Who should be on the other side of the table?

I’m sorry to have to bring this up, but over the last few weeks it feels to me as though startups are reaching some kind of tipping point: they have become a kind of modern cargo cult. My son, emboldened by the descriptions of startups and pitching permeating the media, has occasionally begun trying to lecture me about New Business, innovation, invention and all the rest of the same sorry mess

Eskimos / ice etc.

I want to inspire him, sure: but how can I get across to him that even if you have an incredible idea, have a powerfully persuasive plan, and can demonstrably prove that you are utterly brilliant at executing such plans, pitching conceptual businesses is an extraordinarily poisoned chalice?

For when you go a-pitchin’, who is on the side of the table?

* Grant-giving organizations – I don’t think so. *choke*
* Angels – really? Really?
* Angel syndicates – hilarious.
* Crowdfunding – good luck with that hoverboard, matey.
* Banks – banks and conceptual business are like oil and water
* Peer to peer lending – interesting concept, but very hard to find a middle ground.
* Private equity – not unless you know all the partners really well, and can scale your concept up to a $5m investment round
* UK Venture capitalists – not unless you have appeared on Newsnight and can scale your concept up to a $10m investment round
* US venture capitalists – not unless you have appeared on Fox News and can scale your concept up to a $20m investment round

In reality, startups circa 2015 have to look at different tables entirely:
* spin-in (where you sell revolutionary ideas into large, late-lifecycle corporations that have become innovation-free zones)
* buy-back customer-funded (where your major customers own you for a period of time, but you have a performance-led buy-back option)
* customer-driven pitches (where you build up a pre-sales relationship with one or two large customers)
* supplier-driven funding (where you build up a relationship with a factory that owns moulds you are deriving your product from)
* etc etc etc

In short, conceptual business pitches now need just as much active innovation for the funding-to-market business model driving their business as any hardware, electronics or software innovation. In many ways, the Widget part of the business equation has become the easy bit: funding, building out, and selling in is where the real innovation bottleneck now is.

But how do you squeeze such a radically different worldview in a PowerPoint presentation deck? It’s really not about high-concept Tech any more, it’s more about having a genuinely integrated approach to business that sees all the parts of the business landscape and finding the precise ways they can all link together that gives all the parties what they are looking for. In short, starting up is now actually all about business configuration innovation, if you can accept that as a genuine phrase without gagging. 🙂

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Fake pitches and real startups…

I had a nice coffee today with an old friend from my schooldays who sold his decent-sized company not so long ago: it didn’t take long for the conversation to turn to business angels and pitch meetings, something which we both have had a lot of exposure to (though largely on opposite sides of the same wonky-legged table).

On the one hand, in order for startups to get past angel gatekeepers to pitch, they have to kid both themselves and others that in 3-5 years’ time they will multiply an given investor’s stake by at least 10x: this is the modern pitch template, the model that startups are required to replicate in order to be considered “credible” (But of course nobody has that kind of control over the future, however smart you are).

Yet on the other hand, my experience of rapidly growing companies is that they are structured in an open way to allow external serendipity to play a very significant (if not actually a near-majority) part. In fact, I suspect the real growth of such companies would best be charted in a bar graph with “Years” along the bottom and “Lucky Breaks” up the side. (Note that I don’t believe anyone has ever put such a graph up in front of potential investors, except perhaps with some kind of satirical point in mind.)

What struck me most forcefully was the sharp contrast between these two startup “models” – between the PowerPointy pretence of control and the (actual) near-total absence of control. The whole startup discourse has become a slave to the MBA-ified cult of the jut-jawed CEO hero making dramatic bets against the market’s groupthink, all the while the realpolitik of business has grown more diffuse and collaborative, where opportunities more often arrive as partnership outcomes than as snatched moments of solo market brio.

I don’t know: as I’m typing this, I’m feeling the hopelessness of the whole situation – as though angel investors and their groups have, by steering the ‘model’ to such foolish extremes, become 10x more of a hindrance than a genuine help to the whole sector. Add in the triple-whammy cargo cults of the ‘killer deck’, ‘elevator pitch’, and ‘executive summary’, and you have a pervasively dysfunctional setup to deal with.

Right now, I have this huge urge to stand in front of a room of business angels and just, I don’t know, tell them the goddamn truth. You know, that business is hard, arbitrary, strange, but collaborative; that what genuinely differentiates proper startups from, say, window cleaners is they take a certain combination of ambition, drive and scalability and aim it all at a fat (but wobbly) market; and that if I could tell the future as well as angels apparently need me to, I’d be betting on Lucky Boy in the 2.30 at Haydock Park, not standing in front of them.

