Tell the story of your business more effectively by giving specific details that interest investors.
The ability to succeed in pitching (presenting the company quickly to an audience to generate interest) can make the difference for a start-up. You are every day bringing your business to a wide variety of people, such as potential employees, investors, and prospects.
This skill is not innate to all entrepreneurs.
Study your audience
Put yourself in the shoes of people who will judge your presentation. They are educated, they know a lot about start-ups and they have business acumen. They want to love your project because it is a role cut for the big optimists.
They will not know this area as well as you and will not have studied the issues, unlike you. They may not be familiar with the context of this sector and its jargon.
In your pitch, explain this context as you would explain to a wise friend working in another area. Deliver a clear story.
People who judge your pitch will probably be overwhelmed with information because your presentation will surely not be the first or the last of the day.
Evaluators of start-up accelerators and emerging venture capital firms attend hundreds of presentations each day, typically two minutes each. Your goal is to incorporate as many positive points as possible within these two minutes and to ensure that your contact keeps the basic concept of your project so that you can pass it on to someone who asks for information about your company.
The evaluation process continues for several days. He is exhausting. Many presentations always repeat the same speech.
Help your interlocutor understand quickly (and keep in mind!) What makes you stand out from the crowd.
The investor is not a user of your products. Thus, presenting your business to an investor and a user are two very different things. The investor will almost always know less well the sector of activity, the problem, the solution, and the jargon used.
MICHAEL SEIBEL, YC
Put your skills and those of your team forward
Most companies are not exceptional at first. That’s why we talk about “growth phase.” The evaluators will be able, through you, to determine the growth potential of your company in the event of financing. Be sure to mention in your application file the most difficult or the most striking thing that you have done, even if it does does not belong to the professional field and especially if it “thinks outside the box.” The majority of candidates are founders of well-known companies, former model students who have attended prestigious schools.
They will have a hard time adapting to the functioning of a start-up, where there are no pre-established programs, good points awarded to the best elements or teachers to ensure that deadlines are respected.
Investors know it well.
If you can boast of having achieved something, do it. Being an Olympic swimming medalist does not make you the best software creator, but it shows that you can provide continuous effort and work for long hours. No need to be a Nobel laureate, the complex projects that you have completed despite the obstacles are just as exciting because they are similar to the challenges of start-ups.
If you have made money on the Internet in the past, even a little shameful (affiliate marketing, eBay arbitrage, etc.), it is a positive point. Recall the most important thing you have designed or manufactured. Start-ups make products and convince consumers to use them. However, creative talents are much more challenging to acquire than those of marketing specialist. Possessing such talents is a definite advantage.
If you can not cite any outstanding project or engineering skill, praise your technical skills with hard evidence. Do not say “I have a technical degree,” but rather, “I worked in a chemistry laboratory during my graduate studies. A four-page document had to be filled in to buy $ 8 worth of chemicals. I created the software from a spreadsheet and the Python application. After that, the paperwork was over. My invention has been around the Chemistry department. The purchasing department wanted to block the application but could not do it because my colleagues liked it too much.
This type of anecdote will probably not allow you to land a job at Google but shows that you have the talent to develop a product that appeals to the public. It also shows that you know how to be pugnacious about the refusal. These qualities take precedence over the fact that the application was designed in one day, and only a dozen people use it. Remember that you only have two minutes to convince. Describe what you do, what you did in your career, and skip your failures. Addressing chess is only relevant if you talk about the lessons you learned from it. You are probably submitting your application on behalf of your team. Explain how the team members met. One of the main risks for the founders of a start-up is that the team bursts under the pressure of accumulated stress. A strong team is less risky. State that your skills are complementary.
It is also essential to convey a sense of urgency and dynamism. Successful start-up creators can work on long-term projects, but also to cut down important work in the space of two weeks. If you have already set up an ambitious project in a short time, it’s time to talk about it. To quote YC partner Michael Seiber, the project you’re working on now must show that you’ve “done an awesome job” in the short time you have. “
Give concrete details
Briefly describe exactly what you are designing and who this product is for.
The defect most often found in the presentations we are studying at Stripe Atlas is the lack of precision in the product description. Evaluators rely on an individual’s ability to describe their project to determine if they will be able to complete it.
