Often, entrepreneurs seeking venture capital funding find that pitching VCs ultimately turns out to be an unsatisfying experience. The VCs often look at their phones or nod their heads in a way that says they’ve lost interest in a pitch, and then they tell the entrepreneur how amazing his or her idea is and promise a follow-up that never comes.
What’s an entrepreneur to learn from that?
That’s precisely the question Eric Bahn, co-founder and general partner of early stage venture firm Hustle Fund, sought to tackle during a recent online event(opens in new tab) sponsored by Oracle NetSuite.
“Venture capital today is a black box. As an entrepreneur, you often never hear again from the people you pitch to, so it’s impossible to know the biases behind their decisions,” said Bahn. “We’re going to smash this black box with a velvet hammer.”
In an attempt to demystify the process, Bahn and his Hustle Fund partner, Elizabeth Yin, listened to five-minute practice pitches from three startups and provided no-holds-barred feedback for the entrepreneurs, all for an online audience of would-be fund-seekers. In each case, the entrepreneurs got searing advice that should help them hone their future funding pitches.
State the Problem Clearly
First up was Laura Minquini, founder of Mykigai, which bills itself as a “longevity concierge.” Minquini enthusiastically shared how ageism costs the North American economy $850 million each year. She said the Mykigai platform aims to connect Baby Boomers and older Generation Xers with products and services designed for their age group.
Minquini painted a picture of a market of 135 million people in North America, with projected revenue of $45 million within five years, earned from a combination of brokerage and membership fees. She also said the service launched in April, and is nearing 1,000 members thus far.
If Mykigai’s business model sounds a bit fuzzy from that description, you’re not alone. Yin also wasn’t exactly sure of Mykigai’s objective, and she said startups often don’t spend enough time clarifying the problems they’re trying to solve. She said it sounded like it was a lifestyle membership program, but that it didn’t seem to be tied to health, and that being so unclear would undermine the pitch.
“Making the problem crystal clear affects everything else in the deck,” said Yin. “In this case, I was confused about the problem.”
Yin also took issue with Minquini saying that customer acquisition was happening via “word of mouth,” which she described as a red flag to VCs. Better to simply make a case for how devoted customers are, and how many referrals they lead to on average, said Yin. Lastly, she recommended that instead of sharing revenue projections in the millions, which isn’t enough to whet the appetites of most VCs, Minquini should frame the total market opportunity as being in the billions.
Don’t Forget to Address Scale
Next up was Anatoli Shkliaruk, co-founder of Paqt, a startup that claims its software is redefining digital agreements. The premise of Paqt is to unify a fragmented area in which businesses use a combination of signature capture tools, document templates and communication platforms. The company seeks to provide a more robust, all-encompassing solution than market leader Docusign offers by adding a chat function and essentially acting as the glue that holds agreements together.
Describing agreements as a process, Shkliaruk said Paqt’s product significantly speeds up the agreement cycle. He also said the software offers higher levels of security.
Yin had a similar reaction to the one she had with Mykigai: She wasn’t quite sure she understood the crux of what Paqt is trying to do. She found herself thinking that Docusign can do most of what Shkliaruk talked about, and that people actually create their own fragmentation. She suggested he focus instead on the uniqueness of Paqt’s ability to keep everything all together.
Bahn had a different take: He felt Shkliaruk was simply too focused on the technology he and his team had developed and not enough on the business surrounding it. He made this point by sharing his favorite tweet ever, from one of the co-founders of Twitch. It said: “First-time founders focus on product, second-time founders focus on distribution.”
As a result, he suggested that Shkliaruk cut the product slides in half and spend more time talking about customer acquisition and distribution.
“The question of how you’re going to get this to customers at scale is top of mind for VCs,” Bahn said. “You don’t have to have specifics; you just have to show you’ve thought about it.”
Avoid Burying the Headline
Last up was Hoda Mehr, founder of Stock Card, which she called a “double-sided platform for retail stock market investors and influencers.” Citing a few important shifts in the retail stock market, including the transfer of $30 trillion in wealth from boomers to a new generation, Mehr argued that Stock Card brings together the two sides of a new investment reality.
On the demand side, the company is creating an investment research platform. On the supply side, Stock Card connects content creators with a community that will, in theory, pay for their content.
Mehr talked up the inherent “flywheel” nature of Stock Card, as more investors will attract more influencers, which will attract more investors, and so forth. She also stressed that the company has only paid 60 cents on average to acquire customers, and that it’s retaining customers at a rate above the industry standard.
She then wrapped up by mentioning that all of the founders are investors or influencers who have invested in the product and are using it.
While Yin and Bahn said they liked the relative completeness of Mehr’s pitch, two things caught Bahn’s attention. For one, he felt that bringing up customer retention rates in an industry that sees a lot of churn “feels like a leaky bucket of having to constantly chase users.”
But even more important, Bahn said, was the minimization of the founders’ commitment to the product. He said the fact that the founders are actually using Stock Card and getting the desired results is a critical piece of the story.
“It felt like you buried the headline that we’re influencers who use our own product,” he said.
In the end, the entrepreneurs clearly learned something from the blunt assessments of their pitches, something they simply can’t count on getting from most VCs.
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