In the first quarter of 2019, investment totals declined from peak Q4 2018 levels across all stages except for Technology Growth rounds. There were 103 supergiant VC rounds (raising $100 million or more) – that’s more than one per day. Deal activity at the seed and angel stages was declining, as investors were reluctant to pay for the riskier early stage investments, even if they have plenty of capital available.
At a time where investors are weary of taking risk, your startup’s most important asset is a strong pitch. As an advisor to early stage startups, I’ve seen hundreds of investment rounds and learned that the beginning of the elevator pitch is make or break for investors – the rest is just a waste of everyone’s time.
Back in 1999, Google’s 11 word pitch wowed venture capital investor John Doerr with its simplicity – “organize the world’s information and make it universally accessible and useful” – resulting in a significant investment.
You have to make a strong case for your venture’s business opportunity, and you need to do it quickly and effectively. Entrepreneurs know this, but they often lose their way when it comes to execution.
Our structured method, based on the 4Cs of diamonds, will help you sculpt your pitch and secure an early stage investment round.
1. Carat – List all your key points
The first step is just an outpouring of passion for your venture – you want all the facets of your story there. Write down whatever is meaningful to you without censoring it.
Get twenty or thirty bullet points down on paper and then organize them according to the different categories of your argument: today’s challenge, how your product solves it, how it is unique, any traction or validation that you can claim, and anything else you feel is relevant. Make sure to support your high-level assertions with statistics and facts.
2. Cut – Hone your message
Now refine your message. Precision is key at this stage. It’s hard, but kill your darlings – shave off aspects of your story that are superfluous to your core message. Get to the fewest number of bullets that you can without losing essential aspects of your argument. As a general rule, you have about 20 to 60 seconds to pique interest and get a foot in the door.
Make sure that each point is concise as well. A recent Microsoft study found that people lose concentration after a mere eight seconds (goldfish can actually focus for nine). Today’s digitized brains need information in bite-sized pieces that can be digested quickly and easily.
3. Color – Bring your story to life
Take the outline of your key messages and turn it into a compelling pitch. Here is where you translate dry facts and figures into a story that will speak to investors’ emotions.
• Some ideas work best in story form. You can explain how you saw the need firsthand by sharing a personal anecdote, e.g. “In my ten years working at McKinsey, I saw that no one had time to take in their dry-cleaning, even though they needed clean clothes for business meetings.”
• A mind-blowing statistic can illustrate your challenge effectively: “Did you know that 4 out of 10 British pilots admit to falling asleep in the cockpit? Our sensor identifies when pilots are getting drowsy and sets off an alarm.”
• You can also add color by demonstrating use cases that make the abstract concrete. Explain the need via a day in the life of a potential user: a frustrated programmer, a tired commuter, a hungry graduate student, etc.
• Humor can be an effective tool as well. Connor Blakley, Chief Marketing Officer for The Campus Agency, describes his job as follows: “I help old people understand young people.”
Stay away from jargon, superlatives and bombastic claims – too technical, and you will lose your audience; too grandiose and you will be dismissed as naïve.
4. Clarity – Communication is key
The clearer your pitch, the higher its value. Formulating a winning argument is only half the battle. You need to effectively communicate your pitch to investors. Your delivery and body language need to convey competence and strength. It’s less important to say every word of your pitch and more important that your conviction comes through. Studies show that words only convey about 7% of what you’re trying to say – your facial expressions and tone of voice make up the remaining 93%.
I suggest that you find an intelligent college student and practice your pitch on them. After hearing your pitch once, can they summarize it accurately? This is your main challenge. If the answer is yes, then you have built a clear and successful pitch.
It’s understandably tempting to try to get all your ideas in. However, you will more likely open doors and capture investor interest if you curb your enthusiasm and whittle down your verbiage. By applying the 4Cs, you can show off your jewel to its best advantage and have others appreciate its worth.
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