31. The Pitch (David Brown)

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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?

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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

Below is the “Tip of the Week” transcript from the Podcast Episode 31: The Pitch (David Brown):
I was recently doing some consulting for a local, very early-stage startup called The Mentoring Edge.  They were looking for some help crafting their elevator pitch.  So, I figured I'd re-purpose some of the material I put together for them in today's tip  of the week.
The best place to start is the pitch deck, itself.  We often hear experts reference the ten, must-have slides in every pitch deck.  They include...
  10 Must-Haves:
1- The Elevator Pitch / Summary
2- The Problem (What problem are we solving?)
3- The Solution (How the approach ideally addresses the problem?)
4- The Market (Who will buy & how big?)
5- The Business Model (How do we make money?)

*Please excuse any errors in the below transcript

Nick: David Brown joins us today from Boulder, Colorado. He’s a serial entrepreneur turned investor and co-founded the great start-up accelerator, Techstars. And of course, in 2013, David took on a more active role as Managing Director and President of Techstars. David, thanks so much for spending the time with us today.

David: Great to be here, Nick.

Nick: So can you start us off by walking through your start-up history and how you first got into start-ups and then transitioned over to the investor side?

David: Yeah, you bet, I guess I’m a serial entrepreneur, and started as an entrepreneur before that was anywhere near fashionable—people asked you, including my parents, “What’s your day job?” I started as an entrepreneur in a strange way, I got a summer job in college working for the government and maybe I learned that that was what I wanted to do, and I wanted to do the exact opposite. But I met someone there who was starting a company and I became employee number one at that start-up and, you know, it wasn’t a successful start-up but I learned a lot and they had a business relationship with a company in Florida that was another start-up and I jumped ship and when went to that Florida company—employee number two there, I think. And employee number three was a guy named David Cohen. He and I then began this twenty-five year partnership across not only working at that original start-up in Miami., Florida, but then we went on and found a company together in our twenties that grew and became about a fifth-million dollar business with a hundred and fifty employees or so, had an excess. Went on and did another start-up together that failed….learned a lot. Probably learned more from that failed start-up than the successful one.
And then got into angel investing, felt like we wanted to learn from our successes and from our failure to maybe pass on information to the next generation of entrepreneurs, also provide them with a little funding. Started by joining an angel group. Found that a little dissatisfying, mostly because there wasn’t as much opportunity to help as we had hoped. And that led to founding Techstars. David had this idea that maybe we could combine the desire to invest and the desire to help by creating this idea of a boot camp with some companies and a communal environment and surround them with other successful entrepreneurs to provide advice. Concept of mentors and accelerators, those words didn’t really exist in our day to day language at the time. But the idea for Techstars was literally born out of those angel investing days.

Nick: Great. And that first start-up that you did with David Cohen, was that Pinpoint Technologies?

David: Yeah, it was! Yep. Still around today. Has a different name, because it’s now a subsidiary of the company we sold it to but it still exists here in Broomfield, Colorado.

Nick: Wonderful…and, timing wise, Techstars was founded around 2006?

David: Yep! That’s right. The idea was in 2006 and the founding was in 2006 and we ran our first full report in the summer of 2007.

Nick: Awesome. So today’s topic is the pitch. I’ve been waiting for this topic for some time, so… It’s an absolute pleasure to have you on the show to talk about it. But I’ve seen thousands of pitches and I imagine you’ve probably seen tens of thousands, at this point. Before we get into all the details of the pitch, I’d like to cover some of the basics. So, David, who is the target audience for the pitch and why does that audience often prefer it to a business plan?

David: Great question. I mean, I think the general assumption is that the pitch is for and investor, somebody that you want to convince that you’re start-up is a better start-up than all the other opportunities they have to invest in. Whether they be a micro-VC, an angel, you want to figure out how to get them to invest in you. That’s the general feeling. I like to actually broaden it. I like to think of the pitch as being the story of your start-up. It’s the opportunity to succinctly explain who you are as people, how you want to change the world, what your dreams and aspirations are for your business, who’s going to engage with you and in what ways are they going to do that. And when you have that story, you can deliver that certainly to those investors, but you also deliver it to your customers, to your employees, to your prospective employees, to your significant other, to your neighbors and friends when you go to a barbeque and they say “What do you do for a living?” It’s really hard, I think, for a lot of people too succinctly explain what it is that they do every day.

