11 Sayings that Will Immediately Kill Your Startup Pitch
I have heard some awful startup pitches. Generally, they are awful ideas. Sometimes other things ruin a fundraising pitch. Once in a while, a startup founder will freeze during a startup pitch. That’s just tough and my heart goes out to that founder. A few years back a founder farted while pitching his startup to me. My heart didn’t go out for that one. If things like this happen when you are pitching your startup, you should excuse yourself to use the bathroom and just leave. I am kidding, of course. Finish the meeting, but you may as well try out your most aggressive material because you aren’t ever cashing that investor’s check.
Pitching your startup to venture capitalists and angel investors is an art. Most people, myself included, are not natural pitch artists. I will later post about the art of the startup pitch – crafting a compelling story and creating interest and demand from startup investors. That takes study and practice. Some founders never get great at it. Fortunately, it is not critical for landing startup capital. You do not need to be an expert startup pitch person.
Don’t get me wrong, being a talented startup pitch artist helps. However, it is not necessary. Most venture capitalists and angel investors are wise enough to know true leadership and authenticity when they see it. Leadership and authenticity don’t require a silver tongue. In fact, if you have read Good to Great by Jim Collins, you are familiar with the term level 5 leadership The Misguided Mix-Up OF Celebrity and Leadership. Level 5 leaders have a unique mix of humility and determination, and they defy the stereotype of the handsome, well-spoken, oozing with confidence celebrity CEO.
So, as a startup founder, you don’t need to be perfect. You do not need to know everything. With a solid idea, great team and the right mix of confidence and coachability, you don’t have to be the world’s best performer when the lights are on.
But, do not make the mistake of saying any of these 11 things. Venture capitalists and angel investors are forgiving, but uttering certain statements and responses in your startup pitch meeting make you look like an amateur or just give out the wrong impression. Whenever you say something during a startup pitch that investors hear over and over, you appear trite. Trite is never good. Simply take these sayings out of your game and you will greatly increase your chances of landing startup capital.
1. “If we get just 1% of the market …”
Why stop there? If you get just 10% of the market, it’s even better. 20% and you’ll go public. 50% and you’ll be the richest company in the world. These are all percentages you pulled out of thin air. Yes, 1% sounds like nothing to the average person. That’s the idea, I suppose. To make it sound so easy. But you are talking to professional investors. Venture capitalists and angel investors realize that getting one customer, your first, takes work. Show them how you are going to do that. You are not entitled to any share of any market. Instead, get granular and explain in your startup pitch how you will acquire customers cost-effectively. That is what matters in startup world.
Relatedly, your pro forma financials must show your growth from the “ground up.” That means you show how you put your marketing dollars to work. How many dollars do you spend? Where do you spend them? What is the cost to get a prospect to respond? To convert? What is a customer’s lifetime value? Churn rate? Yes, all venture capitalists and angel investors know these numbers are SWAG – sophisticated wild ass guesses. But, this exercise still has value. In all the many assumptions, investors can spot ones that are ethereal and adjust accordingly. The final number may still be a guesstimate, but at least it is an informed one, not a broad, unsupported wish that some percentage of the market flocks to your startup for no defensible reason.
2. “The assumptions we used in the model are very conservative. We’d much rather exceed them, than revise them.”
Next. There is nothing wrong with these statements IF they were true and IF no one else said them. But, everyone says these words when pitching for startup capital and they are hardly ever true. Generally speaking, you never want to say something in your startup pitch that almost everyone other startup founder says, especially if it’s something that startup investors naturally question. Either say nothing or say some variation of, “I am sure everyone tells you they were conservative when building their model. I get that. Building a model is hard and assumptions are just that – assumptions, speculation about an unknown future. We tried very hard to come up with ones that we can defend, and think you’ll agree they are reasonable.”
3. “First, before I make my startup pitch, let’s sign the NDA.”
Venture capitalists don’t sign non-disclosure agreements. They hear hundreds, sometimes thousands, of pitches a year. They don’t want to manage stacks of NDAs, run everything through legal, and worry about a portfolio company doing something remotely similar to what you are doing. Venture capitalists won’t sign your non-disclosure agreement, so don’t ask. It makes it look like you don’t know how things work. I put out a video on this topic – Should You Ask a Venture Capitalist to Sign a Non-Disclosure Agreement?. You can ask your lawyer to ask the venture capitalists or angel investors to sign an NDA and let him get shot down. Of course, then the investors will realize you do not know how to select a startup lawyer. So, scratch that idea.
Instead, just get over it. Your startup idea is not the most amazing thing the venture capitalist ever heard. And, no venture capitalist is sitting around just hoping to get a great idea, so they can stop living the perfect life and go slog away for 100 hours a week and very little pay for years. Besides very, very, very few startup ideas are that incredible anyway.
The focus in today’s startup market is, as it should be, on execution. It is very unlikely that someone is going to steal your startup idea and in the off chance it happens, most markets support multiple players and good teams can find other things to do. But, most importantly, the golden rule says “he who has the gold, makes the rules.” Venture capitalist don’t need to sign NDAs. So, they don’t. And, you should not ask.
4. “Everyone I talk to says this is amazing.”
All startup investors care about is proof. Proof isn’t your friends praising your idea. Or your lawyers and accountants doing the same. Really? The people you pay love your idea? Wow, what are the chances? Paid professionals are generally not interested in giving you hard feedback, even if they are good at analyzing ideas (a big “IF”). They don’t want to shoot your holes in your startup idea. They know you’d rather work with someone who loves your startup business idea. Yes, you may think you want honest feedback, but most people prefer to feel good and want a bunch of champions of their idea around them. Bring investors concrete evidence from people that aren’t on your vendor payroll and people who didn’t stand up in your wedding. Venture capitalists and angel investors want to see investors and customers open their wallets to your startup.
