How to Pitch Your Company
themacro.com
themacro.com
Weird example. Slack didn't create a new space. They created a new product that entered a supersaturated space. Pretty much any VC would balk at a company creating yet another chat application.
> You don’t need to mention your GPA or that you once worked at Google.
You don't need to, but it helps.
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Here is all you really need: build a good [great] product, get [paying] customers, get a little lucky. Other than the guy who got nixed from YCs HN Crowd selected funding program, it's pretty rare to have those three components and not get funding.
My cynical side reads this piece as an investor giving out, what appears on the surface helpful advice, but in actuality mostly benefits the investor by making their jobs easier by streamline the pitch process, so they can more quickly evaluate deals.
GPA and Google on your resume is good for VCs who want to cover their butt, but it probably isn't a compelling argument for the VCs you want on your side.
Before dimissing a VC for choosing to use or not use it, I wonder what the data shows regarding whether pedigree is a good proxy for selecting founding teams for funding?
Anecdotally, I've seen a lot of excellent academics and skilled corporate bureaucrats from top companies have trouble adjusting to the chaos of startup life, and the demands of the product development cycle, even after they raise a great deal of money. Pedigree and entrepreneurial skills are in some ways orthogonal.
In any case, GPA/Ivy League/resume trophies are a weak substitute for a product that works and appeals to people, which is the main point.
"Google doesn't even ask for GPA or test scores from candidates anymore, unless someone's a year or two out of school, because they don't correlate at all with success at the company. Even for new grads, the correlation is slight, the company has found."
http://www.businessinsider.com/how-google-hires-people-2013-...
Whether or not you want to take funding is an entirely separate question, but one answered more easily if you know what they're looking for.
I think it is pretty helpful for people applying to YC to understand what YC partners are looking for. I'm as cynical as they come but I can't really fault the post, it isn't telling you how to make a successful company, it is telling you how to (as you state) essentially streamline your pitch to YC.
But to compliment your point: the startup I worked at, Thumbtack, was terrible at pitching for ~4 years and it significantly impacted our ability to raise money. During this time we were out-raised by many flashier competitors (Exec, Homejoy to name a couple) who I'm sure were much better at pitching. At the end of the day though it is the customers and not the investors that decide if your company is a success. I'd also add "persistence" to your list of qualities which I think make a successful company (I'd actually put it first -- or at least tied for first with being lucky).
What do you mean by "terrible at pitching"?
And after finally raising the Series A, Exec [3] came along and despite being only a few months old raised a huge seed round at twice Thumbtack's valuation.
My memory of the timeline was a little off for Homejoy, but there was a time after Homejoy raised ~$40 million dollars at ~2-3x Thumbtack's valuation that made it feel like we were underperforming where we should be in fundraising. Thumbtack did eventually raise more money shortly thereafter and then even more money in the future, but at the time you don't know any of this.
1: https://www.thumbtack.com/blog/building-thumbtack/
I've used Thumbtack as a customer for my wedding officiant & photographer. One of things that stands out for me about the local service-provider market is that you really do want to solicit multiple bids, you want to be able to read reviews from other customers, and you want a chance to get to know the providers before committing to them. Thumbtack makes all of these processes super easy. The conventional wisdom in the on-demand market c. 2012-2014 was that customers just wanted convenience, they wanted one-tap order and have someone show up, and sharing-economy workers were basically interchangeable commodities. All of these assumptions are true for Uber and false for basically every other on-demand market; it makes sense that a VC chasing the next Uber would get them wrong.
But after the experience it was quite the realization that most of them had no idea what they were talking about (at least about our space). And if your vision of the world is different than theirs, there isn't that much you can do. Frankly we naively tried to appease them (for example we actually build a "Cherry"-like version of Thumbtack in a weekend to appease the NEA guy), but it doesn't work and they all reject you for so many different random reasons you couldn't even appease them all if you wanted to. You just really need to do your thing and hope you are right.
They won't ignore traction though. Get enough traction and any VC will come around. To the point of the article, I think we were bad at pitching. We didn't have much traction when we raised the Series A but we had the obvious kernels of it. But we talked way too much about what we had done (which we thought was impressive), but VCs really want to hear much more about what you are going to do. And even when we did talk about the vision, it wasn't (and still isn't) anywhere near as sexy as Uber.