Nick: Yeah, I hear you. I often feel like that crazy uncle myself, trying to articulate what it is that I do.

David: Yeah… We’re the inventors!

Nick: Right. So, for the types of businesses that you most often evaluate, what is the right time in a start-ups early life to begin pitching for professional seed capital—so not the friends and family capital but more of the angel round?

David: I guess the right time to start thinking about pitching for money is months before you run out. And there’s some commonality there, cause I think generally around the time that companies go through an accelerator is in the first millionth of revenue of a start-up’s lifecycle. And there are exceptions because maybe you’re independently wealthy and need to raise for a while, or your friends and family are giving you more than most people get so you can wait a little bit longer…but maybe you don’t have any friends and family and money yourself and need to start the process sooner rather than later. But in that first million, I think it’s true for eighty-ninety percent.

Nick: Are there certain metrics or…is there a certain amount of progress that you’re expecting at the point when the start-up is raising that first professional seed round?

David: Yeah, so…certainly we’re—even before the seed round—we’re investing in companies when they come through our accelerator program and we do look for progress, although we measure progress not in absolute terms but in relative terms. So “What have you done recently? What have you done in the last month? What have you done in the last six months?” If you’ve done a lot but you’re not very far along, that’s ok! You built a prototype and you’ve talked to a bunch of customers and you have a product that’s kind of buggy but it kinda-sorta works and you’ve been at it for two months, that’s wonderful. If it’s been five years and you and your buddy have been talking about the start-up that you want to do and you don’t even have a website… So I think that progress characteristic of a start-up is more about over time than it is “You need to be at this particular point before you raise.”

Nick: So, central to the pitch itself is the pitch deck. Can you start us off by walking us through the basic elements or slides that you would look for as an investor to get a good sense for the start-up?

David: Yeah, sure, and whether it’s the pitch verbal or the pitch deck, it’s the same. I think it starts off with what is the problem that you’re trying to solve. If you can’t articulate that, you’re gonna be in trouble. And then how do you solve it. Convince the investor that there is a problem in the world that is real, that’s step one, and then convince the investor that you’ve figured out how to some that problem, step two. And then show me that you’ve actually made progress. Show me products, tell me about all the customers that you signed up, tell me something that’s been able to demonstrate that fraction.
In a verbal pitch, you should be able to do that in a minute. Don’t give me a thirty minute story of your life, how you got up to this point, cram all this knowledge that you’ve gained over your lifetime—you know, into thirty minute where all this information is bussing over my head and I don’t understand what you’re talking about. But in a minute, figure out how to succinctly tell me all of that and use visual aids in the form of slides to do that so the progression of the slides is what’s the problem, what’s the solution, how do you solve it. Then do a deeper dive into the product. Show me some screenshots, give me a product demo, or show me a video… Problem, solution, passion, then do a deeper dive and show don’t tell.

Nick: Got it. And are your expectations at Techstars similar when you’re evaluating applicants as what you’d expect as an investor in a very early start-up?

David: Yeah, I mean, I think those things that I just described is where I get them through by the end of Techstars, so it’s obviously a lot rougher at the beginning and so in the selection process, there’s no pitch deck involved. Give us a little video, tell us about it yourself, come in for an interview, we’ll talk to you and we’ll see if you’re the real deal. We’re not stringent on your ability to sort of weave together a good story before.

Nick: Got it, so there are these standard elements as you mentioned, articulating the problem, talking about the solution and the product and the business model, but there is some debate about whether to talk about exits in the pitch. And I’ve heard from some angels that they don’t like seeing start-ups talk about the exits because it feels almost as if the founders are planning their next conquest and their minds are already beyond the opportunity at hand. What’s your stance on this position?

