Landing The Pitch Call (Fundraising Part 1/3)

There is no end to the number of people who have put together guides on how to raise that first (and subsequent) investor check. And, the truth is, that every single person’s path is almost certainly unique to them and what works for someone may not work for you.

That being said, I’ve put together a few documents that may help the founder looking to apply some linearity to their fundraising process particularly when it comes to knowing how to close a check.

One key operating principle to keep in mind (that I’m borrowing with immense gratitude from Allison Byers / Scroobious ) : Your goal at each step is ONLY to get to the next step.

Why does this principle matter?

A lot of founders will often orient their pitch around getting the money in the door and may lose sight of the immediate work, which is to make it as easy as possible for an investor to continue along their own process of doing due diligence on a startup. So, let’s break down the process of getting a check into three steps:

• Get the pitch call
• Get the follow up call
• Get the check

Each of these steps have different aims and therefore different things that as a founder you need to communicate. So let’s start by focusing on the first one.?

Venture Capitalists get TONS of inbound interest and in 100% of cases they have limited time. Although the reported percentage of pitches that turn into calls varies wildly from .1% to 20%, let’s just make the clear assumption that getting on a VCs calendar is extremely difficult.?

What helps you stand out then? When I’ve been on the other side of the table, it’s come down to four things that are spelled out very, very clearly.

1. Painful + Urgent Problem -?

Let’s break this down into its two components, because although they are related, they are in fact different:

Painful - Demonstrating existing customer frustration is the key to setting the context for a great problem statement. Pain often comes in permutation of two forms: money (ie. expensive) or lost time (ie. convenience).

Urgent - An urgent problem suggests that customers are not only knowing that they have a problem, but also that they are actively trying to solve it. This is where you can embed any evidence that you have that the nature of the problem is becoming more urgent. Bill Gross talks about how timing is the greatest predictor of a startup’s success. Embed the timing of your market directly into your problem statement.

What does a problem statement not necessarily need? It does not need to be exciting. Often, in chasing the exciting problem you end up with scope creep. Keep the problem statement scope clear and in doing so you immediately tee up the next category….

2. Meaningful Insight into a Solution -?

Notice that I didn’t just write “a solution” here. Remember: the goal is to get a call. It is far easier to summarize succinctly your insight here than it is to explain all the elements of your solution.?

The biggest trap at this stage is including details that distract from what an investor is ultimately looking for: do they know something about this problem that others may not?

A clear problem statement that demonstrates pain and urgency immediately feeds into a thoughtful insight-informed solution statement. Here’s an example of what I mean:

“Although (insert problem) is costing (insert customer) (insert quantified expression of the problem), we’ve discovered that if you offer that customer (insert insight) that they are more likely to (insert ideal customer behavior)”

Founders more often get calls from their insights into customers in lieu of the actual product. Startups often end up releasing far too many products along the way as they grow for any reasonable investor to assume you’ve got your product figured out now.

At the earliest stage of raising capital, investors are looking for insights and not for products.

If you’re just trying to get that call, put your insight front and center.

3. The Source of Your Insight -?

If an investor believes that you have identified a problem and that you have identified an interesting insight, they are now immediately asking themselves “why do they know this?”. And this is the moment where you introduce yourself and your team.

Keep it clear, brief, and oriented around your understanding of the problem and your insight into solving it. Notice how framing your story around the problem means that you can cut out a lot of heuristics and noise (i.e. if you’re going to share where you went to school, make it relevant to the story of why you know what you know).

Good investors will be able to see through where you’re leaning on privilege to access capital. Trust me, I know this from personal experience. That doesn’t mean to avoid your life experience, but just to make sure that you’re framing it intentionally.

You have decided to dedicate a practically insane amount of time at this point in your life to solving this exact problem. Demonstrate both your commitment to the problem and your evolution as a professional and you’ve done all you can to explain the “why” behind your insight.

4. A Path to Scale Teaser -?

Because you’re just trying to get the call at this point, an investor simply does not have the time to understand your entire path to scale. But, they will want to see that you’ve thought about it.?

At this point in the pitch, here are the things I would make sure to include so that you can convince an investor, in as little time as possible, that scale exists:

Market Size - You may have explained the price of the problem already, but pay homage to the immensity of it by defining the market size clearly. If you put numbers down here, be sure to cite your data with links.

Defensibility - At later points in the pitch you’ll have more opportunity to explain why others won’t be able to do what you do, but it’s important to tease out some reference here. Lots of businesses don’t get calls because they think it’s too early to reference why they are immune to competition and so it strikes me at this stage that you need to make a reference to it. Personal preference: do NOT do this with a 2x2 graph that suggests that you are all things to all customers. Rather, explain why your hyper-focus on your current customer type enables you to build for others.

Favorable Economics (extra) - This is a bonus, but can make the difference for some startups at this stage. This is NOT a financial model, but rather zeroing in on why your costs/revenue possibilities work at scale.?

In my experience, when you nail these elements you put yourself in as good a position as anyone to get that first pitch call.?

And.... here’s the secret: you can communicate these things in as little as ~100-150 words or even 4-5 slides.?

An investor probably has about 2-5 minutes, at most, to make the decision about whether they want to spend the time to know more about your business. Focusing on these key things and eliminating fluff gives them the best chance to say yes to a call.

Teeing these things up with a clear narrative allows you to focus that crucial pitch time on the elements that are likely to get you that second call. And I’ll outline that for you in a different article.

Good luck!