As an example, this brief description does not say anything concrete:
The COMPANY will help online stores sell more products through advanced artificial intelligence algorithms and machine learning.
This pitch does not demonstrate enough machine learning or online business knowledge to convince an appraiser that the start-up is bound to succeed. She did not explain what concrete product. Be particularly explicit about the user experience. The evaluator is likely to be seduced by your product and to be the first user, which is why he likes to imagine himself using it.
Here is another description, just as brief, of the same product:
THE COMPANY has turned Google’s AutoComplete feature into a Magento plugin. This increases the conversion rate of product searches, as well as the average value per order (average basket).
This description is full of concrete and convincing details. The investor can immediately get an idea of the product and compare it to another known product. This description implies that a product or prototype already exists (given the use of the past “transformed”).
It mentions the technical solution (Magento) and the market to which the product is addressed (SMEs without specific technical training using Magento). It shows that the founders have a good command of online business. It gives two good reasons to use the product while avoiding stereotyped marketing terms (such as “rush”) that reviewers have heard thousands of times. This pitch arouses the curiosity of the examiner.
Clarity is especially outstanding when dealing with popular concepts such as blockchain or machine learning. Some entrepreneurs are right specialists in these technologies, but many are content to read a few lines on the subject in newspapers and are unable to talk about it in detail. Your goal is to prove that you are not one more person to follow suit.
When you talk about your product, you have to describe exactly where you are and where you will be in a few weeks. You can talk about your long-term ambitions when you talk about your market.
By giving precise facts, you will not be able to make a
mistake. Evaluators expect you to be a specialist in your field or about to become one. If you know the numbers of the sector, give them. Any opportunity is good to take to avoid approximations.
Concrete details allow investors to visualize your project. If you give me that kind of detail, I will not only listen to you but also understand and remember what you are telling me. Often, when a business creator tells me three sentences, I understand less than 5%. Concrete details solve this problem.
MICHAEL SEIBEL, YC
Target an attractive market
Investors are great optimists. They will project the success that your company could have. A company whose potential success is low will most certainly stay the course but will be a bad investment.
Venture capitalists are looking for companies whose future revenues will reach hundreds of millions of dollars a year. Niche products with revenues in millions of dollars are only relevant if they provide access to parallel markets with increased potential. Imagine that you invented the Altair Basic and think of the speech that might convince investors: “This is now a shell for amateurs, but tomorrow we will develop this product to make it a suitable operating system to all the microcomputers and we’ll call it Windows. The success of Microsoft since Windows 1.0 is more to prove, but who could have predicted?
Investors do not want to bet on one of the market leaders, but on_the_leader. Your goal is to dominate the market and not to share it. You must both occupy the ground of your current competitors and adopt a concrete marketing strategy that will allow you to stay ahead of future competitors.
A fragmented market that can be centralized is always of interest. In both cases, the chief innovation lies in creating a better product with significant network effects. These two inventions transformed a market with many geographically distant players into a single global market dominated by an actor.
Some markets have potential that can be estimated in billions of dollars: cancer treatments, search engines, online advertising, etc. If your market is not part of it, prove by A plus B that it can be part of it (or quote a reliable source that proves it), or give an argument proving that dominating a niche market may allow you to conquer a broader and more attractive market.
The Fermi estimates are a great way to show the extent of the market and the quality of your analysis briefly. Count out the number of consumers that exist in this market then multiply that number by your market share. Multiply this number by the number of times that consumers will use your product during the year, then multiply that number by the revenue (or margin, if margins are low in your area) collected for each use. Why not target a broader customer base? Targeting a distinct restricted segment suggests that you are ready to optimize your product and business strategy to conquer those customers. This is much more positive than wanting to reach a wider audience without seducing anyone.
Opt for a brief overview. A detailed financial model may seem inappropriate. Give the evaluator the feeling that you can quickly identify opportunities because that is what will be expected of you.
Sometimes the market is not very developed, but it is not a problem if you can describe to your partner how it will change over the next ten years.
MICHAEL SEIBEL, YC
Explain how your company can grow exponentially to generate billions of euros in revenue. Describe how the business will grow if everything goes as planned.
JUAN CAVIGLIA, MEITER (WINTER 2018)
Share unique information
Following the creation of your start-up, you will spend several years studying the smallest details of a specific problem. You need to think about it now and start your research, whether you’re reading anything on the subject or contacting potential customers.
