Packaging Your Pitch: Raising Seed
Having sat on both sides of the table for raising seed capital, I wanted to provide notes that might be helpful to any founder pursuing their first round of equity funding. You want a well-packaged story about you, the team, the product, and the opportunity. Remember that risk is everything to investors. So while you’re mostly selling a vision as a pre-seed or seed company, you need to incorporate as many de-risking elements as possible. There are a few buckets where you can do this.
Vetting the Founding Team:
Early stage is the riskiest round as it produces the highest rate of failure. “The team” is one of the biggest inputs at this stage and one of the most straightforward ways to reduce risk perception. A track record of past success can be strong evidence for future returns. Repeat entrepreneurs get the easiest pass on this, but that’s because they’ve already been put through the ringer. They’ve done the hard things and they’re prepared for the challenges ahead — be it known hurdles, or unknown curveballs that can cost time and money. The potential for loss is subjectively reduced.
If this is your first time founding a business, you should confidently point to other indicators of success:
a) Leadership of a business unit at another top performing company
b) Integral role in scaling or managing something related
Alternatively, domain expertise is another strong point in your favor:
a) You’re an expert on the field into which you’re selling and have years of experience
b) You hold a patent on proprietary tech
If you don’t have a gold-plated resume, you need to validate yourself by other means:
a) Warm introduction from a respected member in the community, be it another founder, investor, or executive in a relevant field.
b) Acceptance into an accelerator or incubator program.
At the earliest stage of a business that intends to scale, investors are buying you, your network, your acumen, and your hustle. Even the best laid plans often result in a fundamental business pivot, and investors want to know why you, specifically you, are the best one (along with your team) to relentlessly hunt down success.
Vetting the Product / Company:
Your first product won’t be perfect, far from it. Reid Hoffman famously said, “If you are not embarrassed by the first version of your product, you’ve launched too late”
The key pieces on product are:
- what are you solving?
- how does it work?
- why is it easier, faster, better OR why will it be novel, adored, sticky
- what have you learned?
You’d be surprised how many pitches burn way too much time without a clear explanation of what is the thing you’re selling. This should be condensed to a sentence: We make X that does Y for Z.
B2B startups tend to walk though a customer use-case as a common tactic where you can illustrate existing pain or friction. Try to tie your product to the revenue potential for your customer — regardless whether the direct impact is more sales, more efficiency, or more security…you want to convince the investor that your product will support revenue growth for your customer. Bonus: now you’re teasing in a well-packaged sales pitch.
A lot of the same can be done relative to consumer products, but sometimes it’s not about solving pain, it’s something delightfully fresh. Consumer brands can be tricky when it’s more about lifestyle vs utility, so lean on your differentiated strengths even if behind the scenes (optimizing supply chain, COGS, inventory management, user generated assets).
Since you don’t yet have the magic across acquisition, activation, retention, talk up insights and what you learned thus far. At this point you want to show a deep understanding your target audience and what they want and need. Back to risk, if an investor writes a check, how can you show that those funds will be most efficiently and effectively deployed?
Important note: likes, followers, media, traffic, and awards are all vanity metrics. That’s not validation. Fans ≠ Customers.
Vetting the Opportunity / Market Size:
Assuming you’re raising venture (whether or not you should pursue this path is another discussion) means outsized returns are expected. There should be strong implications horizontally across multiple industries or why you can potentially own an industry if it’s a niche focus. Are you going up against giant incumbents who own the space or are there other nimble startups disrupting at speed? What allows you to squeeze in and carve out market share?
Be targeted to start, but show broad implications:
Who is this for? Clearly define your go-to-market and why a particular audience is the right starting point, then make sure you’re not perceived as a one-trick pony and give examples of how broadly your product can be employed or enjoyed.
If the market is saturated with competition, are you displacing something else or are you an all encompassing solution that will require displacing multiple competitors. Don’t do something that will lengthen your sales cycle or muddy up your initial value prop. Most founders will remind you to be great at one thing first.
Lastly, if you’re harping on a gap in the market — be sure there’s a market in the gap. Just because a function isn’t fulfilled, doesn’t mean there’s demand. It’s on you to prove it. Everything ties back to reducing risk.
Take a cue from one of my favorite books and Don’t Panic.
Pre-seed and seed investments are so much about the team. Your ability to effectively communicate value and opportunity to an investor is a bridge to how well you’ll communicate to your team and customers.
If you’re not finding traction… experiment and iterate, but do it thoughtfully. Data driven decisions (even with few data points) speak to your leadership and management style. You want to exemplify a balance between strategic overview and mastery of nuanced detail.
You may have the whole equation down: right founder, right product, right time, right industry — but this doesn’t guarantee investment or success.
Get out there and build relationships with investors. Before you meet, learn about their portfolio, their thesis, and interests. A good early investor wants you to be successful, and brings more to the relationship than dollars. You’re looking for a partner in growth who has insight into the market and building your type of business.
Raising money is not the goal, it’s a hurdle. To quote another good friend in the business. “When someone closes a round I don’t say congrats, I say good luck.” So, good luck to you founders and feel free to get in touch with questions about raising money or pitching.