Ask the Wizard

You could probably create a blog with nothing but "pitching your company" posts and keep it going strong for a good year or more, and this is probably the topic I get the most email/questions about from folks that are trying to figure out how to fund their company. There are a million things to say about this, but I'll try to start off by focusing on getting ready to pitch your company to potential investors and then the actual pitch when it's time to go out and raise that first round of capital. Whether you're looking to raise your first round from angels or a venture fund, there are some general ways of thinking about your pitch that are probably helpful.

Getting Ready
I've seen a lot of discussion about the relative value of business plans on some venture capital blogs. Do you need to create a business plan? Most investors will tell you that these are a great exercise because they help you collect and organize your thoughts about the business with some rigor, although investors will also generally tell you that they only read the executive summary of a business plan. I have personally never written a business plan in my life and don't imagine I ever will. I don't have any interest in writing a business plan because in the consumer Internet software market, 9 times out of 10 you don't end up building the company you thought you were going to build when you first started. The market zigs when you thought it would zag and you end up adjusting and improvising to the market. This does not mean that when you pitch your company you should say "we're going to do X, Y, Z, and then we're not sure what the hell is going to happen but we're hopeful it will be something good!"

I do three things when preparing to go out and raise money. First, you want to line up a bunch of people to talk to in a very short time. It is critical that you generate demand for what you are doing. One question you will hear at the end of most VC meetings is "what's your timing?" and you want to use this opportunity to reply that you're meeting with a bunch of folks this week and you hope to put something together quickly and get back to work on the product. You are trying to sell yourself here, and the best way to position yourself is to generate as much demand as quickly as possible. So, you want to get the list of people you need to meet put together and get meetings set up that allow you to do three or four of these meetings a day. Second, get a demo and a small pitch deck together, anything from 8-12 slides is fine, and anything more than that is probably too much. If you find yourself reading this and thinking "There's no way I can pitch everything about my product in only 8 slides", I assure you that you are wrong. Nobody wants to sit in a room and read data-packed powerpoint slides with pull quotes from Gartner Analysts that describe your market as being a 9 bazillion dollar industry in 2012. Get a short pitch deck together that tells a story. Here's who we are, here's an opportunity/painpoint we discovered, here's what we're doing about it, here's how we believe we will be able to leverage this in amazing ways, and here's how much money we need to accomplish these things. End of story. You might also include "here are the other people who are working in this space and they are focused on these kinds of things", etc.. Third, you should put together some very high level financials that outline how the business probably works over the next couple years, paying particular attention to the operating expenses in year 1. Few people are going to believe your revenue forecast for year 2, and even fewer are going to believe your revenue forecast for year 3, but it's important to highlight that you understand how the business grows, where the cost inflection points are, where the revenue/margin leverage points are, etc. Bottom line - don't go excel crazy on the financials with all sorts of goofy details but paint a simple and clear picture of what the general financials look like as you ramp up over the next year. When will you need more money, what might that financing look like, etc.

Pitching the Company
This is the fun part. If you haven't ever done this before, you're probably nervous going into your first meeting, but you're about to market test your company, and that's a lot of fun. Some of my best friends in the industry are the VC's I've pitched and some of those people have even invested in the companies. I think there are four good tips for pitch meetings.

1. Be prepared to do your pitch with either a quiet unengaged audience of 1 or an energetic, questioning and engaged audience of many. In some meetings you might get through your entire pitch and a complete demo with no questions, and in other meetings you might not get any farther than an opening demo. Whatever. Don't have preconceived notions about how these things should go. They're all over the map.
   
2. If you are pitching VC's or Angels who see a lot of deals, take advantage of this time you have to listen to their feedback. You are getting feedback not just on your product or service but how it's perceived vis-a-vis the forty other things in the market that you won't personally know anything about for month to come as these other companies get funded, launch, etc. Don't focus solely on getting through your pitch - ask your own questions, ask for clarification if you don't understand an answer, and listen. As stupid as this sounds, it can actually be hard to take the time to do this because if you're really passionate about what you're doing, and you should be, then you're going to be focused on communicating your vision and articulating how you're going to attack the market. You can learn a ton from meeting to meeting by asking questions and listening and that will help improve your pitch as you go.
   
3. Try to get to know the people you're pitching. Hopefully, you are going to have your choice of a number of potential investors if you're lucky, and you want to make sure you are working with people you like. As I say, I've gotten to be very good friends with several folks we've pitched, some of who've become investors and some who haven't.
   
4. Have fun. You are going to be pitching your company for years to come if you're successful, and to bigger and bigger groups of people, so I recommend trying to have a good time with this process. It doesn't end once you've raised money.
   

I'll say one more thing about pitching the company. In a couple of pitches people have asked me to look at lately, the entrepreneurs describe their likely exits. Ignoring for the moment that you have absolutely no idea what your "exit" is going to be or when it will be, I'm not sure that any investor would ever react positively to this as part of a pitch. At best, it comes off as naive, and at worst, you expose yourself as having some too low expectation. If a potential investor asks "how does all this play out?" well then that's another question.

Man, I need to work on some shorter posts. I'll try to mix in some quick bits with the treatises here. Still lots to say about ending the pitch meeting and follow-up.