You may be tempted to believe that investors invest with their brains. They gather all the information available about a company, the market, and the surrounding big picture, plug it all into a spreadsheet, and then decide whether to invest or not. That isn’t the case, for two closely related reasons. The first reason is that investors are human, and humans naturally love stories and narratives. Being able to paint a picture of the problem you’ve perceived, how you’re going to address that problem, and how the world is going to be different once the problem is solved is tapping into an emotional realm. Don’t get me wrong; your investors will still do their “due diligence” and plug all the numbers you give them into spreadsheets to see if the story works on that level. But you can’t skip the storytelling step: just handing someone a worksheet with all the numbers already filled in would only work for a vanishingly small subset of investors.
The other reason is that you, the entrepreneur, are human. The investors are not investing in a business plan or even a pitch—they are investing in you, personally. As you go through the fundraising process, you’ll sit eye to eye with several extraordinarily smart people. They will try to figure out what makes you tick. Do you have what it takes to conjure this project from thin air? Are you able to attract and lead people who can help you along the way? Entrepreneurship is exceedingly hard—do you have what it takes to keep on the right track as everything in the world conspires against your company’s success? And, ultimately, these investors are going to be literally and figuratively invested in your startup. They’ll be on your board of directors, offering you direction and advice. One of the things they’ll be looking for is whether you are coachable.
They will want you to have answers to many questions, but more importantly, they’ll want to know how you arrive at those answers. How do you react when they ask you a question you don’t have the answer to? Do you lie? Do you make up an answer on the spot? Do you get defensive? Do you say you don’t know and promise to get back to them ASAP with a solution? You’ll be unsurprised to learn that only one of those is the right thing to do. And you may be appalled to learn how many founders will make up an answer on the spot to seem knowledgeable—unaware that they’re burning their credibility to the ground in the process.
As humans, we relate to each other in many different ways. In the world of fundraising, storytelling and conversations are the tools of the trade.
So, what IS storytelling?
There are as many blueprints for storytelling as there are stories. One of my favorite examples is “Married Life”—the montage that covers the first 10 minutes of the Pixar movie Up. In those 10 minutes, the filmmakers tell the story of the married life between Carl and Ellie. It consists of a series of brief vignettes from a lifelong marriage, ending in Ellie’s death. If you’ve never seen it, you simply must. Without any of the characters saying a word, it tells a story of connection and love. It frequently leaves the whole audience in tears. The lesson you can learn from Married Life is that if you’re able to tap into someone’s dreams, fears, and sense of beauty, you can have a powerful connection with them.
The goal of your pitch isn’t to have to hand out Kleenex at the end of your pitch because everyone is sobbing their eyes out, but it wouldn’t be a wrong goal to at least try to evoke an emotion. Why is this problem so personally important to you? Why is there a significant shift in the world if you can implement these solutions? Who is the customer, and how does your company’s existence impact their life?
Explicitly encouraging the investors to buy into your dream is one thing. Weaving a narrative that means that they can’t help but dream along with you is a different league of engagement. I’ve sat in pitches where the whole room is enthralled, leaning in, eager to learn more. A magnetic, charismatic personality goes a long way—but even if you lack that, a great story that helps people envision the world the way you do is powerful.
Meet BeerSub.com
The opening slide for the company we’ll be pitching throughout our book—BeerSub.com. Image Source: Alexander Raths/stock.adobe.com
In this book, I’m going to create the pitch for a company and take you along for the journey (see Figure 1-1). The company is BeerSub.com—a fictional beer delivery service raising a seed round.
I chose this fictional company for a couple of reasons. It is a business-to-consumer (B2C) company that is relatively easy to understand. I’m a fan of craft beer, so that helps, but more importantly, the direct-to-consumer (DTC) industry has seen a rapid rise over the past decade. Brands like Dollar Shave Club (razors), Casper (mattresses), and Blue Apron (dinner kits) have seen stratospheric rises.
Obviously, I haven’t started this company in the real world, so I’ve had to get creative in some places. Of course, traction is particularly easy with a made-up company, but where possible, I have tried to keep figures plausible, at least. The important part of BeerSub—and its accompanying slides—isn’t the specifics, but the broad strokes of how I’m telling the company’s story.