5. “This is naturally viral” / “This sells itself.”
I can argue that nothing sells itself, although I actually think there is the occasional product that merits one of these statements. That does not mean you should ever make this statement. No startup founder should ever utter these words in a startup pitch. But I hear them a lot when I sit in the angel investor seat.
By “the occasional product,” I meant one in approximately 699,442 ideas. The odds that your startup has that idea = very low. The odds that you think you have that idea = very high. The odds that the venture capitalist or angel investor that you’re pitching believes your startup has that idea = zero. Don’t ever say anything like this. Show why it’s true.
6. “We are the next [insert any amazing company here].”
I was having coffee recently with my friend, Marc Nathan. He founded T-Squared Agency (www.tsquaredagency.com) here in Austin. T-Squared is an advisory firm that helps startups with connections and fundraising. Marc is brilliant and super helpful. Plus, he has heard A LOT of pitches in his career. He reminded me of this gaffe. I am not talking about analogizing to another company – “We are the Uber of the house cleaning industry.” I don’t mind that personally, although it’s a little overused and I know it rubs some startup investors the wrong way. So, do that if it feels right. But, do not ever say your startup is the next Apple/Facebook/Airbnb. You startup is not that. Not yet, at least. Don’t be so presumptuous as to compare your unfunded, pre-revenue startup to Facebook, a $300 billion company.
7. “We are waiting to do that until we get funding.”
There are things you want to do for your startup that must wait until you get more money. Those things are called your “use of funds.” It is fine to say you are waiting to do those things until you get funding. But, because you ought to have explained your use of funds to the investors, this question doesn’t typically come up with respect to those items. It comes up with respect to other items that can be done today and should have been done today.
For example, most venture capitalists want their startup portfolio companies to be Delaware corporations. Don’t approach venture capitalists as an Illinois LLC. Some investors won’t care. But, most venture capitalists will. I often talk to entrepreneurs who say, “why can’t I just wait and change all that at closing of the round once the venture capitalist?” Good question and, believe me, I know it’s a pain to spend money and make changes in anticipation of an investment that is not guaranteed. I get it. But, whenever anything feels uncertain or half-baked, it hurts you. Saying, “we are waiting to get funding (a term sheet) to change to a Delaware corporation” sounds like you aren’t 100% confident in getting funding.
On a purely emotional level, it doesn’t feel good to the venture capitalist. A good analogy is in residential real estate. Home owners with stained carpet and chipped paint walls often tell their real estate agent to offer the buyer a paint and carpet budget. Problem solved, right? Wrong. When most prospective buyers walk in to the house and it doesn’t look and feel great, they’re gone. Humans buy emotionally. Do everything you can to look like you are fully-prepared for your pitch meeting and make the “buying” process feel good to the investor when you are making a startup pitch.
8. “Our startup has no competition.”
Really? None? This is exceedingly rarely. One context in which it’s true is when you have a terrible idea that solves no real problem, so you also have no customer interest. I shouldn’t have to tell you not to lead with that fact when delivering a startup pitch to potential investors.
Otherwise, you almost always have competition. Maybe no one is doing exactly what you are doing, but there are companies doing something to address the same customer pain point / benefit. When Uber first launched, direct competitor Lyft didn’t exist. But, cabs were still competition. Airbnb competes with hotels and motels. Venture capitalists want to be sure you understand your market. If you brush by obvious competition, even if that competition is quite different from your startup, you appear ignorant or disingenuous.
By the way, competition is not an awful thing. If you truly, truly have no competition AND your startup is a great idea, that means you have to create the entire market and convince customers they even need your solution at all. This will scare the bejesus out of 95% of the venture capitalists you pitch. If you are absolutely certain it is an accurate statement, I’ll give you permission to say, “there is no else offering what we offer, but company XYZ and company ABC address the same market / problem, etc. Here is why customers will choose us.”
9. “Here are the other investors we are talking to …”
Venture capitalists may probe for who else you are talking to, but you don’t have to, and should not, answer directly. Be careful not to seem dodgy or pretentious. Instead simply say, “We are in talks with a few / two / three other strong investors who lead deals and are progressing toward a close.”
10. “Please hold your questions until the end of my presentation.”
Alright, I have never actually heard anyone say this, but I see founders try desperately to stick with and get through their rehearsed pitch presentations. Let it go. Questions from investors during your startup pitch are a great sign. They show engagement. If you can answer a question simply and there is a little pause, showing your answer was sufficient, get back to the presentation. Otherwise, let the meeting become a conversation. Venture capitalists and angel investors are smart people who look at lots of deals. Their feedback is valuable and it shows some level of interest. The only time you can defer answering a question is if you are going to address it on the next slide. You may feel like it’s your meeting, but it is theirs. If later there is a pause in the conversation, casually pick back up with your presentation – “one thing I wanted to be sure to highlight is …”
11. “We are almost out of money” / “We need to close quickly.”
Desperation rarely helps when pitching or selling. Later on during due diligence, the investors will realize you are running low on cash. That’s fine. I am not suggesting hiding it. But, never lead with anything that looks desperate. It is an absolute deal killer.
Don’t worry about perfection during a startup pitch. Don’t worry about having every answer to every question. Venture capitalists and angel investors don’t expect founders to know everything.
Be confident, but coachable. Tone down the hyperbole and avoid these mistakes and you will be in great shape.