What to expect when you pitch me your startup idea
I talk to at least a dozen new entrepreneurs each week and probably review two dozen email pitches. Here’s what to expect the first time you contact me and how to get the most out of it.
Get an introduction if you can
It’s always best to get an introduction from someone trusted by the person you want to meet. If you contact me cold then we’re probably going to exchange a few emails before I invite you to meet in person (however, it’s worth noting that I still do take a lot of meetings this way).
There are some people for whom I will immediately accept any introduction because I know that they already have a very high bar for the type of introduction they would send to me. Capital Factory Mentors for example, or CEO’s of companies that I have invested in. Those are the people you want to have send me an email on your behalf.
Here are some tips on how to make your email introductions most effective.
Things to ask yourself before we meet
Regardless of how you are introduced to me, here is the thought process that goes through my head and drives the questions I’ll ask you:
- Can I help your company? Is it an Texas-based tech startup company or is it doing something in the email space? I only advise and invest in companies where I can have a big impact. For me, that’s any tech startup company in Texas or any email related company in the world. I’m also interested in investing in people who have worked for me in the past or who I know through the Aspen Global Leadership Network and Henry Crown Fellowship.
- Are you someone I want to help? Is what you are doing awesome? Is it something I can use to make my own life better? Do I like you and want to spend time with you? Do I believe you are the person who will win at this?
- What is the idea? I want to understand who the customer is, what problem you solve, and how you do it. If it’s in a space I’m familiar with then it might be obvious to me or other times it takes me 2 or 3 meetings to really understand what it is you’re doing.
- How do you make money? I want to understand who pays you and how you can quantify that your product saves them time or money. If your answers starts with, “We have multiple revenue streams…” that’s a bad thing. What I really hear is, “We have no idea what the most significant revenue driver will be.“
- Is this a big enough market to support a venture funded business? It might be a great idea with a solid business model but it still might not be a good fit for venture funding. If it’s a big opportunity that requires millions of dollars to develop the product before you can make money, it could be a fit for venture capital. If it doesn’t require much capital to get started and make money then it might be a better idea to bootstrap it. In either case, the best kind of funding comes from customers, not investors. A general rule of thumb is that you can raise a few hundred thousand dollars to create a business that exit for $10+ million and you can raise a few million dollars to create a business that will exit for $100+ million.
- Do you have any traction? Do you have a minimum viable product? Is anyone paying for it? Work backwards from there… has anyone committed to paying for it at some point in the future? Do you have a waiting list of users that have expressed interest? How many prospective customers have you talked to and what was their detailed feedback?
If you’re raising a seed round of funding, make sure to read this post.
The first meeting
Our initial meeting will probably be short — around 20 minutes. So it’s important to get straight to the point. I don’t want to spend the whole time being lectured with a slide deck. If you have a meeting where you do all the talking go through your slides in perfect order, I would consider that a bad meeting. The best meetings are just conversations, not presentations.
The first question I usually ask is, “What are you hoping to get out of this meeting?”
The answer is usually that they want to join Capital Factory or that they want me to invest in their company, but often I find that the most interesting entrepreneurs have other very specific goals or reasons why they are contacting me. It’s always a good idea to state your goals at the beginning of the meeting so that we can make sure they are addressed.
In our first meeting, I feel like the most helpful thing I can do is to help you identify the biggest risk areas for the business and to offer to make introductions to other possible collaborators, advisors and investors.
Sometimes the risk factors make people feel defensive. You want to be a sponge, not a mirror. I would encourage you to suppress that feeling and realize that every startup company has risk factors — startups are inherently risky! Over time, individual risk factors are addressed with data from the real world. Without any real world data, it’s easy to think up reasons why something might not work. With data showing that it works, none of the ideas about why it might not work matter anymore. The correct response to risk factors is to talk about what tests or milestones you need to achieve in order to address that risk factor. “We believe the risk of low consumer adoption will be addressed if we can show a Viral Coefficient of 1.5 with 95% Monthly Active Users. Do those numbers sound right to you?”
Expect to have multiple meetings
Mark Suster has a saying that he likes to invest in lines, not dots. He doesn’t want to meet someone and immediately invest — he wants to get to know them over time. The best way to impress me is to tell me that you are going to do something and then to go do it. It sounds so simple, yet it’s one of the hardest things for startup founders to do. At the beginning stages, everything is changing rapidly and most things take longer than expected. Just being able to accurately predict what you are going to do and then report back about your results will make you stick out from many other startup founders. This might sound something like, “Over the next month we’re going to talk to 100 potential customers and see how many we can get to agree to pay $300/month when we launch the product later this year. If at least 30 of the customers agree to pay then we will move forward with the financing required to complete the product.”
Do your homework
Reading this blog post is a good start! It’s always obvious to me when someone has and it definitely gets our meeting off to a good start.
If you’re coming to meet with me, please review these questions and think about the answers beforehand. Even better, send me the answers in a concise email 48 hours before we meet so that I can read them before we meet and jump right into the discussion.
