Pitching is a Science but Closing is an A.R.T. F.O.R.M. took place on Friday, October 17, 2014, at 11 a.m. MDT. The webinar was led by Chris J. Snook, entrepreneur, author, venture catalyst, purveyor of Launch Haus Labs, and the man behind Ft. Collins Startup Week. Chris was joined by P2Bi’s cofounder and president, Krista Morgan. Together, the two walk entrepreneurs through the structure of the perfect five-minute pitch in an investor deck context. This valuable webinar on successful pitching can help anyone looking for tips on pitching to investors and other stakeholder audiences—whether you are brand new to the concept and are pitching your first company or have delivered a few pitches already and are looking to improve.
Special guest investor Larry Curran joins the Q&A at the end of the webinar with some tips from an experienced investor.
About Chris J. Snook | @ChrisJSnook
Chris is an award-winning entrepreneur, author, venture catalyst, pitch coach, purveyor of Launch Haus Labs, and the man behind Ft. Collins Startup Week. Chris has seen thousands of companies deliver their pitch and developed a workshop to inspire and educate companies looking to hone their pitches for investor audiences. He is also the chief commercialization officer at Unite For Literacy, a venture-backed social enterprise driving picture-book abundance to improve literacy rates globally and Clinton Global Initiative Partner organization.
About G. Krista Morgan | @Krismtl
Krista is the president and cofounder of P2Binvestor, a crowdfunding platform for receivables-secured commercial lending. Since the beginning, she led operations and strategic direction for the company, growing client contracts to more than $7.3 million and receivables purchased to more than $20 million. Before starting a financial technology company, she worked in digital marketing and managed accounts for major brands at some of London’s top agencies, and earlier she managed operations for a custom motorcycle frame manufacturer.
Krista Morgan: Good morning, everyone, and welcome to our webinar today called Mastering the Five-Minute Pitch. I’m actually really looking forward to this morning’s webinar. I think we’ve got a lot of people joining. Just feel free to enter your questions in the chat box as we go along, and we’re going to get to them at the end. We’ll probably run through this in half an hour-ish and then have a good 15 minutes for questions. Okay. Let’s get started! I’m Krista Morgan, President and Co-founder of P2Binvestor, and you can find out all about us at P2Bi.com. I’m here with Chris Snook, who is actually a pretty good friend of mine, much to my chagrin, and runs Ft. Collins Startup Week, has done all kinds of cool entrepreneurial stuff. Chris, do you want to take a second to do an intro?
Chris Snook: No. I’m just happy to be here.
Krista Morgan: All right! Anyway, between Chris and I, over the past couple of years, we’ve seen a ton of five-minute pitches. Everyone now is getting in… there are more and more incubators, angel groups, and in all of these circumstances, we’re so often, as entrepreneurs, being asked to do a five-minute pitch. I say a five-minute pitch is a lot different to even 10-minute, 20-minute, one-on-one with an angel investor. The purpose of today, what we want to talk about is just what are the critical things that you should have in mind when someone says, “Come, and stand up in front of a crowd of people, and give a five-minute pitch.” The audience we’re thinking about today is really equity investors, so when you’re going up and asking people for investment in your company. And so we’re going to look at what’s the best way to do this.
Chris Snook: Let’s talk about just a little context first. There’s about 11, 12, 13 of you hopping on the line right now, which is awesome. The first two things: there’s a law of gravity that we’re all familiar with, and I’ll put it in context because raising capital and certainly closing capital—which you need to do to raise capital—is just like the law of gravity, meaning you really don’t have to work with it. When it works, it works; when it doesn’t, it doesn’t. So if you and I walk out of this building and were descending on College Avenue here in Ft. Collins, and we stepped off that ledge, we could disagree with the law of gravity, we’re hitting the ground. And so our goal and my goal whenever I talk with entrepreneurs is, with your five-minute pitch, with your two-minute pitch, whatever it is, what you should be trying to do is figure out, we’re in the efforts business, and then capital coming in is actually a lawful exercise. We have to get it to the point where we have to walk off the ledge theoretically.
The law of raising capital is based on three things. At the end of the day, for me, my goal for anyone listening to this right now is that you will have a pitch that, however you deliver it, what you are actually going to cause your listener to do is become very conscious and subconsciously driven by these three things. They’re going to see that you have a need that you’re filling, and they’re going to believe that your ability to fill that need is better than anybody else that may be trying. Ultimately, what you’re really going to do is that if your business is fundable, investible; your idea is going to win out in the market. It is going to be very hard to replace you.
