You might have a pretty slick funding pitch but, remember, investors invest in people, not ideas.
“It’s a ‘fighter’ gene that makes people incredible entrepreneurs,” says Michele Romanow, engineer, serial founder, tech investor and hard-to-impress cast member on the CBC reality show, Dragons' Den.
Romanow was one of several veteran tech investors who shared their pitching tips at this week’s virtual Collision conference, a monster international tech event that featured more than 600 speakers and 38,000 online attendees.
Communitech News listened in on a couple of pitch sessions. Here are some highlights from Romanow’s talk and another by Geoff Ralston, President of Y Combinator, the famed accelerator in Mountain View, Calif.
Grit and resilience
“The No. 1 trait I’m looking for is grit and resilience,” Romanow said. “This (starting a company) is just, frankly, one of the hardest jobs. This is a job where even if you get to success, 80 per cent of the things you try fail. And that’s the same if you’re me and you’ve done this a couple of times, or if you’re just starting out. There is so much failure.
“I describe it like the boxing ring: You’re going to get punched in the face, and you’re going to get a black eye, and then you’ve got to get up the next morning and you’ve got to walk back into that ring and be like, ‘It’s time for Round 2. But I’m not going to do what I did yesterday, I’m going to figure out how to pivot and how to grow.’ And so I really, really look for that resilience.”
Romanow urged founders to include a reference in their pitches that shows their personal resilience.
“Sometimes that’s people who grew up in pretty hard backgrounds or hard places; sometimes it’s people who need to succeed; sometimes it’s people who have something in them to prove someone wrong – it’s like a ‘je ne sais quoi,’ it’s a fighter gene that makes people incredible entrepreneurs.”
Ralston emphasized a similar point.
“I almost don’t even care about the other things (in your pitch),” he told one founder. “Your team sounds so impressive… this is a hugely important point – most of us invest in teams and people.”
It’s also important to surround yourself with mental and emotional supports.
“A startup is a lonely thing,” said Ralston. “One of the hardest things about doing a startup is the psychic toll of having investors like myself say ‘no.’ That will happen. It’s inevitable that things will go wrong with your startup – it’s a super difficult thing to do, and having support during that time is massively important.”
Don’t be boring
Both Romanow and Ralston urged founders to tell compelling stories that show your passion, your resilience, your understanding of the market potential, and why you and your team are capable of executing successfully.
“The worst thing that can happen when you’re talking to an investor is if you bore them,” said Ralston. “No one will ever invest in an entrepreneur who doesn’t seem to care about what they’re doing because it is so hard as an entrepreneur, if you don’t care really deeply about your company, the first time something difficult happens you’ll stop.”
New founders must aim to engage investors during the short time they have to make a pitch, he said.
“A great pitch becomes a conversation where the investors suddenly feel like they’re part of your team and they say, ‘Well, what if we did this?’ If they ever say ‘we,’ you know you’ve won.”
“You’ve gone on too long when investors start to check their phones.”
Practise, practise, practise
Confidence is another must-have. Romanow said that after years of pitching herself, she still practises and refines her pitch before sitting down with investors.
“Confidence comes from practice,” she said. “And I have to do this every time. I have to practise…. Our first pitches are typically throw-away pitches; you want your first 10 people (investors) that are probably not in your sweet spot. Then you can kind of start getting really good.”
Ralston said that prior to Y Combinator’s famous “demo day” sessions, his team spends hours helping participants refine their pitches.
“It is an outsized challenge to spend two minutes explaining what you do, and doing it in a language that someone who doesn’t know what you do gets (and) completely understands and is able to see your vision. It is a super hard thing to do and requires iteration after iteration after iteration.”
Practising your pitch on people who don’t know what you do is a great way to refine it and make it clear.
“The most common mistake in this sort of pitch is they understand too deeply what they do, and they don’t understand that the person listening to them has no idea,” said Ralston. “And so they don’t explain with great clarity, as early as possible, what exactly the product they are talking about, or the business they are talking about, is.”
“We ask every YC company to come up with a one sentence or most, two-sentence, description of their company that anyone can understand. Then you’ve just achieved the nucleus of any pitch. Therefore with any pitch you already have what you need to get across, what you do with great clarity. Once you start with that, once I get it, ‘OK, I get what you do,’ everything else is refinement.”
Do you need to be an extrovert to make a pitch?
“Be you,” Ralston advised. “Use the technique that matches who you are. Some people are incredibly dynamic and charismatic, and if you’re not that person, then maybe you’re conversational, maybe you’re going to tell a story in a way that’s just compelling because of the belief that you just put across in the soft-spoken way that you get it across.”
Should I start a business in university?
Romanow is a big proponent of hands-on learning. She started a coffee shop while studying engineering at Queen’s University and went on to start other companies while finishing her undergrad and an MBA.
“I’m a huge believer that you don’t learn entrepreneurship in a classroom, you learn by doing,” she said.
“(University) is the absolute best place to start. I would have never become who I am if I wouldn’t have started in undergrad building businesses. You have so many resources and professors and shared office spaces. It’s such a good time to start building a business, start making those mistakes. There’s really no difference building a coffee shop, like I did with my first business, and like building Clearbanc (an investment company she co-founded, recently renamed Clearco). The motions are kind of the same; the scales are different, the zeros are different, the problems are a little bit different, but you get used to it.”
Should I start a business during a pandemic?
Both Ralston and Romanow said now is a great time to pursue a startup.
“I’m extremely optimistic,” said Romanow. “Honestly, I can’t believe how much growth has happened. E-commerce exploded, customers are now looking to buy local from independent businesses, and that movement has taken off. And so I think there’s no better time to build a business.”
“My advice,” said Ralston, “is if you’ve got a great tech startup, there has never been a better time, there’s never been more money, there’s never been greater availability of capital than now. So this is a perfect time to raise money to build your company.”
“My favourite one-liner of advice is simple,” said Ralston. “We say, the most important thing to do is to write code and talk to customers, and iterate. What that means is you talk to customers to find out if what you built is even close to what they wanted, and you find out it wasn’t, and then you iterate, you do that again and again and again.”
Romanow said that before a founder signs an investment deal, you should check out the investors to make sure they’re the kind of people you can work with.
“Try and do a bunch of reference checks before you sign a deal because this is like a marriage – it’s a very big deal to go into business with someone.”