David: Well, I agree with that. And the reason I agree with that—so, first of all, personally never had an exit strategy in any of the start-ups that I’ve done. I’ve always been passionate about what I’m doing to change the world. I’m helping save lives, or I’m solving problems with customers, or…you know, it’s more about product, customer, and business. Working with the people that I’m working with, that’s what gets me up every day. I don’t get up every day excited about my start-up because I’m gonna make millions in my assets somewhere down the road, and if in the pitch you’re leading with “Well I think we can exit to this guy and this guy and this other guy for this amount and I’m sure we could do that too.” If your passion is all about the money and the exits, you’re not passionate about the things that really matter that are gonna grow your business to get to that exit eventually. I agree, wholeheartedly with it.

Nick: Interesting! And, recently, I read your article, great article, in ink kind of all about the pitch and some of the sort of key outstanding elements, key things you’re looking for as well as things to look out for… So, can you first talk about what are some of the common issues that you’ve come across in pitches over the years that may be would immediately disqualify a start-up for investment consideration?

David: So of the things not to do. First of all, talked about it earlier, still true, is that if you go to cram in all of your lifetime of knowledge in the five minutes that you have to talk to somebody, you’re gonna overwhelm them. They’re not gonna understand what you’re talking about. Don’t try to impress me by confusing me. And I think that is a big mistake. My favorite quote, I think I put it into that article, the Einstein quote, which is “If you can’t say it succinctly, you don’t understand it well enough.” I believe that to be true. If you can tell me succinctly what it is that you do, I’m not gonna be impressed by “you seem to know what you’re talking about, but I don’t get it.” So I think that’s sort of one of the biggest Gotchas.
A second gotcha is don’t assume that your audience knows everything about your market, and your product, and target customer. You know your business. They don’t. They might be seasoned investors that have seen a lot of companies, but they don’t understand your target audience or market well as you do, so remember that you know the most about your business. Part of getting a potential investor up to speed in your business is educating them on what it is that you know.

Nick: Yeah, the investor is often not the primary target market for the start-up, right. But sometimes either, I think, the investment side of the table gets confused and they make quick assumptions about whether it will sell or not, and also the start-ups maybe make assumptions about what the investors may know that clearly they don’t.

David: Absolutely. I have a great story from one of Techstar’s cohorts when there was a great start-up that had a concept for group dating, rather than have a traditional one-on-one process. They came to me and all they wanted to talk about was product ideas. I’ve been married for fifteen years, right. The last time I went on a date, Google didn’t exist. You’re wasting my time asking me questions on product ideas. I don’t know! I’m not your target market, ask me questions about other things that I might know something about. So don’t assume that your audience knows everything that you do.

Nick: Yeah, absolutely. On the other side of this question, what are some of the elements you’ve seen over the years that make for an outstanding pitch?

David: I love when can sense the enthusiasm on the part of the pitchers. When they are passionate about their product, and they love what they do, it shows in the pitch. And in my opinion, it’s a greater predictor of success than just about anything else that you can see in a start-up. So it doesn’t matter what the product is. You might find it to be the most boring thing in the world, but if they’re passionate about it, their likelihood of success is so much greater. And I think that’s something people don’t necessarily realize is so important to investors. That they’re investing in the people, especially if you’re in the early stages, far more than in the idea.

Nick: Yeah, it’s the whole walking in skeptical, and walking out inspired. If you were talking to entrepreneurs creating a pitch deck, or investors reviewing pitch decks, what sort of key advice would you give?

David: Be succinct. Ton of bullets. Don’t really understand, but that’s a word that I don’t really understand… Less if more, that would be one. Get to the point, don’t save it all for a crescendo and wait till the end. Get to the point as to what—if you have something impressive to say, say it up front. Be interesting as you’re delivering the pitch or you’re showing the deck. Get your audience’s attention. Funny or different or use an analogy that really helps get to the crux of how you’re gonna change the world.

Nick: Absolutely. When I get sent these business plans that are ten pages long and read like a resume, it’s just not worth the time to jump into it. It’s an immediate pass.