Regardless of all the tactics and all the strategies in the different slides and the three little pictures, and all that stuff, if we’re not giving a clear understanding of the need for what we do, our ability to do it, and then how hard it will be to replace us with something else, it will fail. So at the end of the day, let’s keep the main thing the main thing. That’s the law of raising capital. There’s another key belief. I’ll say context for us so that we can kind of better understand this, but there’s only two ways to make money: you at work, and your money at work. And so when you’re pitching the capital, remember that they don’t want to work anymore. Their work is putting money to work. So they’re looking at it through that lens, and we have to think like an investor, not like a founder. We are a founder or whatever, but we have to think like an investor. An investor is looking for putting money at work in a way that it is going to grow, at a rate that is exponential to what they could do in a “risk-free” kind of return. At the same time, they want to de-risk it as much as possible. And so that takes us to the next one, which is, again, just a little bit—some of you may be well-versed in this already, but for those who aren’t—when we pitch, especially institutional capital, venture capital, there’s a law that some of you may have heard of called the power law, and all venture capitals for the last 40 years that’s been around has been based on power law because that’s what the statistics show. Essentially, what that means is, regardless of how many investments they make, one to two companies in that portfolio is going to return the fund. So if they have $100-million fund, at the end of the day, if they raise another fund, if they’re successful in venture capital, and they continue to be getting hedge and fund money and everything else in place, that’s because two companies returned 10x the fund between the two. The other ones, whether they were successful or not contributed in a very minimal way or flat out failed. So whenever you’re pitching an investor, understand the size of the fund. If you were pitching a $100-million fund, even if you don’t know if you’re an $800-million company, realize that they’re looking at you subconsciously if nothing else, like, “Is this an $800-million exit? Because if we have 15% of it, 30% of it, whatever we have, at full dilution, then is this one of the two deals that, 10 years from now, we’re going to go, ‘Thank God we’re in that deal because it gave us the ability to actually return this fund’?” Do you have the potential to be that? Is there $1-billion fund? The math is just big. They’re looking at you as are you going to be one or two of those deals that’s going to exit at that value. That’s the game you’re playing. Just some quick context before we kind of jive down in some of the technical stuff.
Krista Morgan: Awesome. I think that’s really useful and I think the key takeaway, which I believe, yes. Really, what we’re saying here is that when you’re going out to do this five-minute pitch, you have to think about who the audience is, and you only have five minutes. So what are you really trying to… what’s the outcome that you want? You want to give them one, great, compelling reason to want into your deal because you only have five minutes, and you just want to grab their attention and say, “Here’s the thing that makes me more investible than all these other guys.” It is really about just piquing their interest. There are entrepreneurs who get up there and try to cram 15-minute worth of information into 5 minutes… It’s just never that effective based on what I’ve seen. The less that you say and then the more passion and kind of combination of passion and reason that you put into those five minutes, it’s just going to get them excited. They don’t need to know all the ins and outs of your business. And in the pitch, five minutes, the pitch is about you. It’s about showing the investor that you are the type of founder that can stand up, clearly articulate what you do and why it’s really exciting. You are really selling yourself. By doing 15 slides that are really details about your business, you’re going to lose… It’s no longer going to be about you as the founder who has this great vision that they’re going to buy into it. You’re getting too wired in the details. I don’t know, Chris, if you can add anything.
Chris Snook: I think it’s right. It’s about you, and it’s about you being used to get them where they’re trying to go. Investors don’t have anything… they don’t have a job if there’s not people like us, and at the same… I mean they don’t because, at the end of the day, you’re putting money into a vehicle, an asset class, and when you put it in the stocks, then you have those things. When you put it in the real estate, you have an idea of what’s driving the value of real estate. And when you look at venture investing, early staging or whatever it may be, there’s an asset class there, and they’re looking at we’re mules; we’re horses. We’re to be ridden. Just like if you would on the races and you’re betting on a horse, you’re looking at the horse and the paddock, and you’re looking at that stuff. That horse is gorgeous. It’s brushed. It’s strong. Some of them are… they’re looking at us that way. It’s not a beauty contest per se, but depending on what kind of deal you’re in—if it’s a very consumer based deal—then the showmanship and you’re ability to present is key. If it’s a really, really, really complex, scientific, bio science thing, then what’s sexy is someone who looks like they never come out of the lab. So you kind of understand. Play to your strengths, but at the end of the day, you are selling you, and you want to sell you as the horse they’re going to ride to 8x, 9x, 10x their money.
Krista Morgan: It’s not that we all, as entrepreneurs, want to be thought of as horses, but it does seem sometimes like that’s the reality of it. When you’re thinking about structuring your five-minute pitch, people’s attention spans are short. Even if someone’s giving you… In my experience, if someone says, “I’ll give you 12 minutes for this pitch for that, I would way rather have a great six-minute pitch and keep the extra time for more questions because it’s really hard to hold someone’s attention. We think about all the stuff on YouTube and video. People… our attention spans are going down, and we don’t necessarily… even if you’re a great presenter, they don’t necessarily want to hear you talk for 10, 15 minutes at a time. It’s just harder to hold their attention.
Chris Snook: Yeah. In my experience is great pitchers—and you’re one of these—is someone who could talk for five minutes, but it feels like two. And you don’t want to talk for more than five minutes before they’re asking your questions because what we’re trying to do is give you a five-minute pitch that feels like two or three to the person listening and then causes them to give you 15 because, now, they’re asking questions. That’s when you own them. The goal of the five minute pitch is to buy the next 10 minutes, but it doesn’t mean so that you can talk at them but so you can talk with them. Again, that’s how I would encourage using a five-minute pitch. If it’s in an angel format where they’re going five minutes, and there’s five minutes Q&A, fine. Then, same thing. What you want is you want that five-minute Q&A that they have “standardized” to not be enough. You want 15 people that are sitting in there in the angel audience pissed off that they couldn’t get the question in. And so when you’re walking off stage, and the next person’s up presenting, they’re leaving the room to go ask you questions in the hallway and the next guy loses out. Again, psychologically, that’s how you should be thinking about that. It’s the format.