Now while Thumbtack was a success for the founders, early investors, and early employees, it still has a tiny tiny fraction of the overall services market. While it is clear that companies that went out of business were "wrong", I'm not sure at what point Thumbtack's approach becomes "right".
Perhaps a more fair statement would have been: "good advice for pitching, but really, spend your time building your customer base."
You need to think about it in a business context. Pre-slack virtually no businesses used realtime group chat.
Developers sometimes used IRC, HipChat, etc. and some corporates used Lync/Skype For Business/Yammer but these were terrible solutions for the majority of businesses.
Slack didn't succeed by taking marketshare from IRC, it succeeded by bring real-time group chat to people who never had it. That was a new market with real questions as to whether there was any demand for real-time chat among the wider business world.
Um, BBM?
I agree with most points on your original post though.
> Pre-slack virtually no businesses used realtime group chat.
BBM, Real time group messaging, used by businesses. It was popular long before group messaging was popular.
Yes blackberry is now a joke, but there was a time when many businesses provided employees BB for communication, and it's users loved BBM.
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That comment also missed the point: Slack didn't enter a new market (the claim from the referenced article), it entered a market that already was saturated, and by having a better product, is winning in that market.
Hipchat, Campfire, Lync, et al, are all competing for the same customers that Slack competes for.
Whether slack is better for businesses, or whether it was a direct competitor to BBM, completely misses the point.
What were you using in 2005 to communicate internally in your company?
If Slack entered a supersaturated market, you should be expected them to either (a) gain almost no users, (b) solely gain users at the expense of competitors.
Neither is even remotely true.
As a developer with no experience founding a business, it seems being able to succinctly answer those 7 questions, for myself, co-founders, and even early customers, could be very useful in building a great product and getting paying customers.
I'm curious, do you have anecdotal evidence for this? Would it help if you were the potential investor? Have you seen scenarios where founders got funding after mentioning they worked at Google, but wouldn't have gotten funding otherwise?
"If you know how big the market is, you're too late." -- quote I saw somewhere
Now, that's probably an exaggeration. You can probably have some idea of the size of the market before you get into it. Is it a small niche, a medium-sized niche, or potentially huge? But I wonder if you can really be much more precise than that.
I absolutely love this! Thanks so much for sharing.
I've always hated size-of-market analysis. It always rings hollow. Your quote is a pretty good reason for why....
Your answer to this single question actually addresses a bunch of other question (i.e. it's a signifier for a question cluster):
- Are you creating a new market or entering one with existing players? - Are you taking an $YB market and growing it or taking revenue from others (presumably by undercutting them) - Do you understand the motivations of your buyers (i.e. if you're selling motorbikes your customer base isn't all who need powered transport).
I raised $20M for Talima without any market size projection -- but I did understand the market (aging baby boomers with disposable income who, as they aged, would need the product). The macro numbers were enough.
https://www.crunchbase.com/organization/talima-therapeutics#...
Not sure if that's accurate, but they have received ~20M in funding.
I do agree that the question is important to think about. And I think you should at least be able to say broadly how big you think the market might be, and explain your reasoning. And I also agree that it depends somewhat on the situation. If you're trying to create a whole new market, as you say, it's pretty much impossible; if you're trying to displace an existing player in a mature market, you should be able to narrow it down pretty well.
What I'm saying is that AirBnB is not a large enough factor to impact the overall market size.
For a quick snap shot, I looked up number of American's that AAA predicts will travel on the 4th of July ever year. In 2011 the number was 39M[1], in 2016 it was 43M[2]. Not really that big of a difference. AirBnB does make travel more attainable for the non-traditional worker[3] (such as students), but students won't rapidly expand an industry.
[1]http://newsroom.aaa.com/tag/independence-day-travel-forecast... [2]http://newsroom.aaa.com/2016/06/aaa-americans-will-take-trip... [3]http://blog.airbnb.com/economic-impact-airbnb/?_ga=1.1156748...