Show the evaluator that you have already started this research.
Your reviewer will undoubtedly be insightful, but probably not an expert in your industry. Reading your presentation, he must learn things, including information that does not flow from a source for an educated public. Just like talking with a customer, giving an investor unpublished information can give them a reason to remember.
For example, if you sell learning management software for start-ups:
Traditional eLearning solutions are designed to meet the needs of businesses with a large number of office employees, such as hospitals or staff with a high staff turnover rate, such as the restaurant industry. Nobody proposes an adequate solution to the employees of the hyper croissante start-ups who do not resemble either of these two categories. A 100% annual workforce growth means that 50% of your engineering team, your finance team and the management team are new to their position, and this fact never changes. That’s why we offer personalized, fast pieces of training for office workers.
“Accountants in start-ups have as much seniority as employees of fast-food restaurants.” This is an astounding fact that no one, not even in start-ups, had had to worry before, and whose implications suddenly become apparent. Of course, continuing education does not meet the needs of standard business accountants. After demonstrating this, you can explain why this involves making a specific product, marketing, and sales decisions.
Your pitch must also prove that your vision is unique in the market. Talk about your competitors (if you do not have one, it means that the target market is not at all attractive or, even worse, you have not done any market research). Explain what sets you apart and what this benefit brings you.
It is essential to build your case based on real facts. If you have numbers, mention them. Be careful not to be too vague and talk about specific facts. Providing the investor with the information he or she is not aware of is the best way to show that you are in control of your subject. Your knowledge will have ten times more impact if you explain how you acquired them.
MICHAEL SEIBEL, YC
Understanding who your users are is fundamental to seeking funding from YC. We first noticed that our customers hated to enter their transactions manually when they were tracking their cryptocurrency portfolios. We spoke with hundreds of users (including those who chose to stop using our product!), And this allowed us to present our project to YC based on real user testimonials. Moreover, this is even more convincing if the testimonials come from users who bought your product!
CHANDAN LODHA, COINTRACKER (WINTER 2018)
Focus on your growth potential
Many successful companies around the world were not successful start-ups. People who rely on emerging companies do so because they believe in the growth potential of these companies.
Investors remember the beginnings of the current giants of the industry that are Google or Facebook. These were not companies run with an iron fist by a competent management team. On the contrary, these large companies started with a ridiculous budget and were managed by unlikely people who were doing almost everything wrong, but whose incredible potential eventually exploded.
Facebook was a pirated toy that had almost no functionality, but this invention has spread like wildfire. Google was just one search engine among many, but it was significantly more efficient.
Many presentations are similar to “business plans,” that is, a presentation of different aspects of the business. Business plans, which are institutions, rarely give a detailed overview of the project, but usually, contain a myriad of unimportant information. You have very little time, so focus on your strengths.
Remember that while the company’s ultimate goal is to generate profits, investors know they are geared to young shoots, not century-old oaks. At this point, it’s pointless to prove that your business is profitable. If you dwell too much on this, investors may think you do not understand their expectations. You have to sell growth and nothing but growth. Less than 50% of the companies that have recently taken the YC program generated profits at the time of application.
Being able to approach the financial aspect of your business is a good thing, especially if the numbers are attractive, but your growth potential will be your main asset. For example, being able for a company that sells ready meals to calculate profit per order is a perfect thing. The same is true if you can calculate customer acquisition costs for a given channel.
On the other hand, knowing that your profits of the current month have exceeded the number of your expenses of 2000 dollars, is not very interesting. In the same way, your tips for saving a few hundred dollars by remodeling your application or changing host are not likely to interest big world. It is not by reducing costs that we become the next Google.
A good argument must take the form of a fluid and clear narrative. It should reflect your vision of the future, how you plan to achieve your goals, and why you think you have the right team and strategy to succeed. This argument must tell a story and not spread a set of facts.
JOHN COLLISON, STRIPE
Provide evidence of your success
When it comes to measuring your success, you need to ask yourself three questions: do you know the data to be measured? Do you measure them? Are your figures particularly useful compared to the period taken into account?
It is essential to know which key indicators start-ups in your sector or start-ups using your business model are judged. A16Z has written many articles on crucial indicators of start-ups. You can also ask for help from friends or more experienced colleagues working in similar companies. Do not reinvent the wheel, and there are already quickly calculable vital indicators for your sector.