Krista Morgan: And I think that’s going to carry you through this whole… Everything of the five minutes is about telling them, get them excited, but actually deliberately not answering even some questions that seem obvious in order to get them to ask it because Chris is right. Once people start engaging with you… and those moments, as an entrepreneur, where people are asking you questions, and you can give them a compelling answer, that makes you seem even more knowledgeable…
Chris Snook: On that point, to give you maybe a practical point. If you have something that you kickass, like a major differentiator, my thought would be within that five minutes, create a gap between the problem you’re solving and the outcome. For instance, if someone says, “Oh, what about so and so that competes in that space?” and you know that that objection’s going to come, you know that question’s going to come, instead of overcompensating and saying, “Here’s how we beat so and so,” say, “Here’s what we do, and here’s how much money we will make on the other side. And here’s why no one… and here’s what no one else has done.” So that when they say, “Well, what about so and so?” they’re asking you about so and so, and you are saving all that ammo where you kick their ass for the response to their question versus pitching it in front of it. It’s a strategic way of playing the strengths of make the Q&A where you do your best selling.
Krista Morgan: I agree. And then obviously—and I know all of you have heard this law – tell a memorable story, but I was chatting to a girl who was a really… She was pitching. And it just so happened that I sat with her and went through her pitch beforehand, and she went through it the first time, and it was good. She went through explaining this. Her slides were good. It was a very effective “here’s my business and what it does.” And then, she started saying, “Well, here. Just take a look at my main deck,” and she got all her slides out, and as I looked at her main sort of investor deck, what it said was… her first couple of slides were, “Hey…” she’s in oil and gas sector. She was presenting a renaissance in drilling right now. Everyone’s looking for more oil. And right now, the way people do that…” she’s like, “I’ve been into these oil companies. The way the posters hang on the wall, like thumbtacks and string, so they’re making their decisions on that. And then she had a slide that said, “And what we’re doing is we’re doing for oil and gas drilling what money ball… what [stats 13:42] and predictive analytics did for baseball. And I was like, “Oh, I get it.” As soon as I understood that she was doing like money ball for oil and gas drilling, I was totally hooked, and it made me immediately connect with her business on an emotional level that I hadn’t when she had taken out that kind of presentation.
So storytelling isn’t complicated. It’s just about saying, “What is it that can get me to connect with people at a very emotional level and have them go “Oh, I do really understand that.” And that’s different for everyone, but that’s what you’re trying to find in that five-minute pitch – what’s the kind of story that identifies with what you’re doing and see the need for it.
Chris Snook: Yeah. And I think storytelling also allows you to simplify on the other side the complexity which you have to do because, no matter how smart the audience is, we all like stuff simple, and easy, and pragmatic. So storytelling’s a great tool to do that.
Krista Morgan: SIMPLE MATH. It’s Chris’s slide. You should talk about SIMPLE MATH.
Chris Snook: A structure gives you freedom. I’m not a structuralist by nature, but I’ve come to appreciate structure over 15 years of doing businesses and also pitching because it gives you the freedom to kind of be yourself and to be different. Most of the slides that people are going to do in a five-minute deck are going to be 10 to 12 slides. 10 slides will give you 30 seconds a slide. That’s a lot of slides even for five minutes. My goal would be use an acronym that I call SIMPLE MATH to make sure that you don’t have a slide in there that does two of these and not one of the other, so then, you’re having redundancy in your slide deck and you only have five minutes to present. At the same time, you don’t want to leave one of these out. There wouldn’t necessarily be a slide for being humble. That would be a thread that you are trying to communicate throughout your thing. You could be humble and powerful. The way that you would do that is to edify or build up other people, someone asks the question, “What if you’re pitching on someone else’s behalf.” I mean, at some point, you always are—even inside your own company. You’re going to talk about your team in a way where you’re being humble but actually bragging because, in order to have a great team, you are great. We try to acknowledge who we want. Anyone who’s been around awhile knows we attract who we are, not who we want. So if we have really smart people around our team, which makes us more investable, by nature we don’t have to be really smart. We don’t have to tell anybody. The chance to, again, thread humble into the whole deal by building up other people. I have the right to brag about our CTO because I’m not that damn smart, that kind of stuff. Anyway, Short and tangible. Interesting that kind of goes without saying. Management – obviously, you’re going to highlight that, but you’re not going to drill down too deep into it; make that part of the Q&A; that’s more of that gap you want to create. Your experience, it is relevant. How did you come up with this? One way that I’ve seen it done really well in five-minute pitches is I was doing this that and the other thing, and then this really pissed me off. And I had said, “Well, there’s got to be a solution for that, and come to find out there wasn’t.” And the person who invented the cardboard thing around coffee cups because they thought that’s got to be a sure thing but it wasn’t. Experience does have relevance. Problem and pain – that should be obviously number one and kind of like the thing you hit. What problem are you solving, and how bad is the pain? How are you going to get the leverage and scale? Your Enthusiasm should come through. I mean whatever your personal style is, there should be a passion. Or go do something else because I would never invest in anybody that isn’t hell-bent on what they’re doing.
