We have the opportunity to hear a LOT of pitches from seed-stage entrepreneurs in India. As expected, the pitch quality is highly variable.
First impressions do matter, so it is worth the effort to prepare to deliver the right content in your initial investor meetup. Also see 10 things we really want to know about a startup.
Tip 1: Get an introduction
Warm calls are always better than cold calls. We are much more impressed with entrepreneurs who take the effort to network through someone we already know to get introduced to us. This provides us with context and a reference. It also demonstrates that you know how to network — which is a critical success factor as you develop your business.
Tip 2: Sell your team, while not over-emphasizing advisors
We invest in people, not just ideas. Concisely, tell us about you and your team’s experience and how it is relevant (and critical) for your business success. Explain how you are “all in” for persevering to develop the business — whatever it takes. As for part-timers and advisors, it is fine to identify them and their contributions, but they are secondary to the core, committed team.
Tip 3: Focus on unit economics, not spreadsheet projections
As a seed stage investor, we are not expecting you to be profitable. We are expecting you to be obsessive about unit economics. Know your gross margin, cost of customer acquisition, business unit (see note 1) economics, how to think about break-even, capex, etc. What have you achieved so far? How do you expect to improve these? What do you still need to understand? We are looking for a path to great unit economics which will indicate that you are ready to raise additional capital in order to accelerate your growth. We are much less interested in your spreadsheet formula skills on projecting your rocket ship growth over 5 years.
Tip 4: Distinguish between actual data and assumptions/guesses
Too often we see entrepreneurs presenting assumptions and guesses incorrectly as facts. While you do need to have assumptions, you are much more credible when you clearly identify them as such and then focus on how you are going to validate them. We’ve all seen way too many business plans/models that have masses of assumptions built upon assumptions … many of which are unproven. If you don’t have any actual data, figure out how to get some to improve your credibility to investors.
Tip 5: Focus on 12-18 month plan
Your goal is to raise just enough expensive(!) seed capital to develop your business far enough in order to attract a larger amount of less expensive capital to fuel your growth. So how are you going to wisely invest this seed capital to validate assumptions, discover/experiment with game-changing ideas, build your team’s capacity and generally make your startup attractive to less-risk-tolerant “Series A” investors? Get specific about the key things you think are absolutely critical, explain why and then put all of the other ideas as “later.” Investors love focus.
Tip 6: Niche to win
You have a big plan to conquer India and the world. Great, but for the next 12 months, you need to be very focused on getting traction with a small, focused customer base who love your product/service. You need to demonstrate that some people care enough to pay and use your product/service. Our friend (and investor in our fund), Dave McClure calls this “niche to win.”
Tip 7: Admit what you don’t know
If you don’t know the answer to a question posed by an investor, say “I don’t know.” Don’t just start talking and give a non-answer. Investors, like most people, like honesty. You can follow that up with taking a note and saying that you will find out the answer and get back to the questioner. And, then, do get back with a response promptly afterwards.
Tip 8: Propose clear customer value & impact
Some investors only care about maximizing profits irrespective of values. Other “social investors” prioritize social impact over profits. We invest with a Profits and Values Approach which emphasizes profitability and scalability coupled with strong, smart values. As part of this approach, we want to understand how you are going to deliver — and how you will measure — positive value to BoP families. Identify 1-2 key measurements which also help you build you business.
Tip 9: Less is more
Fewer slides and more discussion is always better. You don’t need a separate chapter or slide on every point above, But you need to know your business, and have well thought through points of view. Enough said. That’s why we don’t have a 10th tip 😉
Note 1: By “business unit” economics we are referring to the economics of, for example, one training center, or one village water purification business, or one city operations center, viewed separately from the economics of regional and/or corporate costs.