, let the person sitting across from you ask all the questions they want (more questions, means more interest).
So, you might be asking, 30 seconds and two minutes only?! How can I fit all of what my company does in that short amount of time? Well, below I have mentioned the sentences that you should include when pitching to your company.
One thing to note: Bootstrap your company as long as you can, do not ask for investor money until you really need it to scale, that is when you will get proper interest from investors.
The Thirty Second Pitch
Thirty-second pitches are to be used during conferences, events, or elevator rides. It should be your first step to getting into a fruitful conversation or scheduling a future meeting with an investor.
Sentence #1: In a simple and straight forward manner, tell us what your company does. It should be so simple, that your grandmother could understand in one sentence. Assume that the person in front of you, has no background knowledge on what you are talking about. Let me give you an example, if I was to explain Facebook in one sentence I would say: “Facebook is a platform that helps you connect with your friends online and share content with them.” I would not go into all the features that Facebook has or any of their new products. This explanation is very easy to understand, and it will get the investor you interested to learn more.
Sentence #2: How big is the market you are in? This is a quick Google Search and it can tell your listener the potential of your company. However, be realistic! If you are operating in a small country in the Middle East and this is your first fundraise, do not talk about the US market size that you are not planning to expand within the next 18 months, it’s not relevant.
Sentence #3: How much traction do you have? Investors really care about what you have done so far and if you have proven your product market fit; so, make sure you talk about it. If you still did not go to market, tell the investor the most important milestones you have achieved so far.
That is all that you should include in your thirty second pitch. It is comprehendible and quick; you did not bore the person listening and they are now willing to ask you questions to learn more about your product. Also, they could potentially ask for a future meeting.
The Two Minute Pitch
The two-minute pitch is the story you will tell investors in the beginning of every meeting.
Begin with the 30 second pitch above (sentences #1,2, and 3) and then talk about the following:
Sentence #4: Explain how you are unique. Investors probably sat with a company that is similar to you in the past, so tell them in a clear manner how you are different (use the grandmother test again). If an investor never heard of such a company in past, make sure you tell them how your unique value proposition is already getting real interest. For example, the Airbnb founders told investors that they rented out their house to three guest and charged them $80 a night to get some extra cash when they were unemployed. No investor ever heard of such a crazy idea before the Airbnb guys showed up on their doorstep, but they were able to prove that their unique proposition was in demand and that people were willing to rent out strangers’ extra home space.
Sentence #5: How do you make money? Do not talk about future potential revenue streams, just talk about your revenue streams today. Even if it is a just small income stream, just mention it and move on. Do not try to hide anything. Do not talk about future revenue streams, because there is no guarantee that it will work.
Sentence #6: Team. In few words talk about your team. Elaborate on who the founders are and if they have a technical background or not, how the founders met, and how big is your team . However, do not go on and on about how impressive your team’s background is and that you graduated from a really good university with straight A’s. Investors only really care about your background if you are a serial entrepreneur or an ex Amazon, Uber, Google, etc. employee.
Side note: do not have a cofounder who you met yesterday, cofounders should be really close before starting a startup.
Sentence #7: Your big ask. In this sentence you ask the investor exactly what you want; whether it is a capital, an introduction, or bit of support. Just make sure that you have a justifiable reason for anything you are asking for. So, if you are fundraising, know all your numbers and how you came up with this round size and valuation. If you want an introduction to a big corporate, be ready to answer why you need this specific corporate and how the corporate could benefit from this introduction.
Those first few minutes are going to dictate the rest of the meeting. It will either get an investor interested or not. Hence, it should not only be short, but it should also be very simple and straightforward. Grandma should be able to repeat it perfectly to all of her friends!
