Blog

The Investor pitch and the customer pitch – what’s the difference?

sales pitch

A common confusion I find amongst entrepreneurs is about the audience for their pitch. Many create a generic pitch which they then try to use for business plan competitions, investors, partners, customers and anyone else who may be interested in their company.

The article Why your investor pitch is ruining your sales pitch by April Dunford on HackerMoon.com does an excellent job of explicating the important differences between the two pitches a startup needs: the customer pitch and the investor pitch.

….. some founders start seeing their pitch contest pitch as “THE pitch” — a general-purpose sales story for any audience. But customers are very, very different and they are looking for very, very different things. In a customer pitch the starting point positioning is different, the value they are looking for is different, and the call to action is different.

Here’s the three major differences she lists. Read her article for important detail on each one.

1/ The Set-up: Positioning is completely different for Customers vs Investors

2/ Why you: Investors and customers look for different kinds of “proof”

3/ The Ask: Selling your company vs selling a solution

April Dunford and I agree that there are a lot of problems with pitch contests – and I’ll post about that at a later date – but one of them is that “they reward a particular kind of pitch that doesn’t work in any other circumstances.” As she states: Customers hate your pitch contest pitch.

The core reason for this problem, however, is never made explicit: the first rule of any presentation or any communication for that matter is: who is the audience? The second is what is your goal in communicating with this audience? Once you apply these two rules it becomes painfully obvious that investors and customers are two radically different audiences – though both may give you money and your “ask” is also radically different.

So once you have completed your business plan competition pitch, pitch it out! Start over again tabula rasa with your customer pitch. And the same rule applies to both: practice, practice, practice! And learn from your feedback. Unlike investors, who hate to say “no,” on the off chance your venture may actually be successful and they will want in at a later date, customers have no problem saying “no”! They are a much tougher audience! What might have worked in your B-school contest will probably not work with real customers.

The bottom line is start talking to customers before your start developing your pitches! Nothing impresses an investor more than a venture that has real customers, customer engagement, and real growth in the customer base. And if you are too early stage for those accomplishments there is still no substitute for primary market research – talking to real customers instead of relying on analyst reports and other secondary research sources.

Design New England magazine sponsors mentor awards

IMG_2383

Sitting in the waiting room before my arthroscopic shoulder surgery, I picked up a magazine I hadn’t seen before, Design New England. The magazine was filled with design eye candy for home and garden lovers like me, but more importantly was their page about honoring mentors. (I apologize for the quality of the photo, but not easy taking a picture of a magazine page using just my left arm.)

What I particularly liked was the headline: Mentoring is its own reward. Very true. But what I had never seen before was “But we think mentors deserve some recognition.”

2017 Mentors in Design

We are delighted you are considering nominating a candidate for Design New England’s MIDDIES (Mentors in Design) program. The MIDDIES salute design professionals in interior design, architecture, building, landscape design, landscape architecture and related fields, who share their time, expertise, and wisdom with the next generation. A nominee might be someone who has mentored you or who you have observed mentoring others during his or her career. The candidate might be your boss, a close colleague, or someone from another discipline who has opened the door to new possibilities.

Part III: NOMINATION ESSAY

Short Essay: Why should your nominee be recognized as a 2017 Mentor In Design? Some points to consider include: how the nominee has influenced you and/or others making career choices? What are some of the memorable moments of the mentoring experience? Are there particular anecdotes that highlight the mentor’s knowledgeable guidance, recognition of a protégé’s skills, unselfish giving of time, simple words of wisdom, and teaching by example? Please limit testimonials to 500 words or less.
While I’m not advocating for recognition for mentors for entrepreneurs, I found it interesting that mentoring plays enough of a role in the home and garden design world to merit such recognition. Just more evidence of the increasing importance of mentoring.
I think mentoring is part of a larger trend, just in time learning. Because of the accelerating rate of change in almost every field driven by the digitization of almost everything, what you learned in school is increasingly likely to be out of date. But how do you keep up to date once you’ve gained your degrees and are out in the world? Participating in the founders’ networks and having mentors can help solve that problem. Of course, there is no substitute for being an autodidact – highly successful entrepreneurs like Bill Gates, Mark Zuckerberg, and Elon Musk all turn out to be inveterate readers. But how do you avoid the proverbial “drinking from a firehouse”? problem? That’s where mentors who are familiar with your subject domain can help point you towards important books, documents, videos, talks, conferences and other ways to keep up with what’s new without spending an inordinate amount of your time learning when you should be doing.
And you might ask why I’m not in favor of awards for mentoring founders? I believe awards foster competition, not collaboration, and collaboration between mentors, such as done at the MIT Venture Mentoring Service, is vitally important. Mentors provide perspective, so more than one mentor can be very valuable. As Alan Kay said, “Perspective is worth 80 IQ points.”