The words and the pictures
Later in this book, we will explore how your slide deck can be used to back up the story you’re telling. I wanted to say something about the interplay between your slide deck and your description before I get that far, however. In an ideal world, your audience is on you—not on your slide deck. Of course, slides can do things you can’t do with words: show photos of your product, show graphs of your process, and help punctuate the story you are telling.
A great slide deck is an essential tool for you to structure and underline the critical parts of your presentation. And a great storyteller doesn’t need a slide deck. With one of my companies—Life Folder—we were creating a chatbot that was helping people have their very first conversation about death. In the pitch process, I would sit down, put my laptop on the table, and ask a question: “I have a slide deck, but we are about to talk about death for an hour. Do you want the deck, or shall we just chat?” Without fail, every investor had already received the deck in advance. Most of them had looked at it for long enough to decide to take the meeting, at least. And none—not a single one—out of the dozens of meetings I took wanted to see the deck. They wanted to look me in the eyes and engage at a different level. There’s no way I would have been able to give an excellent presentation without using the deck as a mental crutch—but by the time these meetings were happening, I knew the performance off by heart; I had all the stats, talking points, and story points at my disposal. And, as I had expected, the investors found it far better to engage at a human-to-human level when talking about a difficult topic.
How to weave a story
If you’ve ever seen a truly great stand-up comedian, you’ll have seen how they tell many small stories that are part of a much bigger whole. They get laughs in the short term, but the funniest jokes tend to be the ones that they’ve set up several minutes in advance. In the storytelling world, those techniques are called “gates” and “callbacks.” The gates are story elements you have to pass through for the story to make sense later on—if you didn’t set up the joke, the punch line doesn’t make sense. The callbacks are more advanced jokes. Here, you tie up a loose thread that you dropped a while back—your quick-witted audience members see the gag coming, and the tension builds. When you finally get to the punch line, the audience experiences a sense of release and relief.
Your venture capital pitch should be like this, as well. For each slide, there will be one or two key points that you have to make. If you don’t, the rest of the story falls apart. It is building upon itself throughout, so if you failed to mention something in an earlier part of the story, the rest of the narrative doesn’t work. That is annoying if you catch yourself and can go back a couple of steps—but remember that you will be giving this pitch many, many times. Make sure you are well rehearsed. Failure to practice means that you might end up forgetting to mention key parts of your story. If that happens, at best, you will be facing needless questions. At worst, you’ll meet the blank stare of someone who doesn’t “get” your pitch.
The way to solve this is to think about the narrative and of the “gates” you need to hit. Mentally, keep track of what the next gate is, and gently guide your story in that direction. It sounds confusing, but it becomes a lot easier with practice. When you’re presenting from slides, you can use them as a prompt to yourself, but the goal is to have a mental checklist ready.
For example, for one of my companies, I had “my background, their background, origin story, and hiring pipeline” as mental notes for my “team” slide. Earlier in the presentation, on the product page, I mention that we had a unique advantage of team recruitment—that both my co-founder and I had teams that we could bring with us. Explaining the specifics of that wasn’t part of that slide—but it is a crucial part of the team slide. I know there are four talking points to hit when it comes to my team. A longer way of thinking of those talking points would be: “When I am talking about the team, I should mention my background and that that of my co-founders, highlighting how we have different but extremely well-matched skill sets. I should mention how long I’ve known my co-founders and how we have faced huge obstacles together in the past. If the mood in the room is right, tell the story of how we met. Remind the investor that we have 15 people kept warm who are ready to join the company, so hiring is a less-than-usual risk for this startup.”
Everyone thinks about narrative a little bit differently, so how you make and organize your mental notes may be a bit different from how I would do it, but when you are practicing your pitch, it can’t harm to use some index cards. Write the name of the slide at the top, and add some bullet points that remind you of the points you want to make here. Having a visual reminder of how many gates you have for each chapter of the narrative you’re sharing is helpful when practicing.
Keep your audience in mind
The best storytellers customize their stories to their audience. As you would expect, that is true for a fundraising pitch too. Put yourself in the shoes of the partner you are pitching today.
In the morning, they may have had a board meeting with another portfolio company, and they may be slightly preoccupied with the challenges that came up there. They probably have two more deals they are working on at the same time, and they may have seen two other pitches already that day. There are probably three hundred emails waiting in their inbox. They walk into a room, and there you are. You’ve connected your laptop to the meeting room screen. They sit down. They will probably have glanced at your deck earlier in the day, and an associate may have briefed them on what your company is doing.
