31. The Pitch (David Brown)

The Full Ratchet Podcast DownloadNick Moran Angel List

David Brown joins Nick on The Full Ratchet to discuss The Pitch Deck, including:

  • David Brown The PitchWho is the target audience for the Pitch?
  • Why is it preferred to a business plan?
  • When is the right time for a startup to begin pitching for professional, seed capital?
  • What are the basic elements of the pitch for an investor to get a sense for the startup?
  • What are the most common issues that you see with in a pitch that can immediately disqualify a startup for investment consideration?
  • What are some of the elements that you’ve seen over the years that make for an outstanding pitch?
  • If you were talking to entrepreneurs creating a deck or investors reviewing a deck, what would be your key advice?

Itunes:  http://bit.ly/1AaVHFc

Direct-audio:  http://bit.ly/1DF7BIm

SoundCloud: http://bit.ly/1eUVMpu

Guest Links:

Key Takeaways:


1- The Audience


While Investors are the obvious audience for the pitch, David called attention to the fact that The Pitch goes well beyond just investors.  Going through the thought process of the pitch elements is primarily valuable for the founders, themselves.  This forces them to make choices and get focus around the core value proposition, the specific target market, the problem being solved, etc.  It also becomes the vision and messaging that is communicated again and again to customers, to current and prospective employees, to partners and even to friends and family members.  Ultimately, the key elements of the pitch become embedded in the psyche of the leadership and communicated in a clear way to all stakeholders.  
And David’s follow-up point on the audience related to their ability to process what the startup is saying.  As discussed, the investors are often not the target market for the startup and may know very little about the market.  It is the founder’s responsibility to deliver the key message in a focused, concise and understandable way.


2- Progress


David talked about progress as a key indicator that they look for when evaluating startups.  So, not progress in the absolute sense but rather in a relative sense.  He wants to see how much momentum and traction has been generated in the recent past as opposed to a great idea that’s been discussed and brainstormed for the past five years but not executed on.  I think this point relates well to what Steve Blank discussed in episode 28, the Investment Readiness Level.  It is not about the value of a startup at a snapshot in time but rather the delta, learnings and evolution of the business over time at the early stages.


3- The Exit


We talked about how some investors prefer to see an Exit strategy, while others don’t, and if this is a necessary component of the pitch deck.  In David’s opinion it’s not and he actually prefers not to see it at all.  From his own startup experience, he has never had an exit strategy.  His focus was on changing the world and addressing a major problem, not how much money he’d make when he exits.  We’ve addressed this before and have maybe provided some conflicting guidance.  I have talked about how I do like to see a slide on exit strategy b/c it shows me, as the investor, what the multiples are and general M&A activity in the startup’s market and a directional estimate of the potential return I can expect.  But David brings up a great point that this may lead the investor to think that the startup is more focused on the money than the mission.  It seems that a startup must first ask theirself who the audience is for their presentation.  That answer may indicate whether to include it or not.  But another smart approach that I’ve seen a couple founders use during their presentation is to include a slide on Exit Strategy, with a caveat…  One founder said, I’ve included this slide on exists because I was asked to include it. I understand it’s importance to investors, but would rather not spend a lot of time on it.  I prefer to spend my time building the business, not planning to sell it.  Now I got a good laugh out of that, but it was pretty smart.  She, smartly, appealed to the group that had interest while not alienating those that dislike it’s inclusion.


Tip of the Week:   Deconstructing the Elevator Pitch