It’s what you don’t know that you don’t know that will hurt you

 

quote-there-are-known-knowns-these-are-things-we-know-that-we-know-there-are-known-unknowns-donald-rumsfeld-25-42-14Most founders assume that it’s stuff that you don’t know that will hurt you. But things you don’t know – like if you should file a patent on your invention or trademark your product, can be easily answered by others. That’s why an army of lawyers, accountants, tax experts, and consultants swarm around founders and are paid a lot of money to tell them what they don’t know but need to know.

But how in the world are you supposed to find out what you don’t know that you don’t know? That’s where mentors come in. Why in the world for example would a typical founder know what an 83B election is? I just ran into a situation where an entire founding team neglected to file 83Bs when they should have, which will come back to bite them in the future. I won’t get into the tax ramifications of 83B here, that’s what the link to Cooley’s site is for, but it’s a good example of stuff that you don’t know that you don’t know.

There are dozens of other similar issues including exactly what questions you may or may not ask job applicants.

Mentors have been there, done that. They’ve made their share of mistakes, or in my case, far more than my fair share. As mentors we know you will make mistakes, but our job is to ensure you don’t make the same ones we did. Be creative!

So that’s why it’s so important to get a mentor or mentors as soon as you plan your venture, so whether it’s protecting your IP, improving your tax position in years to come, avoiding law suits from candidates you turn down or staff you let go, you get early warning. In the days of the Cold War there was something called the Distant Early Warning System or DEW line for short. It was set up to detect incoming Soviet bombers during the Cold War, and provide early warning of any sea-and-land invasion. Think of your mentors and advisors as your DEW line.

Once you have legal and accounting firms that represent the company they will act as your DEW line for many issues. But there will be others that fall outside of their expertise. That’s where both familiarity with your venture’s domain, say mobile software applications development, is important as is diversity of experience of advisors, from technical experts to financial, sales, and marketing experts.

Obviously it’s time consuming and quite difficult for a very early stage company to have a full advisory board as DEW line, so in the mean time you may want to rely on generalist mentors like myself who have founded several companies, advised many, many others and have a good sense of the typical things founders don’t know they don’t know. Decades after I first learned about the danger of the things you don’t know you don’t know our former Secretary of Defense, Donald Rumsfeld was quoted in a similar vein:

There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.

What’s not included in his quote is that it’s the unknown unknowns that will bite you. I don’t know if Mr. Rumsfeld is doing any mentoring of startups these days, but make sure whomever you get as a mentor is familiar with the insidious trap of the “unknown unknowns.”

Looking to raise VC funds? Are you coachable?

hbs

If you are looking to raise money from VCs the article How Venture Capitalists Really Assess a Pitch from the Harvard Business Review is absolutely must reading!

Before Lakshmi Balachandra entered academia, she spent a few years working for two venture capital firms, where she routinely witnessed a phenomenon that mystified her. The VCs would receive a business plan from an entrepreneur, read it, and get excited. They’d do some research on the industry, and their enthusiasm would grow. So they’d invite the company founder in for a formal pitch meeting—and by the end of it they’d have absolutely no interest in making an investment. Why did a proposal that looked so promising on paper become a nonstarter when the person behind the plan actually pitched it? “That’s what led me to pursue a PhD,” says Balachandra, now an assistant professor at Babson College. “I wanted to break down and study the interaction between the VC and the entrepreneur.”

I’m just going to list her findings as bullet points, with one exception. Read the full article to get the valuable details;

  • Trust beats competence.

  • Gender stereotypes play a role.

  • Coachability matters.

    Particularly among angel investors, who get involved earlier than traditional VCs do, decisions aren’t driven only by potential returns; they are driven by ego as well. Most angel investors are experienced entrepreneurs who want to be hands-on mentors, so they prefer investments where they can add value. For that to happen, a founder must be receptive to feedback and have the potential to be a good protégé.

This last point is of course a vitally important finding to me as someone who spends a lot of time mentoring entrepreneurs and reviewing investor pitches. What founders need to realize is that raising capital is actually a sales process, the investor is paying your company for equity in the company. You are a sales person and your product is company shares. So note Dr. Balachandra’s conclusion well:

The most important takeaway for entrepreneurs is this: You should approach the pitching process less as a formal presentation and more as an improvisational conversation in which attitude and mindset matter more than business fundamentals. Listen hard to the questions you’re asked, and be thoughtful in your responses. If you don’t know something, offer to find out—or ask the investor what he or she thinks. Don’t react defensively to critical questions. And instead of obsessing over the specifics of your pitch deck, Balachandra advises, “think about being calm, cool, and open to feedback.

And you might read my post Sales calls as a conversation, not a sales pitch.