Further, AirBnB's tiny slice of the market could consist of some cohort that would not otherwise participate. CouchSurfers, for example. I used to do CouchSurfing, but I found I preferred paying for AirBnB in some cases.
Obviously, now AirBnB is much bigger than its first adopters.
https://www.slideshare.net/mobile/PitchDeckCoach/airbnb-firs...
I was imagining the market size question being posed at the seed stage. (And I suspect that whoever wrote the line I quoted above was thinking along the same lines.) If we could read AirBnB's YC application, would it have a similar estimate? I rather doubt it.
http://www.businessinsider.com/airbnb-was-rejected-by-seven-...
and the story of the one that wanted to invest
Airbnb, My $1 Billion Lesson https://arenavc.com/2015/07/airbnb-my-1-billion-lesson/
There's a point about doing one's homework, but I don't think this is the correct conclusion.
Market sizing should be done to set rough upper and lower bounds on who might want to buy your product. If potentially all parents of toddlers might want your product then that's awesome. But if only parents of toddlers who also have a pet fox would be interested, well, it's probably a much smaller opportunity (unless, of course, you can make the case that foxes are about to become incredibly popular as pets).
Even if you feel like you're creating a new market segment (blue ocean) it can't hurt to think through it. What might the structure look like, what other market segment could be similar etc. etc.
At the end of the day you're thinking about aggregated customers. Even if you think market sizing is a waste of time you still need to think about reaching customers and how they interact with one another (feedback loops, word of mouth).
Using the Google example from the article, the bad one answers "What does Google do?" and the good one answers "What does Google do for its customers?".
1. Personally I doubt that Google was that clueless early on as how to make money. A better search engine is inherently valuable because of the ability to direct traffic flow to favoured sites.
That statement could just as easily describe Yelp or Thumbtack.
Just because Google makes its money from advertisers doesn't mean users don't matter.
I'm paraphrasing. I can't find the original as there are lots of copy cats (including Seth Godin [1]... intentional or not). Even ATDC [2] the very startup booster organization that did not accept us (I laugh at this because our startup is still around and successful unlike all the others they did accept).
Which brings me to a great segue... you don't need a pitch if your company makes money.
[1]: http://sethgodin.typepad.com/seths_blog/2010/01/why-you-why-...
IMO the above is very good.
I particularly liked this section. It felt like a new way to ask "what is your competitive advantage?" while generating a bit more insight into how the founders perceive the problem their solving.
>I want to feel impressed with how much you’ve done in the period of time you’ve had to do it. This can apply to a company that’s one week old or ten years old.
You can't sustain the same ratio of work-to-time over the long-term. Barring superhuman attributes, that ratio will decrease significantly.
It's much easier to refine an idea when you've been immersed in a particular problem space. Longer time frames also allow for taking a step back to think and reflect—both of which are hard to do when your head is down and you're constantly working.
1) What are you proposing to do? (proposal)
2) Will it make any difference? (market/impact)
3) Can you get it done? (personnel/environment)
That's it. If you can't knock every one of these out of the park in a few short sentences, you are unlikely to be funded by either the private or public sector.
And before anyone remarks on how different the two are, note that the SBIR/STTR program is mandated by Congress to pay out every penny of their granting budget each year to try and turn publicly-funded research into privately successful companies.
If your startup doesn't pass this test, is there any good advice on how to fix it (either for this startup or future startups)?
Fix whatever that is, get productivity back up.
Can you walk me through the difference between customers first and biz dev deals?
BD deals is creating channels that might result in customers/revenue. Both are important, but revenue is more important than the potential to get revenue.
So Michael is saying something useful: we're willing to invest in a team with no credentials, no deals, no business development. Other things are more important. Things that are democratically available to us: building product, iterating with small customers, clarity of communication.
What would be a good way to ask something specific, without coming off as too arrogant or needy?
X = A goal you are working on achieving. It should follow naturally from the description of your business.
Example: We are looking to demo our product to attendees at SXSW next year, like Twitter did originally.
Y = What you are asking for (investment, introduction, etc.). Should be obviously beneficial towards achieving X.
Example: Who should we be talking to at SXSW to make that happen? We've already spoken to…