TechStars' founder David Cohen on how to get what you really need from an investor: an invitation to come back.
If you're pitching to investors for the first time and expecting them to be so blown away by how thoroughly amazing your pitch is that they write a check on the spot—well, prepare to be disappointed.
About once a quarter, TechStars hosts a "Demo Day" and more than 500 investors typically show up. They travel from all over the world to see the new start-ups exiting from our program. In the weeks leading up to the event, we constantly remind our companies about the one simple goal of demo day: It's not about getting checks, it's about getting meetings.
Brad Feld, my co-founder and mentor, likes to say that every interaction he has with a company should be better than the last one. If that's not the case, he won't invest. Brad, and many other smart investors realize that anyone can put on a good show one time. But two or three times? They'll want to meet with you several times in order to make sure they understand the business and love the entire team and not just the person making the pitch. They'll want to dig deep into your customers and competitors.
Mark Suster likes to say that investors invest in lines and not dots. Think of your first pitch as one very important dot. But recognize that you’re going to have to keep that line going through a series of interactions with potential investors. And don’t forget that this goes two ways—you should expect to have great interactions with your potential investors, too.
Once you understand how investors think, use it to your advantage in your initial pitch. Here are my tips for a first pitch that will impress:
Keep it short.
Prepare a 5-10 minute overview and let the investors guide your questions. You can have plenty of backup material, but stick to the basics in your first pitch.
Show, don't tell.
Don't bore them to death with bullet points and graphs. Instead, show your product. Tell the story from the customer’s perspective.
Let them feel your passion.
Help the investors understand how you're connected to the problem you’re solving, and why you can't stop thinking about it.
End with an ask.
Sure, you should explain how much money you'd like to raise. But your first meeting is likely to be a short one and nobody is going to write you a check on the spot. So get to the point quickly and use the remaining time to address any questions they may have. I see about 5,000 businesses ideas a year, and I can tell you that I appreciate it when someone can get to the point efficiently. When the meeting is done, ask to get together again so you can dive deeper.
Of course one of the great things about offering general advice is that sometimes it’s just plain wrong. Right in the middle of one TechStars Demo Day, just after HelpScout finished their pitch on stage in front of hundreds of investors, Dharmesh Shah tweeted that he would invest. In another instance, I recently introduced one TechStars company to a very famous investor, and he literally invested via email on the same day.
Every once in a while a founder will give a pitch that renders that first meeting unnecessary. It could happen to you—but don’t bet on it.
DAVID COHEN is the founder and CEO of TechStars. Previously, he founded several software and Web technology companies. David is an active start-up advocate, advisor, board member, and technology advisor who comments on these topics on his blog at DavidGCohen.com. @davidcohen