Incubators offers child care and mentoring

 

childcare

Lis Tyroler, center, helped start Nido, a co-working space that offers on-site day care, in Durham, N.C.CreditJeremy M. Lange for The New York Times

The article Starting Up a Business, With Little Ones Close by AILI McCONNON in The New York Times is about incubators, this one that enables working moms, and dads, to take advantage of child care services as well as other typical incubator services, including mentoring.

Funded in a variety of ways that include bootstrapping entrepreneurs and corporate behemoths like Google, these spaces all perform vital functions. Some host meetings with a bank or investors, others help entrepreneurs learn all facets of starting a business, while some simply provide a common space to meet and talk with peers.

One such space in Durham, N.C., called Nido was exactly what Ali Rudel said she needed to fulfill her dream of starting her own bakery while juggling the responsibilities of caring for her 3-year-old and 6-month-old daughters. They attended a Montessori preschool on site while she worked next door on developing her idea over 14 months.

20ebiz3-master675-v2Ms. Tyroler, center, with her children and Tiffany Frye, another co-founder of Nido.Credit Jeremy M. Lange for The New York Times

Google has been a pioneer in providing day care to its employees but with its Campuses it also provides combination incubator/child care to founders around the world.

Ms. Sielicka-Kalczynska, founder of Whisbear and originally from Poland, connected with various mentors at Google and was invited to a workshop in Palo Alto, Calif.

Google started the first Campus for Moms in Tel Aviv in 2013 and now offers this program on six campuses outside the United States. More than 650 parents have gone through the Google program, roughly 10 percent of them fathers.

Google does not charge for the program or take any equity in the new companies.

“We began as a start-up in a garage, so backing start-up communities is part of Google’s DNA,” said Mary Grove, the director of Google for Entrepreneurs, the Google division that runs Campus for Moms. The company does hope to draw on participants’ loyalty by introducing Google’s tools to start-ups.

Ms. Sielicka-Kalczynska now has a group of Google mentors in several countries. Whisbear just won the top award at one of the biggest baby trade shows in Europe.

It’s great to see new incubators spring up, like the one in Austin for foreign founders and Nido, for moms.

Accelerator provides mentors for foreign-born founders

According to the article in Forbes by Murray Newlands The Chief Architect Of Austin’s Tech Revolution Is Betting On This New Population, International Accelerator, is the only accelerator in the United States that is focused exclusively on foreign-born entrepreneurs. The International Accelerator is located in Austin, a hub of entrepreneurial activity.

In addition to helping the company incorporate in Delaware, introducing them to service providers and taking care of their accounting and even finding a home, according to CEO Angelos Angelou:

We provide them with mentors, interns, and identify one to two U.S. based board members to provide guidance and raise the profile and credibility for the company. Our goal is to make the company look, account and govern like a U.S. corporation from day one.

The accelerator currently has six portfolio companies for which they have raised nearly $11 million. They organized a business plan competition during SXSW which 100 startups participated. Four or five companies have been selected to join the accelerator.

Angelos provides the reason so many foreign entrepreneurs are coming to the U.S.:

There is significant  innovation from foreign entrepreneurs, but they lack the experience of growing and managing the scaling of their business. Where these startups are coming from, they don’t have a large pool of experienced management talent. This is what they are coming to the United States for, and this is where the International Accelerator steps in and plays a very active and pivotal role.

He might have added that where these startups are coming from they also don’t have a large pool of mentors to guide and advise as they will find in Austin.

Building your network can help in finding mentors

getty

The article in Inc., by Stewart Thornhill Why You Might Want to Hold Off On YourStartup Dreams makes the argument that would-be entrepreneurs might be better off entering the workforce after graduation rather than trying their chances at a startup.

….entering the workforce to spend a few years in a stable position has tremendous benefits for aspiring founders and their future ventures, and could even pave the way toward founding better, more stable ventures.

One of those benefits is building a professional network:

Building a professional network is essential to any recent graduate, regardless of what their career path might look like. For entrepreneurs, networking is especially important when it comes to generating awareness for your venture, attracting investors, securing customers and building your staff. Many student entrepreneurs build up a solid network at school, but can struggle to grow it beyond their campuses or college towns. Spending a few years working for another company helps to keep entrepreneurs sharp and build up a solid list of references for the future. Many times, co-workers become co-founders and managers become mentors, helping to navigate the common pitfalls in business that until that point have yet to be seen. And, as important as building a network, graduates can establish a reputation within their organization–a reputation that will follow them into their own ventures. Becoming known as someone who can get things done is easily as valuable as the degree one earned in school.

Note that building your network can be key to find mentors for your career or your startup. And just as important is building your personal brand. It’s not just who you know, but who knows you, as the saying goes.

The author concludes:

Before making startup dreams a reality, entrepreneurs should weigh the pros and cons of all their options and not forget that delaying entrepreneurship does have its benefits.