Custodians of the Magic. The two best pieces of early-stage pitching advice.

[First published on the Techcrunch Crunch Network on 9 July 2016. Thanks to Lauri J?rvilehto (author of The Nature & Function of Intuitive Thought and Decision Making and CEO of Founders Factory portfolio company, Lightneer) for reviewing some of the post's more technical elements]

Over the past ten years I have been on the first cap tables of three start-ups that, while I have been responsible for closing their capital raising efforts. I’ve been in more than 200 investor meetings as part of the operating team, and have raised money from the smallest angel investor, to the biggest European VC funds and from some of the world’s biggest corporate investors. My present role as Head of Corporate Development at Founders Factory has seen me on the other side of the table, assessing the materials and pitches of many early stage start-ups, as well as running the internal Founders Factory programme designed to assist our cohort close out their next round of financing.

 I remember our MD, Jim Meyerle, coming back from one of the many pitch-days he attends, in full wild-eye mimic of a particular start-ups’ presentation as they asked with syncopated emphasis whether or not we could ‘imagine a world without pizza’. It’s true, I can’t. And if ever there was a reason to invest, it’s that. But that wasn’t the point Jim was making. At Founders Factory we don’t hire actors to help the cohort present, we don’t prescribe a rigid formula to how they should pitch. That’s as much a function of the type of accelerator we are, we take in much fewer cohort members and provide a much more bespoke programme to each, as it is a point of principle. But if there has been a complaint of pitch and demo-days it has been the sometimes cookie-cutter approach to the pitch; and sometimes that approach has led to the presenting teams delivering an inauthentic, sometimes damaging, caricature of themselves and their product.

New founders are ravenous seekers of knowledge, and demand guidance. Generally anything too equivocal is not well received. But the truth is, being equivocal is a necessary fact when it comes to early-stage tech investing, particularly at the pre-Series A. The reason: the success for any early stage tech business is too sufficiently complex to predict. Even the super-forecasters require systems at a certain level of maturity before they can confidently predict the next 12-18 months. Very early stage technology businesses are not at this stage. Success is almost certainly a matter of irreducible uncertainty; winners sit in Taleb’s fat tail. Which means even the best investors aren’t able to deploy too much in the way of data to guide their decision.  Instead they say they make their decisions on intangibles: a feeling for the team, the sub-text in the story which speaks to urgency, innovation, size of opportunity and a sense of the Big Mo.  

..they make their decisions on intangibles: a feeling for the team, the sub-text in the story which speaks to urgency, innovation, size of opportunity and a sense of the Big Mo 

The challenge – and the opportunity – is that these intangibles are entirely subjective. Like a Barthesian death, the salience of the sales message is often in the ear of the beholder. And, whether they know it or not, the decision is likely made at the level of their unconscious, fast-processing, associative, system (Kahnemann’s system 1) and then later justified by their slower, apparently rational but often simply self-certifying, System 2. Which will throw up ironies like a ‘too good’ pitch alienating the investor because the presenter has focussed too much on honing their pitching skills to the point of precision, while forgetting that pitching is not really pitching – it is sales – and sales is subtle. They have failed to do the job of selling.

...pitching is not really pitching – it is sales – and sales is subtle. They have failed to do the job of selling.

 So before we collapse completely into Nihilism, what guidance is there for the early stage pitch. We help our cohort understand then when speaking to a listener’s system 1, you have to deliver a narrative, a coherent story that follows a dramatic arc. You need to ping their emotional senses, spark their interest, have them fall in love. They need to believe that you both know what you are talking about today and will be able to credibly tack an uncertain, but potentially industry-altering, future. They need to believe you can inspire employees, partners and investors. They need to trust you, which is where story telling plays another telling part because it makes your product more available, and therefore more believable. Once that is done, then your product and investor materials need to be sufficiently robust to allow their apparently logical system 2 confirm their bias towards you. We encourage to think of your investor deck in terms of a story:

And you need to know that what works for one investor will not work for another. That is what subjectivity is all about. It’s entirely natural, and utterly irreducible, to be rejected by some.