If you sold a product online, you probably have analytical data to understand how it is used. This data will not only help you improve your product faster, but also show that you can analyze user behavior. This makes you more credible to investors.
Specify, for example: “60% of our users instantly invite their team members because teamwork is the real added value of our product. That’s why they give up Excel to migrate to our product.”
Give the right numbers, especially when it comes to your recipes. Do not quote the total amount of sales as your revenue amount. If you act as an intermediary and charge a transaction between two parties, this transaction will be called the “total sales amount,” but only your share will be considered real income. Do not consider a one-time payment for long-term service as a recipe for a given month. For example, you can send the bill for an annual subscription to software in March and collect the money in April, but the revenue is spread throughout the service, not just in March and April. Recipe approximations are synonymous with evil intentions or incompetence.
If you have “traction,” put it forward. Remember this concept. It’s a vague term that comes from the arts, but you’ll hear more about it in the years to come. “Traction” can be defined as quantitative proof of the product’s suitability for the market. The definition of this term may vary from one company to another. Apple and Berkshire Hathaway are worth billions of dollars, but just by looking at their website, you will see that these companies are committed to very different values.
Start-ups often ask us what the targets are for investors. It is difficult to generalize because these objectives are very variable. Investors want you to provide evidence that you have made considerable progress in your current stadium, as well as indications of even faster progress after that.
The figures you supply does not have to be all dramatic, but they must show that you be on track and that you stand out from the crowd. For example, Snap users launched the application 7 times a day on average (while other applications struggled to pass the two launches per day).
Your evaluator will read thousands of encrypted data in a day (a pitch has an average of more than 10 encrypted data). Nobody can remember as many arbitrary numbers, which is why the evaluators classify them as “no one,” “interesting,” “impressive.” Since it is worth quoting a few figures, here are some rough estimates that can help a very young start-up move from “great, they have designed a product” to “excellent, their method of acquiring customers is very effective .”
For low-touch SaaS B2B software, such as Basecamp: $ 10,000 + recurring monthly revenue, over 100 active pay accounts
For high-impact B2B SaaS software, such as Salesforce: at least one driver per software (no consulting services) worth more than $ 50,000 or more being created, evidence of the existence of a sales channel (one to two signed letters of intent, etc.)
For mobile applications: hundreds of thousands of free users or thousands of paying users, ideally with a growing acquisition rate over at least a few weeks
Websites funded by advertising: millions of visitors per month, ideally with traffic increasing over at least several weeks.
The earlier your company’s creation date, the higher the bar. A sentence such as “We have 20,000 active users” will have a much more significant impact on a company created last Tuesday than for a company in place for 3 years. Here is a (realistic) way to help investors see your business at its best: if you’ve been working on a project for a while but have just started to do this, please mention this crucial step as the date of your project. Creating your start-up rather than the date you thought about it for the first time in the shower.
These goals may seem difficult to achieve. They are. However, some of the companies that will apply at the same time as you have already achieved them. If this is not your case, you will have to redouble your efforts and refine your application to show that you have the skills, the energy and the opportunity to achieve these goals quickly, and then continue to develop through the after.
Create a convincing prototype
Bring a prototype if possible. The prototypes show your ability to design a working computing solution. The creators of emerging start-ups capable of developing software are far fewer than we think.
You have only two minutes to present your project. You could get five or ten if your pitch attracts investors. However, that’s not enough to evaluate an IT solution as a whole.
Use the few minutes you have to impress your audience with your software.
Nobody ever said of a company “Great! I was speechless in front of their login page, and I want to invest in this login page. »Give investors direct access to an authenticated session that already contains fictitious data.
Do not take this interview for a training session; no need to explain to investors how to use each of the features of your software. Show them the incredible interactivity of your application. You can also start by talking about the purpose of your application and let the user operate retroactively. For example, if you are trying to impress your contact with your e-mailing software, present the user with a fully-written e-mail or almost, and then invite them to complete and send it.
Deliberately cheat the system. If an interaction requires the action of a third person in a real context, simulate an immediate response (you can be transparent on the subject).