Are you going to make a Market or take a Market? Clarify that. In you five minutes, at least let them know. You’re growing a market that doesn’t exist, or you’re going to rob one that does. I mean be very clear at least to deliver—you’re taking one or making one. Think quickly about your competitive advantage. What makes it unfair? Why should it be illegal to do this because you’re going to rob everybody’s bank And then it’s all about Tactics. And then, again, your trigger. Get that in so that you’d laid enough ground to ask pointed questions that they care about or they want to know during the five-minute follow-up.
Krista Morgan: I agree. I think this is great for a gut check when you’re thinking about, “Do I put this slide in or not?” You can ask yourself, “Does it fit in here? Does it fit one of these things or not?”
When we’re putting this webinar together, I thought, over… I don’t know how many pitches I’ve done the past couple of years, at least 50 times I’ve gone up and pitched, and every time I’m getting ready, people are like, “Let’s sit down and look at the pitch,” and, “Actually, we want to talk about our competitor analysis,” and, “We should bring up our SWOT,” and, “We should make sure that we have our projections but also our past financials and documents and don’t forget our go-to market rate.” People strategize all the time. There are a million of things that you can say in this five-minute pitch. My opinion—and it’s absolutely an opinion, and it may not be right for your business—is that there are a couple of things that I think, in five minutes, are the most important things that you want to say and that everything else can come up in either the question period or the follow-on conversation that you’re going to have with investors. There really is a lower level of priority when it comes to how do you hook an investor in five minutes. You obviously need to tell people what you do, and you should be able to say what you do very quickly.
P2Binvestor is a complicated business, and when I’m wandering around, people say, “What do you do?” I say, “Hey, we’re crowdfunding business loans,” and that is a very simplistic view of what we actually do, but it communicates enough to people that if they know about it, they’ll say, “Oh, what type of business loans?” and then you go from there. And if they say, “Cool,” you know that that’s probably the end of your conversation. Clearly saying what you do, why it’s better, what is the problem that you’re solving, you always want to give an idea of market size. To Chris’s point earlier about VCs they care, “Is this $100-million market, $1-billion market, $1-trillion market?” So have something at market size. The team slide—this was what we’re seeing earlier—I always have a slide in my deck that has the team, but what I have seen too many entrepreneurs do is they start going, “So, there’s me, and so there’s my CTO, and he’s done all this stuff. And then there’s my CMO, and she’s done all these amazing things.” The next thing you know, you go through three or four people, and you… I mean that’s two or three minutes used already.
Chris Snook: Yeah, you’re getting cut off right now.
Krista Morgan: Yeah. And no one…No one cares. So what I do is I put the slide up, and usually, what I would say is something like, “We have an awesome team. I’m so proud of the team we’ve built. I’ve got full bios available in our executive summary,” and then I move on because you want to tell the investors you have a team, but you really don’t want to spend time on it in my opinion in the pitch.
Chris Snook: And I think there’s a lot of confusion out there too, and so I’ll give you my two cents on why I think that is. Kauffman did a study that was over five years long, and they looked at what are the key variables that drive venture returns. They looked at a hundred of things: persistence, relevance, ideas, scale, etc. One thing that they found that was actually substantial was team. Specifically, there was like an 8% chance of being a better than 2x or 3x return to get one founder who went to like 20 then it was two. And then when you get the three or four, there was like a 56 or a 50 something percent. So there’s actually a published data that said the number one thing to invest in is team. As founders though, we have to remember is that only matters when we’ve sold them on the idea we’re solving a real problem. So what you’re saying and to give you why I agree with you in the five-minute pitch, forget selling the team in the five-minute pitch. Sell them your problem solution. If you get me hooked on you’ve got the next big thing and I am not allowed to curse on this? I’m sorry. I apologize. PG13. We should be alright.
If you have the thing that is then next thing, the first question on any sophisticated investor’s mouth is going to be, how are you going to do it; who’s helping you? That’s what I was talking about earlier. When I was saying “set the gap,” if you know your team kicks ass, set the gap. Sell them so hard that this is the next thing so that the first and only question they ask are, “Well, tell me about your CTO. I mean do you have the people to pull this off?” and you go, “Oh, let me tell you about Joe,” or, “Let me tell you about Sally,” “Let me tell… they ran this, and they went public there. My CEO…” and now, suddenly, you own them. That’s the strategy of using team.
Krista Morgan: Agreed, agreed. And then traction, and I actually put this in because, for a long time, I really didn’t have a lot of traction things to put into our pitches, and now that I do, I can tell you it is one of the single, most important things that an investor wants to see after what you do and actually tell me about who’s buying it, who’s interested, what have you done so far. More and more angel investors are wanting to invest in people, like that very early stage where you really haven’t done anything. It’s getting harder to get money, and you want, in your pitch, to think about… and traction might be, “I got 50,000 Facebook likes.” If that’s all you have, then put that in there, but give them something that says, “I am gaining some kind of traction in the market. Here’s what I’ve got going.” It also shows that you’re moving, that you’re doing things even before you have the money.
Exit plan, again, one of those… I always have a slide. It says, “Hey, don’t worry. We’re going to exit,” because angel investors don’t want to… they never want to hear that you’re going to stay in this business for the next 10 years. But again, don’t’ spend a lot of time on it. “Hey, we think we can sell out to a company like this,” some logos on the slide, and maybe a line that says, “Here’s another company that did a similar exit.”
