As an entrepreneur, especially an early stage founder, you’re heavily focused on developing your company’s product or service. It’s understandable that you would conflate your product and your company. After all, you’ve been conditioned to differentiate your product, describe the features of your product, and generally sell your product. However, when you are speaking or pitching, investors are more interested in understanding your company, than buying your product. While the company and the product are inexorably linked, they are not the same. Therefore, it is important to understand the difference in how to pitch your company, and not just sell your product.
Why Pitch Your Company to Investors?
Venture capital investors are going to be assessing how quickly and how much of a return your company can produce. Remember, VC’s only make money when you exit. An exhaustive review of all your product features is sure to waste valuable time. Spend this time telling the investor why they will make more money investing in your company rather than your competition.
Simplistically speaking, investors are almost exclusively looking for the lowest risk, highest return opportunities regardless of industry. A good pitch weaves a story simultaneously minimizing the risk while maximizing returns. Let me share contrasting examples of the difference between pitching a company versus pitching a product. I’ll withhold the names to protect the innocent.
Pitching Company vs. Pitching Product
The CEO of NewCoRed has a unique solution in what is otherwise a frothy, crowded market. Her pitch highlights her product’s differentiation in the market using a single slide. She spends the rest of the presentation singing the praises of the stellar talent she’s assembled and the high caliber and active involvement of her advisory board, the revenue growth the company has experienced within a market that’s also growing rapidly, and she shares solid data on similar companies that have exited with impressive multiples.
In the other corner, the CEO of NewCoBlue also has a unique solution in a crowded, frothy market. He spends his pitch painting a clear and convincing picture of why his service is superior. He continues to show a picture of an enormous advisory board. Conclusively, he mentions that the market is growing along with his revenues. He has a sense of what an eventual exit valuation, but had no citable support.
While some investors will be drawn to the clarity of the superior service of NewCoBlue, it’s more likely that NewCoRed will get funded sooner. Even in this highly simplified, but very real comparison, investors will glean important insights from these two very different pitches. At the highest level, the material presented may be largely the same. Merely analyzing the amount of time spent by NewCoRed on positioning the company will resonate with investors more than the extensive comparison of product features of NewCoBlue. Add in the additional detail about the superior team, active board, familiarity with exits (the ultimate goal of investors), and it becomes painfully obvious why NewCoRed has a higher probability of funding raising success.
These two companies pitched at a recent competition I judged. NewCoBlue technology had a higher ‘wow’ factor and the presenter was substantially better than all the others. However, after the competition, NewCoRed had a flock of interested investors. NewCoBlue had a surrounding of fans of the technology and (i’m guessing) potential customers. I’m guessing because I didn’t get a chance to speak with NewCoBlue while waiting to speak with NewCoRed.
Tune in next time for similar analyses on why you should Pitch Your Product to Customers – NOT Your Company. https://www.advantary.co/team/angel-orrantia/