But most importantly I want to tell them that it is their shared model that is killing startups: that if they had the guts to invest in startups without having them go through that stupid ritual of pretending to have sufficient omniscience, omnipotence, and precognition to guarantee insanely good ROI, then maybe they’d get the kind of returns on their investment they wanted.

Really, do I honestly think there’s even a 1% chance many will stop punting their miserable pin-money stakes into social me2dia shutdowns (i.e. the opposite of startups) anytime soon? No, of course not, not a hope. But that’s the view I get from here, make of it all what you will.

How to pitch your startup…

The #1 way to pitch your startup is with a high-speed presentation, that…

• can use numbers to get its point across, but is not actually a numerical argument.
• is a selling aid, not a business-school case study
• is a glossy brochure made flesh, filled with richly-saturated emotional appeals to the audience.

And just in case you haven’t worked it out already, the brochure is you and the audience is potential investors.

But before you try out your pitch on anybody who might conceivably be able to respond, write it all up in a shiny four-page brochure format. If you find yourself unable to do that, be very afraid (because it probably means you’re lacking some important sales skills) – and then immediately find someone who can do it for you. And in fact, lots of people can – the hardest bit is admitting that you can’t do it, and that you need their help.

So, if you find that this is the case, don’t be proud, be effective – see what you’re missing and find a way to beg, borrow or buy it in.

In fact, there are three big reasons for doing this:

1. Many potential investors respond better to shiny glossy material in their hand than spoken stuff in their ear
2. Many people you pitch to will pass the material on to other investors they know (for a whole variety of reasons)
3. Finding effective soundbites for your brochure will help you do the same for your pitch presentation

But what are you actually trying to say? Actually, a pitch says nothing more than:-

“This is the world I see, and it looks totally money.“

Overall, if you’re saying much more than this in a pitch, you’re probably trying too hard. The point of a pitch is to find people who agree with you that what you see is indeed “totally money“, i.e. a great big juicy, succulent, mouth-watering opportunity for everyone involved to get rich several times over. So, work out what the top three reasons why investing in your startup is a fantastic, solid-gold, never-to-happen-again, buy-in-or-kick-yourself-for-the-next-decade good idea, and spend whatever time you have getting those three reasons across to your audience.

A pitch is not the place for carefully-constructed, highly-detailed rebuttals overcoming various sales objections you’ve encountered along the way, it is a place for enthusiasm and excitement. In modern movie terms, it is a Call To Adventure in the Hero Investor’s Journey: given that the second stage is called “Refusal Of The Call”, it is your job to find ways of dragging people past that Refusal by connecting them up with the gift of Supernatural Aid that propels them into your adventure. For example, this might be an article in the Financial Times bigging up your sector, or a shared LinkedIn connection that strongly endorses you at precisely the right moment.

However, what is arguably most important in a pitch is the way that you say all this. If you have never sold anything before in your life before trying to sell shares in your startup, be afraid. Few salesmen are particularly good at selling big-ticket items – and, let’s face it, a startup is (even at this early stage in its lifetime) a very big ticket item, making it a very hard sell.

So if you’re an entrepreneur trying to do this, look over at your bookshelf. If what you see says “Agile Development With Rails (4th Edition)”, “Linux Device Drivers, Third Edition”, “Programming Perl” or (dare I say it) “The Lean Startup”, I can only suggest that you consider broadening your repertoire… and fast. Say, “Close Every Sale” by Joe Girard, “Secrets of Closing the Sale” by Zig Ziglar, “Presentation Zen” by Garr Reynolds, “Mastering the Complex Sale” by Jeff Thull… you get the idea.

Put another way, you wouldn’t put yourself in the seat of an F1 car without a lot of training beforehand… and standing in front of a room of investors is a high-octane context where the stakes are high, one where people in the audience expect to be sold to vigorously (and to resist just as vigorously). And you’re just going to wing it, like you’re talking to some mates down the pub? Riiiiiight.

The big modern mythology that has polluted this whole discourse is that “some ideas are so powerful that they sell themselves“. Well… it may indeed be the case that this is true for one or two ideas in a generation. But please take this on board: it’s not personal, but the chances that your (say) urban social media hack falls into that extraordinarily elect group is basically at lottery-like low levels of probability. But you aren’t Mark Zuckerberg, your startup isn’t Facebook, so trying to achieve your success by emulating his outlier success is hopefulness bordering on idiocy. Let’s face it: you’re probably going to have to take a slightly different route.

If you’re an entrepreneur, 95% of what you do is now sales. If you don’t like that, tough luck – at some stage, you’re going to have to get over it, and get with the programme. Learn from people who really know how to sell. And then sell like you really mean it – because you do.