Business model, you got to answer the question, how are you going to make money? I would put in again a revenue chart, but don’t go through the financials. I understand that so many investors get to a big hard-to-read financials chart, and again, two minutes can go by during, “… and we’re going to grow 30% from year one to year two, and then 50%, and…” no one needs to know that in five minutes. In five minutes, usually, the things that I hit on is I put a bar chart showing revenue growth with a line of profit, and I’ll have a big caption that says, “Max cash burn,” or, “Expected profit margin in year four,” like just some stat that you think will resonate with your audience without getting into the nitty-gritty of it.
Chris Snook: And on traction—this may sound a little woo-woo, but it works. It’s worked for me anyway, and I think it works in other areas of life—so much gathers more. So whether that’s you want a date, go find three people to date, even if they’re not your ideal spouse or whatever because much gathers more. What you’re saying with traction is, when you get customers, get them banging together; get them colliding together; get them to talk about them with each other. Like, brag about one customer to another one if they did something cool because that shows traction. And so emotionally, it creates traction. When you’re in your five-minute pitch, you’re talking about you raising money. Before you get up there and pitch anybody—this is the part where you got to be willing to shoot stuff in the back of their head, meaning your idea—if you would put $800,000, $500,000, $1 million or two, if you had $1 million or two to invest, would you put it into your deal? And the only thing that’s not an issue. Everything else is the same. There’s someone who is leading it, is pitching like you, but would you invest in your own business at the level you’re asking someone else to if everything else is the same except you couldn’t be active in it? If you couldn’t see yourself doing that, then fix something because something’s broken. Meaning, my first business, I raised $500,000. $300,000 something of it was friends and family and stuff like that. Three years later, I’m in this venture capital investment competition. I’m looking at all these businesses. I’m learning how venture capitalists think in an exercise that was unrelated, and I go, “Oh my god, I would never invest in my first business.” I would have never done it.
And so I lost four years, $500,000 of my own money because I didn’t understand how to think and look at it objectively. I didn’t look at it like it’s not my idea. I looked at it like, if someone came to me and I had $1 million sitting around, and this was available, would I race to get in? And if you won’t race to get in, then your energy (the woo-woo part), your energy when you’re presenting it is not going to be optimal. You’re not going to get traction in that room. If you are so convinced, even if you’re bat-shit crazy that you would throw money at this, if it wasn’t your idea, then you would resonate that in every slide and every piece. And when you talk about customers and you talk about traction, whether it’s 50,000 likes or not, it won’t feel minimal because you’ll be so convinced that this is the best thing in town, independent of you, that that’ll come off. Again, try and really be disciplined with how you assess the investibility of your deal, and try to think like that, “Would you invest in this if it wasn’t your idea?”
Krista Morgan: Yeah, I think that’s definitely critical. To just finish this out, the deal you’re offering, one good slide, “Hey, our company’s worth this much. We’re raising this much, and here are the broad terms of the deal,” but don’t spend too much…
Chris Snook: What are your thoughts on this, on the last slide? In a five-minute pitch, what I’ve seen as effective—but I don’t know if you’ll agree with this or you have a different way of seeing it—the last slide should be your ask. And so like, whatever that is, the tenth slide, whatever it may be, if you’re asking for, let’s say, $100,000, when you finish your pitch, right now, we’re in a round of whatever, $800,000, that’s going to buy us this much runway, tell them how much runway. That’s going to allow us to do this. Speak loosely, you don’t have to have a chart necessarily, you could, but just keep it clean. $800,000. And we’re going to buy this much runway or in the middle of the ramp, if you’ve got some of it committed, please brag. Half of it’s already committed. $200,000 is committed. We’ve already got $150,000 who commit. There’s still some left. There’s still room. And then leave that. The thank you should be below $800,000. Like thank you. Don’t have a slide if you’re in a five-minute pitch because what you want is, ultimately, if you’re in a five-minute pitch with five-minute Q&A, like some of the angel groups, you want that slide up there while they’re asking you questions. And then if they ask you a question that you have a supplemental slide for, you can flip to it. But my strategy is put in their face, like leave the ask up, is again, I’ve seen that done well.
Krista Morgan: I would tend to agree with that. Think about your last slide just having it be a thank you slide is maybe not the most effective use. Again, these slides are available for download. This is just my kind of general suggested narrative when I’m thinking about a five-minute pitch, that you do want to think about your introduction because the first minute, and I’d almost say the first like 35 seconds of your presentation are the most important. That’s when you’re taking the audience who are all sitting and looking at their cell phones because someone just finished, and there’s been this transition time, and you’re standing up on stage, and you want to grab their attention.
“Hi. I’m Krista Morgan from P2Binvestor, and I’ve got a billion-dollar idea I want to tell you about.” It doesn’t have to be that, but it’s got to be something that gets people going, “Hey. I’m interested in this.” And then you’ve got their attention, you can say, “Look. And I’m solving… I’ve got a billion-dollar idea that I’m solving a $5 billion problem, and I’m doing it with this amazing crowdfunding and technology approach.” So you kind of get through, “Here’s what I’m doing to solve it. This is why it’s better than anything that’s out there. Here’s why now. And why now I would not spend a ton of time on. You can say we think this is the right time. I’m going to make money this way. Or your competitors, I don’t… I mean that’s…I actually don’t often put who are your competitors in it, but…
Chris Snook: In a five-minute slide, it depends. If you’re in a crowded space, and everyone in that room knows it’s a crowded space, then it could be relevant as one of your slides because it could fall into one of those SIMPLE MATH things. What I would typically do is do a graph where you have like a top-right box, and if there’s like…
Krista Morgan: Quadrant.
