It’s both simple and complicated to craft that perfect startup investor pitch. Simple because it’s just a conversation about two sets of needs. Complex because few people are good at talking about each others needs.
Let’s talk about the complicated parts first. Financial projections, stock structures, voting control, the need to feel like you “won,” attorneys, competitive analysis, scalability models, company valuations, timing, investor availability – I’m just getting started. You’re already thinking of more hurdles and hassles to overcome. Forget this! Lets just go back to our day job! Ahhhh! I need a drink!
Ok, now that we have that out of our systems, let’s get back to the simplicity of a good investor pitch. It comes down to a basic set of needs that you and your prospective investor both have. You have your list and she has hers. Let’s call her Janice. Yep, like the Janice in the TV show Friends. Chandler Bing’s girlfriend. You can hear her laughing can’t you?
Anyway, you have your list of needs and Janice has her list of needs. Your job is to really listen and learn what her needs are. Figure it out. No assumptions. If you can really figure out what she needs and how she values those needs, you can probably pitch a deal she will buy. But it may not be at a price you are willing to accept.
Next, you can figure out what you need out of the deal and put a value on your needs. More often than not, you and she don’t need the same things, or even if you do, you may place different values on the needs. That’s your open door. Look for the space between needs. That space between needs is where good pitches grow up to become deals!
Let me explain: Janice may be motivated by a little more voting control on your board and a bigger chunk of equity. You may need control but your big need is long term profit. Profitless equity is dumb. You really only want that equity if it makes money, right? Many people get stuck at this point but there is usually a simple solution.
Sell Janice a little more equity and with it a little more control, but get a profitable buy out option in place for her. Then, in a few years you can buy Janice out if the company is profitable. She makes a profit, takes the exit and you get your equity back while keeping the long term profits on all of the equity.
That’s just one example and we all know of others that are way more complex. But, hey, this is a short article, not a book. With a little creativity and a lot of listening and understanding, you should be able to work something out.
Sure, you will need an attorney and maybe even a CPA to help out with the deal, but your job (if you want to pitch well) is to keep it simple and focus on the relationship.