It’s entirely natural, and utterly irreducible, to be rejected by some.

 If I were to offer two canonical pieces of advice when it comes to pitching, it’d be these:

2. Be the Custodians of the Magic

Very early stage tech investors are, by their very nature, embracers of the future. If they were other, they’d be more like Charlie Munger, waiting and watching like for months – even years – before investing, and then only after they’d wrung the decision through many mental models to make sure it isn’t one corrupted by bias. They want to be shocked and impressed in equal measure. They want you tell them something they don’t already know. They want you to demonstrate that there is some insight in your study and/or your experience and/or your flat-out genius that is just bloody-well bone-crushingly smart. And they want to believe that is you – and precisely just you – that will deliver on its promise. They want magic. And they want you to be custodians of it.

Your job is to convince them of this.

I recall how Gerard and Archie of Vidsy managed to change my mind about them in just this way. At first blush, I put Vidsy down as a less interesting upwork. Yet another creator marketplace. But they said two things that I neither knew (although with hindsight it was obvious - the best kind of insight) nor was likely to know. First, that branded video advertising on the newest social platforms were jarringly anachronistic. Totally tone-deaf. The incumbent creators weren’t creating content that was sufficiently lithe to speak to the constantly shifting consumer zeitgeist: face-swap filters, time-lapses and Chewbacca masks. And, Archie was a digital film graduate so he knew that there was a swarm of young creatives with the time, energy and desire to spin up volumes of high quality, platform-consistent content.

The team uniquely lived on both sides of their marketplace and helped me understand that the spin they put on their product was the most natural thing in the world to provide the solution.

The guys building the Flourish product had spent years as a data visualisation agency creating jaw-dropping interactives that, for example, animate all the world’s planes or ships or squish countries to show how they compare on any given metric. But here’s the rub. Duncan is a published author with best-selling books about climate change under his belt, Robin is an Oxford educated Computer Science PHD who, when ‘flu has him laid up on the couch, finds proofs for N-P quite-hard maths problems. They had the hard-won insight, born of real world experience, that there’s a particular way to structure responsive interactive visuals designed to tell stories with data. Over the years they honed that approach until they felt ready to make a toolkit that would let others do the same - because that product, specifically the telling stories bit, does not exist today. I didn’t know that. They understood that democratizing their skills is a much bigger and more powerful idea than hoarding them.

2. Practice in the wild

This is the single best piece of advice. You can read tons of articles like this and others on the internet. You can ask mentors a thousand questions (and probably receive a thousand different answers) how to pitch.  

But I’ll repeat, pitching isn’t pitching, its sales. And sales is subtle. They are about convincing other human being(s) to buy something.

You may have been raising for weeks or even many months, but you have been convincing people all your life. Pitching, like all skills, is better delivered coming from your system 1 system – not your system 2. Just as is driving, riding your bike and playing your virtuoso violin. Get your pre-frontal cortex out of the way, because it can cause the yips, and rely on those primitive brain systems that find optimal processes via trial, error, feedback and tweaking: the original lean methodology. Through repeated practice your sophisticated subconscious will work out an effective rhythm and pace to your presentation, it will adapt to questions and react to investor un-said cues. Like a good comedian, you can guess what the audience will be receptive to, but you won’t know until it has been tried out. Then you tweak and tweak until it is the best it can be, and naturally flows.

 The homunculus that believes itself to be in control of yourself, is actually an under-performing, over-confident, energy-guzzling, often sabotaging imp that is best deployed only when really needed.

 So practice, practice, practice and watch it fall into place.

 Like magic.

“System 1 is the superpower behind all the most amazing human feats that we can achieve. With enough practice, you can direct it to take you anywhere you want — whether it’s the Olympic Games, or the most vaunted chambers of Silicon Valley. System 1, when trained and then left to run on its own accord, will put you in flow — a state of sync with yourself and your audience.” — Lauri J?rvilehto, CEO of Lightneer and author of The Nature and Function of Intuitive Thought and Decision Making (Springer 2015)