Chris Snook: Yeah, top-right quadrant. And graph your competitors visually against like, “Some do this part of the solution really well. Some do that really well, but we’re up here.” And so visually, they go, “Okay, there you go.”If you’re not in a super crowded space, or it’s not known that it’s super crowded, then, yeah, wait for Q&A and have a supplemental slide that really speaks to the differentiation. Mention it. Say, “We compete against this. We compete against X,” but don’t waste a lot of time on it unless it’s like you’re really going into a crowded space and everyone’s going to laugh at you if you don’t speak to that.
Krista Morgan: Agreed. I think that’s a really good point. Same with who buys your product. I mean it’s good to say, “This is our customer.” You could combine, “This is my customer, and this is my plan to get them.” Team slide, we talked about. And then, yeah, how much do I need, what am I going to use it for? And just think about, what is the investor getting out of it?
To Chris’s point earlier, he’s saying maybe you end on the ask slide. I often end it on a slide that was, “Here, look. Here are the three…” I call it the “why invest” slide. What are the three things? I have a huge idea, and there’s no one else doing it. I have technology that nobody else has. I have a team that’s done this four times before, and they can do it again. This is our fifth homerun – something that if you can boil the reason that you are going to succeed into two or three things, put them on a slide. That’s what going to get investors excited, and that’s what’s going to make them want to ask more, get them asking questions, get them thinking about your deal.
Chris Snook: I think the other thing too is this doesn’t end up in a slide, but it shapes how I would present it, and I think it shapes how good presenters do it: do your homework on who the hell is there. If you’re speaking to a certain group, check out the last three deals they funded. If they haven’t funded a deal in six months, consider whether you should even waste your time, if it’s been six to 12 months. If they call themselves angels, and they do these dances, but they haven’t funded jack squat in the last year, then maybe you don’t even go there.
If you do, figure out if one or multiple of them syndicated a deal outside of that thing and then understand what that was, and try and figure out as much as you can about what caused them to invest before, and find out who the founder is. See if you can talk to them; how’s it going? I mean do all the stuff you would do with a VC. Never get on a stage and just pitch generic, I guess.
Krista Morgan: Agreed, agreed. Sorry, we’re going to try to wrap up this last couple of slides. I’m just looking at the best practice. Generally, I think eight to 12 slides. I know that the trend in tech starts and all these incubators is you have all these super animated slide decks, and there are no words and I think that that works for some companies, and I think if that works for you, then, awesome.
My general preference is that having slides that have a little bit of text but not nothing, and I actually think animations, video, when I see people who have those in their slides… it’s just tricky. Again, you’re asking them to take their attention…
As soon as you put an animation or a video on your slide, you’re asking your audience to take attention away from you (the founder) and onto a screen, and you know what? You as the founder should always be more compelling than what they’re seeing on the screen. You want to put a slide up. They look at it. They can digest it in three seconds, and then they go right back to you and listen to what you’re saying.
Keep your sentences short. Keep your ideas simple. Those are really powerful in a five-minute pitch. As we see on this webinar, it’s easy to run on and keep talking, but the shorter you keep those ideas, the better. Strong close, it goes without saying. And it’s okay to gloss over slide. Put a slide up, say, “Here’s the team. They’re amazing. Let’s move on.” And then someone said to me in my first pitch when I did—I’ll never forget. It was the Rockies Venture Club—and I stood up, and I really did cram 15 minutes worth of content into five minutes, and at the end of the pitch, I listened to the room, and the whole room was silent. No questions, and they were all like, “Holy-moley! I don’t even know where to start.” And we didn’t even get a lot of questions, and someone said to me after, “You know, it’s a good practice to have a couple of questions ready. So if your audience is still digesting what you said, you can say, ‘An investor yesterday asked me X, and this is what I told them.’ Just get people going because you usually have the time allotted to you.”
Chris Snook: Yeah. Even if an investor didn’t ask you that (your mom asked you that), call her an investor because that shows traction.
Krista Morgan: Agreed.
Chris Snook: “I talked with an investor yesterday.”
Krista Morgan: Exactly. Exactly.
Chris Snook: It might have been my uncle, Bob…
Krista Morgan: Yeah. And then practice. Just practice all the time. The pitch that I give, it’s rare for me to stand up in front of a crowd and give a speech that I have not practiced alone or with two people at least 20 times. It’s five minutes. You can practice a five-minute pitch a lot in not a very long time. Just, it’s worth it. It’s all I can say. Talk a little bit about, who is the best person on your team to deliver the pitch. My general preference, I rarely see a two-person pitch that works well, especially in five minutes. It’s just really hard. Again, you’re asking people to switch their attention. And you should think about Peter Adams at RVC, who we really like. He talks about “venturetainment.”
These five-minute pitches, they are about providing angel investors with this… it’s like a fun night that you’re getting up and entertaining the crowd, so take it that way. Try not to be so serious. Have a bit of fun with your crowd; let your passion come out. Even if you think it feels a bit over the top, it usually isn’t. People are always excited to see passionate entrepreneurs.
