There is a paradox at the heart of building a company. On the one hand, to be VC investable, you need to create a multibillion-dollar company. On the other, you can’t start off building every aspect of your company right from day one.
In early-stage companies, even if you know the market pretty well, there’s a risk of loss of focus. Every time you turn over a new rock, you’ll find seven new opportunities lurking. Inexperienced entrepreneurs won’t believe their luck: Look! There is so much gold just lying around in the streets! All we have to do is to pick it all up! The problem, of course, is that each opportunity requires a slightly different approach, and this triggers two potential avenues that don’t work. Either you try to build a broad suite of products that serve every opportunity you find. The problem with this is that you’re a startup. Per definition, you’re woefully under-resourced. Trying to build a whole suite of products is a surefire way to sink your company before it’s even up and running. The other approach is to create a “one-size-fits-all” solution. That might work, but the problem is that your target customers are probably already using a one-size-fits-all solution to their problem. Convincing them to switch is hard, especially if your solution has a bunch of features that they don’t want or need.
Painting a picture of your solution
The solution at the earliest stages of building a company is to take a broad approach in your pitching. You believe you know something about what the world will look like 10 years from now, and how your company can help move the world in that direction. You tell the story of your big-picture vision—this is the story of how you are building a billion-dollar company. Once you’ve done that, it’s time to use the magic phrase. “So that is our big-picture vision for the company. Let me tell you where we are going to start.”
In military parlance, the beachhead is where you start your attack. Just taking the beach doesn’t help you win the battle—but without a place to begin your assault, you’ll never win the war. As much as I hate war metaphors in startup contexts, this one is pretty helpful—building your big, world-changing company is the war. But, just like with any strategy, you have to be conservative with how you deploy your resources.
As a military strategist, putting all your soldiers on the wrong beach is hard to recover from. As a startup strategist, that is what you have to do. Figure out where you’re going to start, and then commit 100%. The reason for this is that you are testing ideas. If you believe that your toothpaste startup will do best with mothers-of-two in rural areas, then prove that fully. If you only commit 50% to that strategy, you won’t know if it worked or not: Did it fail because your approach is wrong? Or did it fail because you didn’t try hard enough? The most awkward meeting you’ll ever have with your board is trying to explain why you didn’t believe enough in your go-to-market strategy to commit fully.
Sales and marketing will be a huge part of the operations of your company, and it is often hard to distil a whole marketing strategy into a single slide. Many founders I work with have a separate deck for their sales and marketing efforts, which investors spend more time much later in the due diligence process. For your initial pitch deck, it’s helpful to be able to show that you’ve done your homework and that you have a firm grasp on how you are going to get your first few million dollars worth of revenue. Image Source: artnature/stock.adobe.com
You can slice the market by a near-infinite number of criteria. Consider age, socioeconomic background, geography, interests, marital status, car owner status, media consumption habits, and much more.
Out of all the dozens of opportunities you’ve identified, where are you placing your chips? Why do you think that this particular market or demographic is particularly representative of your company? What are you hoping to learn from this market, and how will that apply to other markets?
Marketing and segmentation
As I mention, there is no “right” answer, but in the context of a venture capital pitch, there are “wrong” answers. The most significant opportunity to shine on the go-to-market slide is to show that you know how to think through the marketing and sales strategy for your market segment.
On your slide, include information about how many people you expect to reach in this segment. The right number varies wildly based on whether you are a B2B or B2C startup: for business sales, three or four big customers may represent a huge win. For example, if you manufacture memory chips and you land Apple as a client, that could make or break your company. Although come to think of it, if your customer is Apple, it will probably make and break your company. In the world of consumer products, three or four sales may be a failure: if you are Apple, and you only sell three iPhones, that’s not going to do your stock price any good.
As part of this slide, you should know how you are going to reach your customers. Are you operating a sales team? Are you buying advertising? Events? Will you be working with influencers to do marketing that way? Would there be billboards alongside the road? Are you doing a direct mail campaign? Do you have an existing email list you will be leveraging? If you have a mixed channel marketing approach, how effective do you expect each channel to be, and how much money are you spending? Finally, you should know how scalable your marketing channels are.
Telling the story of your go-to-market plan is an exercise of applying your tactics to your strategy. In your initial go-to-market activities, the vision for your company first starts gaining traction; these are the steps you are planning to take to get your product into the hands of your customers. It’s the first step toward building a robust feedback loop that helps inform your marketing, product, and product/market fit. In a fundraising context, it’s good to remind yourself that your investors don’t necessarily have to agree with you on what your go-to-market strategy is. For most investors, it’s more important that they follow your thought process. They aren’t investing in the specific approach you are outlining in your deck—they are investing in the brain that came up with that approach.