Before you even open your first slide, the partner will have a wall of preconceived notions about your company. Perhaps they have already looked at four companies in your space over the past couple of years. Maybe they missed out on an investment into a company founded by someone who went to the same university as you did. Perhaps they feel a fondness for you because you share a hometown or you have the same first name as their best friend. All of this is arbitrary, and none of it should have an impact on whether they invest or not. But the truth is investors are human, and they are as influenced by biases as you and me.
You have no way of knowing what biases and preconceptions your investors will bring into the room. But there are a few things you do. They are there because they are professional investors. They are there because they are looking for companies that can give them an outsize return on investment (I cover how VC works in more detail in Chapter 2).
So how does this tie into how you think about your audience? Well, for starters, it means that your investors aren’t excited about the same things that excite you about the business. In the context of a slide deck, as a product-focused founder, you are probably neck-deep in three aspects of the company: who your customers are, what the problem is they are experiencing, and the solution you are building for them.
When pitching, remember that you need to keep your audience in mind. Of course, if your customers are ambivalent, the problem is nonexistent, and the product is terrible, your company will fail. And if all of those things are true, you will probably fail to raise funding.
Bear in mind that a VC firm has its business model. The limited partners (LPs—the people investing money into the venture fund) are on one side of the equation, and the startups on the other. The “problem” VCs are trying to solve is that their LPs have invested money in the venture fund, and they would like an outsize return on that investment. The “solution” they are providing is the investment thesis—the theory behind why they are investing in a particular stage and type of companies.
The quality of the team (are you the right people to solve this problem?) and the ability to attract great talent (can you attract more people to help you fulfill your mission?)
The size of the market—and whether it’s growing
The problem you are solving—and whether it’s worth solving at a venture scale
This isn’t to say that investors don’t care at all about your product. They do. It is worth keeping in mind that when you are at the earliest stages of pitching, they only care in the context of answering the preceding questions. The product you’ve built to date shows how you make decisions and whether you’ve been able to attract early customers. It is worth pointing out that after you’ve raised funding, things will shift between you and the investor. The solution and the product (alongside the nebulous work of “company building”) come into sharper focus.
As a founder, of course, you are passionate about the solution you are building. Your goal is to raise money, and the amount of time you have to tell the story of your company is minimal. Make it count.
Where to start your story
Your company is terrific, of course—but where do you begin telling its story? The same way you would recount a story to a friend. Start with the most significant headline. For some companies, that headline comes easily. For others, you may have to dig a little deeper. What you are optimizing for is the biggest “wow” moment—what is going to make a potential investor put their laptop aside and lean in to really pay attention to the pitch?
Remember that your story doesn’t have to be chronological. If your team isn’t your biggest strength, don’t start with how you and your co-founders met. If your market is relatively small, don’t start by laying out your total addressable market. If the problem you are solving is unsexy and “boring,” but you have incredible interest from customers, you’d be crazy to start with your market.
Once you have all of your slides together, try this exercise. Think about how you would tell the story if you were to start with each of your slides. I have even seen an incredible pitch that started with an “exit” slide. Of course, the founder had an unusual story there. “I left Facebook to start my company, and within 8 months, Facebook tried to buy my company. I said ’no,’ and let me tell you why…” That is storytelling.
“I have a PhD in this field and am the world’s foremost expert on this type of medical procedure. There may be two people in the world who understand all of this—and I recruited the other one to be my co-founder.” That is storytelling.
“There are only two ways to solve this problem. And I hold patents for both. I am building one of the solutions, and if someone else is trying to launch the other solution, they will have to licence the technology from us.” That is storytelling.
“We can save each customer $10,000 per year, and our product will cost them $30 per user per year. It’s a no-brainer, and we have 3,000 companies on the wait-list already—we can’t make the products fast enough.” That is storytelling.
You should be able to find something that makes the listener go “wow.” Find out how to tell that part of the story in a compelling way. Use that to pique the interest of your listeners.
I occasionally work with founders who say, “I can’t think of anything that makes investors go ’wow’.” Usually, that is a sign. They may be too close to the business. They might be too modest. Or, in some cases, it’s a sign that the founders should stop work on this business and go do something else instead. If there’s nothing about your business that makes an investor lean forward with dollar signs in their eyes, you’re going to have a really tough time raising money.