Chris Snook: Yeah. I mean you can… I joked about this with her yesterday. We have someone really smart who’s very critical to the team. A way to make it entertaining, a way to not spend a lot of time on team but a way to do all of the things we would to a team is I used to joke about, “We got to drive him out of the basement.” I had like the picture of the guy from Goonies and this law, whatever it was, with, “This guy’s so smart or this girl’s so smart, we just leave them down there, and we make them code. They don’t shower but once a week. But I’m going to bring them out because you need to meet them. So I’m going to bring them out.” And that’s the entertaining side.
You’re being a little bit hand and mouth or whatever it is, but it’s trying to make it light and fun that says, “We got some really smart people on this team. They’re really focused. They know their job’s not to sit up here and pitch. If you have a technical question, that’s your person. Don’t ask me because I’m just going to give you nothing.”
There’s a way to do it where you edify your team, but just to make it playful and fun. But I think one person… I mean I’ve seen two people do it well, but they got to be rock stars. Five minutes is short for two people.
Krista Morgan: Yeah, it’s really hard. Okay. That’s it. We’re done talking, so let’s take questions. What have we got so far?
What if you’re pitching on someone else’s behalf?
It’s a tough question. If it’s not your company, it’s someone else’s company, I don’t know. Chris, what do you think?
Chris Snook: I think, in the context of this, it would be… I’m assuming that you’re pitching on someone’s behalf, like you’re not involved in the company at all, which if you’re pitching on someone’s behalf to get a meeting, then that’s easy. That’s one thing. But if you’re going to present for five minutes on the deal, I don’t know when that would show up. I guess I’ll answer the question as the first one just so that we don’t not answer it. I think the expert is always the one that you want to build up. So if the expert is Krista, I’d pitch on P2Bi’s behalf all the time because I like what they do. I’d talk about what they’ve done. I’d talk about their leadership. I’d talk about I think they’re kickass. I’d talk about the fact I think they have the only thing that is in the crowdfunding space that makes any damn sense. I mean because you can actually see aclosed-in loop to it. Money can move, and it can come back.
I would just say, it’s easy. Build them up. Edify them, and say, “You know what? I know enough to be dangerous. You will hear me say that a lot if you’re spending time with me. “I don’t have to be dangerous. Let me get you with so and so.” So build the interest, and then say you don’t have to be dangerous so that they realize you don’t have any answers, and you’ve made them want some, and so your own goal is get them to want answers and then put them in front of them. I don’t know how it works if trying to pitch as the spokesperson, but that’s where I would take it in five minutes.
Krista Morgan: Agreed.
How much weight do the visuals really carry? Is it worth using professionals?
I actually think the visuals matter – less than we think they matter, but they still matter. And I do… I can’t say I’ve had a designer do my pitches because I’ve been building PowerPoints for the last eight years, and so I like to do them myself. But yeah, I do think the way your slides look matter. I think that with services like oDesk and all these outsourcing services, it is really cheap and easy to put a flat PowerPoint together and then give it to someone who’s a designer and have them make it look good. The biggest thing that you want to do before you get there is just take out the extra words. Really have someone else edit your slides is maybe the most important thing so you aren’t putting more words than you need, but you have enough words to get your point across.
Chris Snook: Yeah. I think it’s how you dress it. You got to feel good, like it should not be a distraction. So you don’t have to be the best PowerPoint person in the world, but don’t waste time trying to make it good if that’s not your skill.
Krista Morgan: Yeah, get someone else to do it.
Chris Snook: Get someone to do it who does visual, and then that way, you’d feel proud about it. It’s just kind of like, are you going to wear clean clothes or dirty?
Krista Morgan: Agreed. I mean, that a sort of thing that I would really notice as far as looking at a slide, and it was like all over the place and not formatted, and it didn’t look good. It’s just, why? It’s not complicated to make it look good. So get someone to do it for you.
If you’re not presenting the whole financial plan, the most important figures.
Like I said before, in my experience, investors really care about max cash burn, like how much cash are you projecting to burn over the next phase of your business, and are you raising enough to cover it? Because that is probably the single, most important thing that investors are thinking about, is, “If I give you this money, how long is it going to last you? How much do you really need to do what you say you’re going to do?” and, “Do I believe you?”
So I think, really, cash burn is a big thing. I don’t know. Chris, anything else?
Chris Snook: Yeah. I mean it depends on your market. But I would put something in there from a ground-up standpoint, which everyone’s probably heard, “What’s your customer proposition?” If you have any customers, then you can show kind of a predictability lifetime value, like, “We want to be doing this six months. So we don’t know if it’s six months or if it’s 12 months, but what we do know is, in six months, this many people have stayed. It cost us this much to get them. At scale, that number drops down. That number goes up.” Those are key because, again, unit economics is key more than, “Oh, the market’s this big. We’re going to grab that much of it.” That sucks. You’ll get laughed out of there.
Krista Morgan: Right, I agree.
Chris Snook: So I would put some slide out about unit economics, whatever that may be. In your case, it’s, “We borrow it for this. We sell it for this.” I mean it gives the investor some meat to go, “Oh, okay.”
Krista Morgan: I absolutely agree with that. Cash burn, unit economics, great things to talk about.
How do you determine what your ask should be for each individual pitch?
