Simplifying the message to VC’s
All CEO’s sell. They are constantly selling themselves their products or their company; shares or raise capital or the entire enterprise. Recently, a seed-stage entrepreneur said to me “I look forward to the day I can stop selling”. I said, “then that will be after”. After you are closed up or sold off the company.
Part of his reasoning for making this statement is early capital raising frustration. It’s far from burnout, that will come later. Frustration is just part of the funding process and being rejected. Rejection is a direct result of (a) not knowing your audience well; and (b) how you message what is is that you [really] do. VC’s like simple, one sentence pitches and simple, easy business models that have few moving parts. Few moving parts = less risk. Their thinking, not mine.
So, here is a simple way to simplify the message:
- Look at your financial model. How are you making money in Y1, Y2 and Y3. What’s the mix or sources of revenue? Have they changed between Y12, Y2 and Y3?
- What are you selling? Are you selling a product — features and benefits that seemingly solve a problem of degrees (nice to have vs. must have)? Or, is the by-product of implementing this solution (eg: data or network) more valuable ?
Here’s an example of what I mean. Take McDonald’s. Restaurant chain right? Sure, and a big one. But, it’s value is as a real estate and franchising enterprise. They own a ton of increasingly valuable real estate they lease to their franchisees. It’s a nice bundle or synergy: Franchisees invest in a proven system and a global brand that 99.9999% of us know of. But, they need to lease the land from Big Mac. Then, pay a franchise fee and ongoing royalties as a percentage of sales. The product is the franchise. The valuation strategy is Real Estate supported by sustainable recurring revenue and the tactic is restaurants operated by others that take the operating risk.
If you have a software solution for restaurants are you in the SaaS business or, the data business? Are you building a mobile network or is this all about getting onto the hostess stand?
Whatever your real business is, convey that message in as few words as possible. Make it so easy to understand without getting into the minutia. It may not be what you think it is.