Offer a quality of design adapted to your product. Many start-up accelerators favor founders who have a “product sense,” ie, people who have an undeniable artistic dimension, know what positive user experience is and know the characteristics of the best market products. Be sure to emphasize your product sense, mainly if you’re operating in a market where this quality is essential, such as designing mobile apps for the general public.
Do not think about demonstrating your product at this time. It is quite rare that the investors to whom you present your product become the first users, as convincing as it is. A demonstration is not the best selling point for your business. However, there are exceptions to this rule, especially for consumer products.
MICHAEL SEIBEL, YC
During the interview, you should not bet everything on the demonstration, but make sure you can present something in 20 seconds. Partners may have trouble visualizing what you describe. In our case, the partners did not see the added value of our reservation system: “It’s just a copy of OpenTable? “. Being able to show them our product saved us.
LUIS CAVIGLIA, MEITRE (WINTER 2018)
Be relaxed, but not too much
You can introduce humor, optimism, and joy into your presentations if it comes naturally, so much, the better. It is not necessary to write a sober presentation to appear professional. If you lack eloquence, you can work on your narration later. For the moment, simply list the facts as you would tell them to a good friend.
Can we go too far in terms of humor? Although some investors are not against a hint of irreverence when it comes to following unnecessary rules, remember that a start-up is a workplace and your investors must be held accountable. Do not mention in your story the fact that you are sorely lacking in judgment, and do not expect your audience to congratulate you for this lack of judgment.
Risk-taking is encouraged in the start-up community, but not the reckless risk. Pushing the door of a manager’s office without an appointment is a risk, but it shows your ambition and your business skills. On the other hand, to evoke the details of a crime that you would have committed testifies to a cruel lack of judgment.
Ask for a recommendation if you think it can help you.
Silicon Valley has a particular culture of recommendations. As Marc Andreessen explains :
Getting a recommendation to be introduced to a venture capital firm demonstrates strong networking skills. … It turns out that the skills needed to get to know a venture capital firm is the same as those required to make themselves known to a customer, a supplier, the press, or a recruitment firm.
If you can get a recommendation, ask for it. A good recommendation has two characteristics: it must come from a credible person in the eyes of the decision-maker and prove that you are in some ways above the market average.
A recommendation from, for example, someone who has already received investor funding is a good recommendation:
I have worked in the past with $ ENGINEER. They are the most successful people I have met. Our technology manager has estimated that the deployment will take six months. They did the work in two weeks.
A recommendation that does not come from a credible person in the eyes of the decision-maker is not right, regardless of its content. Any recommendation that does not demonstrate superior market skills or strong and valuable personal support is not valid, no matter who provided it to you.
A recommendation of this type is, at best, neutral, and in the worst case, a negative point. Do not waste your time asking for irrelevant recommendations to get a recommendation.
People immersed in the culture of Silicon Valley are very attentive to the recommendations because they are precious on the social level. A recommendation is not a simple e-mail. A definite recommendation benefits those who give it by strengthening the relationship that it has with both the person it recommends and the recipient of the recommendation. It is by recommending everyone for no good reason that the recommendation loses its value.
No recommendation is required to submit a project to YC. This is one of the reasons for their success. They chose from a wide selection of talented candidates who were not recommended to any Silicon Valley venture capital firm. In one of the last YC classes, almost half of the participants had no relationship with YC. However, if you can get a quality recommendation, do not hesitate, it will be useful.
Do not give up, no matter the result
Many companies have had several refusals before they are successful. A refusal does not necessarily mean that your project is uninteresting. YC explains that only a limited number of start-ups can participate in the program and that those who are rejected late in the selection process are often in favor of another candidate who just had something extra.
If your pitch does not fly this time, do not get discouraged and keep developing and tweaking your project. You will have other opportunities to present it to investors, just as there are many opportunities to attract potential clients or job candidates. You could even end up seducing the same investor who failed you! In one of our latest promotions, 50% of the companies had at least one creator who had been rejected by YC in the past.
Do not let go. You will probably experience other hardships throughout the life of your business, be aware of this failure, and continue your efforts. Develop your skills, your business, and try to improve your pitch to hit a new opportunity.
If your application to a start-up accelerator is accepted or you have found funding, congratulations, but nothing is won! Celebrate it, then go back to work. Success brings more significant challenges and bigger challenges.
Whether you’re just starting your project or you’re ready to tackle more significant challenges, we’re here to help.