I think what we’ve been talking about here is an investor pitch. So your ask is usually, “I’m raising this much money. I really like to find…” I don’t know. Maybe you’re looking for a lead investor. Maybe you’re looking for someone to… an expert in the room maybe. Maybe you’re just looking for more investors, and you can say, “Look. We are looking for X number of dollars to close our round, and if any of you are interested, come and talk to us.” Just figure out who you’re talking to.
Chris Snook: Yeah. If you’re pitching to angels, I would ask for $1 million or $800,000, like ask for something substantial because the reality is, otherwise, you’re going to pitch warm market or friends and family to get a convertible note round that gets you $200,000 or something like that, and you’re wasting that five minutes if you’re pitching to a syndicate and you’re asking for $200,000, like it doesn’t make sense. So ask for more if you’re pitching in that kind of group even if you don’t need it because…
Krista Morgan: Yeah. Good.
How do I feel about a big image-only slide with almost zero text?
I think there’s room for one of those in every pitch deck. I have a slide in my current pitch deck that’s like we’re talking about shaking up business lending, and it’s like it was one of those great pictures like a dog shaking water all over the slide, and it’s just like, “Hey, here’s what we’re doing.” And it usually gets like a couple of smiles in the audience. But I don’t overdo it. You do not need like eight funny slides in your pitch. Oh! We actually have… it’s true. We’re actually lucky enough to have an investor in the room with us right now, very luck, one of our P2Bi investors. He’s got a couple of tips. Larry, do you want to just jump in and give your tips?
Larry Curran: Sure. One of the things—and for all the listeners here, I’ve worked at a university and in our class on entrepreneurship we talk about this a lot—you don’t have to have all your elements for success lined out, but you have to be able to verbalize that you’re thinking about the right ways to solve the problem. And everybody’s like, “I don’t know how I’m going to solve it,” then you can’t. Just think about, “Have I thought through the things?” You have to have a mental map. The other thing that we see a huge gap in is people don’t understand what pre-money is. When you go to ask money, you have to understand what the valuation of your company is. So if you’re looking for $1 million, and your pre-money is not $1 million, then that means I own more than 100% of your company. And so often, we see young entrepreneurs not think about the relationship between what they’re asking for and how much they’re going to give up because it all stems from your pre-money valuation. Spend time to figure out why you think you’re worth what you are other than air. I’ve been in meetings where somebody will tell me, “Hey, I’m worth $2 million.” Great, and that’s the answer. They’re like do you have patents pending? What do you have that’s establishing your value, easily can go in an industry market and look at trading multiples of what you have out there. And also think about your structure. Every time somebody walks in with an LLC, angel investors go, “Oh! Oh, I hate units. I can’t do stock. I don’t want the pass through tax liabilities.” Think about that clearly when you start out there, and then… I don’t think there was anything else? I put my thoughts down in writing. I wasn’t sure I was going to get a chance to say. So thanks so much, guys.
Chris Snook: I’m going to add just one thing to your horse being ridden kind of thing. As a founder, you have to take on a real understanding and a responsibility. When you’re raising $1 million, you have to come from a place that it’s already done. Most don’t think about that. They just think I need $1 million to go do my deal. They don’t really understand what $1 million is. If I take $1 million from anyone that’s an institution or a credit investor, they’re looking for $8 million. Now, would they be happy with three or four… they’d be happy with anything that’s not zero, but the reality is that they’re investing in you because they want an 8x to 9x return over a five-to-seven-year window. Otherwise, they would just put it in mini bombs. If you think about that, if their pre-money is going to be, whatever, $3 million, and they’re going to have 25% after they give you $1 million, $8 million times four is $32 million. I mean the minute you take $1 million into your account, you are prepared to build this company an exit for $32 million. You have to get yourself centered on that before you take money. My experience is money will flow to you quickly if you are vibrating that. If you’re resonating that you understand the mechanics, then the investors go, “Okay. They may not hit an 8x for me, but they at least know that’s their job, is to go win an 8x.”
Krista Morgan: That is an awesome point. I think the more… We’re just finishing up our third angel round, and let me tell you, you learn a lot, and you took Chris’s point, you absolutely learned as an entrepreneur…Not a lot of people get to raise money. If you’re lucky enough to do that, it really is your responsibility to make sure that you understand the value… like those investors are putting just a huge amount of not just trust, but they’re really saying, “Look. I believe in you, and I’m here behind you to help you do this,” and you have a responsibility back to them.
I think, too often, we say, “Well, I have this great idea, and I just should get this money.” It’s really not about that. You’re entering into a partnership with your investors, and the more that you understand, and value, and respect that partnership, the better that you’re going to do, and investors are going to see it. Well, I think that’s it. We’ve taken enough of your time, so thank you so much, everyone, for joining us. Obviously, you can find us at P2Bi.com, and Chris is at LaunchHa.us.
Krista Morgan: Got you. Feel free to reach out to Chris. We’ve got Twitter handles there on the screen. Please ask if you have any other questions, and we have tons more webinars coming up. Actually, if you have ideas for webinars that you’d like to see, tell us, and we’ll make sure we’ll get those scheduled. We hope it’s invaluable for everyone. Thanks so much. Thanks, Chris.
Chris Snook: Thank you!
Krista Morgan: Thanks, Larry, for being here, and a big thank you to Erin, who no one sees. She’s here behind the scenes with me.
Larry Curran: Thank God for her.
Krista Morgan: All right.