David: Right, you thumb through it, see if there’s a graphic that catches your attention. If there isn’t, you’re done. If you don’t get it, you’re done. It’s a recipe for disaster.

Nick: Speaking of that, when a start-up is pitching at a formal demo day or an event, they’re gonna have the platform for a number of minutes, they’re gonna walk through, let’s say, ten slides. But when it comes to email, I’ve almost found that these start-ups that send me a teaser, so it’s a one pager and it doesn’t have all the detail but it has these elements that you’re talking about—sort of the elevator pitch, the problem, the solution, you know, just give you a good sense for what the start-up is but much more succinctly. You also look for starts that send you something that’s more brief before you go to the next level of reviewing a ten page deck.

David: Yeah, absolutely, especially if it’s an unknown start-up. If somebody sends us an application, a deck, we don’t know who they are and they say “Please take a look”, it’s hard to spend that much time every day, but if they give you a little teaser and it’s impressive, then you want to go to the next step and learn more.

Nick: So David, you cofounded Techstars, and in 2013 took a very active role as President and Managing Partner, can you talk about what you’re currently most focused on with regards to the mission and strategic roadmap for Techstars?

David: Sure—and there are other managing partners, I have partners here at Techstars. David Cohen and myself are actively involved in making sure we are smart about how we make our investments. What I’m personally focus on is the expansion of Techstars, because on one hand, expansion is great because it helps strengthen the network and gives more contacts in terms of other founders or investors, mentors, public partners, such that all of the alumni get to interface with, but that expansion has to be done deliberately and with quality because we have to make sure that the programs we add are as good as the programs that we already have. My focus is on really making sure that we are smart about how we run these programs and certainly don’t over-extend ourselves, but at the same time find ways to provide even more unfair advantages.

Nick: So do you have focuses that are geographic in nature as well as maybe horizontals and vertical programs? Or is it one or the other?

David: No, it’s both. So right now, our split about fifty percent horizontal and fifty percent vertical. In terms of our geographic, of our fifteen programs, there are twelve of them in the States, three of them in Europe. As we grow, I think you’ll see more of the vertical programs, more international programs, but certainly not exclusively in either of those.

Nick: Great. Any new offices that are opening up abroad or domestically that we should get excited about?

David: … Yes.

Nick: [both laugh] You can’t say, huh? Alright I guess—

David: You can certainly expect some knew announcements in the coming weeks and months.

Nick: Oh good. Ok. So we’ll stay tuned for that.

David: You bet.

Nick: So, David, if we could cover any topic in venture here on the show, do you think we should address and who would you like to hear speak about it.

David: You know, I think that there are interesting investors that consider changing up the status quo. And by that I mean, sort of the old style, go to Sam Hurst Rd, pitch investors—that environment is changing and there are many forward thinking investors, which Brad Feld and Foundry Group are a prominent one that we’re obviously closely affiliated with, that think about changing that model and creating an environment where start-ups exist in their own geographic environment, investors come to them to figure out who they would like to invest in. So I think investors that are looking to shake up how investments are done are always interesting to hear their point of view.

Nick: Anybody in particular come to mind?

David: I think there’s several—I’d hate to call out any specific ones, but Brad is one that obviously we’re closely affiliated with and always has great ideas but there are many others as well, both in Silicon Valley and all around the world.

Nick: Yeah, fortunately we have had Brad on the show, as well as Troy Henikoff, sort of your resident Chicago Techstars leaders, so got a great presence from your organization and we feel very fortunate that you guys have been so generous with our audience.

David: It’s our pleasure.

Nick: And David, what is the best way for listeners to connect with you?

David: I’m easy to reach, I’m david.brown@techstars.com and I promise to answer anybody’s email or I’m @dbrown if you want to follow me on Twitter.

Nick: Excellent. All of David’s contact info will be in the show notes. David, thank you so much for the time today and thanks for everything you do for the greater start-up ecosystem.

David: Thank you very much, Nick. It’s been a pleasure being on your show.