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How to Pitch Your Company (themacro.com)
283 points by craigcannon on July 19, 2016 | hide | past | web | favorite | 79 comments

> If you’re creating a new product or space (like Slack)

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.


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.

You're thinking like a developer. You see Slack as a realtime chat protocol and think there's already a million solutions.

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.

But, the Chinese companies have always used all kinds of IMs with group chat facilities to communicate. Many companies even developed their own IMs since as early as the 2000's.

> You need to think about it in a business context. Pre-slack virtually no businesses used realtime group chat.

Um, BBM?

Are you seriously comparing Black Berry Messenger to Slack? I had to Google BBM, and laughed when I saw that because people in businesses did not use Black Berry, or BBM, in any capacity even close to Slack.

I agree with most points on your original post though.

Straw man. I wasn't comparing slack's feature set to BBM, just refuting the point that before Slack, barely any businesses used group messaging.

> 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.


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.

Most Canadian companies, as well as most of the US government before 2005, used BBM the way most people use slack today. it was the killer app of enterprise.

What were you using in 2005 to communicate internally in your company?

> This piece just seems like investors giving out, what appears on the surface to be helpful advice, but really are just trying to streamline the pitch process, so they can more quickly evaluate deals.

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).

Fair point.

Perhaps a more fair statement would have been: "good advice for pitching, but really, spend your time building your customer base."

yeah, I read it as an attempt to help founders get back to the stuff that matters by spending less time developing pitches.

Hm, it looks like thumbtack raised an enormous amount of capital compared to Homejoy, both before and after.

What do you mean by "terrible at pitching"?

For "terrible at pitching", the official story [1] is trying to raise a Series A and getting rejected 42 times. I don't agree with everything in the official story, but the part about going to a bunch of meetings and being rejected over and over again for 6 months is accurate. I went to a handful of those meetings and I assure you it was very bad. My favorite one was a partner at NEA telling us that if we could only be more like Cherry [2] then we'd be fundable.

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/

2: https://www.crunchbase.com/organization/cherry/

3: https://www.crunchbase.com/organization/exec

I do wonder if the factors that made it so hard for Thumbtack to raise were also the factors that made it succeed in the end (i.e. the VCs were just wrong in their assessment of what the market needed, Thumbtack was right, and that's why Homejoy & Exec's VCs lost millions while Thumbtack is worth a billion).

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.

I absolutely agree with you. It was an interesting experience because before you get in the room with these investors, investors that you've seen giving speeches and writing articles, you assume they are somehow these visionary people. Of course they'll ask all the right questions and understand things better than you do.

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".

Streamlining the pitch process benefits everyone, because both investors and startups seeking funding have a lot of pitch sessions to wade through. Fund-raising is a long matching process, and the more you can make it like speed dating for the first pass, the better.

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.

By GPA, the author likely meant "name of prestigious university."

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?

The data may show a correlation, but it would show the same correlation to everyone, which means that the advantage of investing in Ivy Leaguers/4.0 GPA students is priced out.

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.

Interestingly, Google themselves decided GPA doesn't matter much.

"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."


Assuming you actually want funding, then streamlining the pitch process actually helps both parties. It's the entrepreneur's time too, and when expectations are clear from the beginning, the entrepreneur can decide whether those expectations fit with their current thinking and choose not to waste time fundraising if not.

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.

> They created a new product that entered a supersaturated space.

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.

"> You don’t need to mention your GPA or that you once worked at Google. You don't need to, but it helps."

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?

"Here is all you really need: build a good [great] product, get [paying] customers, get a little lucky."

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.

Totally agree with your comment. Literally my first thought when I read the slack reference

But the investor should optimize the process for themselves, they're in control. The startup needs THEIR money in order live.

Were the investor in control, they would be funding their own ideas, not someone else's.

The company nixed from the crowd selected funding fellowship was offered the investment but directed it to charity instead.

> 2. How big is the market?

"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.

Sounds like a lame-ass excuse for not even trying. Granted, if you're creating a market like Google or Facebook, it's hard to impossible. If you're doing the next AirBnB or Uber, it's pretty much on the table. If people can't come up with a realistic Market size and their reasoning behind it, 90% of the time they simply didn't do their basic homework (and usually the realistic market size is minuscule).

You really think the market size for AirBnB could have been reasonably estimated when it was just getting started? Even if the founders had had some clue -- and I doubt they foresaw it getting anywhere near as big as it has gotten -- could they really have produced a convincing argument to support their estimate? We know, in fact, that there were investors who passed on the opportunity (I forget who, but I'm sure I've read this); so they, at least, weren't convinced.

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.

Of course it could have been. Look at the amount of money spent on hotels, look at the existing VRBO type options, look at how many people travel to places, try to take a guess at trends in airfares and travel preferences. You could certainly get some sort of order of magnitude guesses together. In this case you'd quickly get to "very big" and "global" and would have a nice answer.

Yes. Airbnb's original 2011 pitch deck is online. They literally have a market size slide and supporting slides to back it up:


They launched in mid-2008 [0]. By 2011 they had been running a growing business for a couple of years; their Series A was in late 2010, apparently preceding this pitch deck (!).

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.

[0] https://en.wikipedia.org/wiki/Timeline_of_Airbnb

I mis-labeled the pitch deck as being from 2011. It's actually from 2008. Described in this BI story as being a copy kept by an MBA student from that period when investors were snubbing them. http://www.businessinsider.com/airbnbs-first-pitch-deck-2015...

Oh, okay. Well, point taken, then.

Airbnb was rejected by seven investors who could have had 10 percent of the company for $150,000 in 2008


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/

Travel didn't suddenly increase because AirBnB, it just made it more affordable by taking from the existing pie.

Are you saying travel is inelastic?

... Travel is one of the most elastic industries. Entire theme parks here in Orlando close down during the summer because travel always dips.

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...

Depends on what you mean by rapid growth. For an activity that is already stable at a large volume, any noticeable growth can feel rapid.

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.

Neither Google nor Facebook created their markets. And neither could realistically estimate their market's size at the beginning.

There's a point about doing one's homework, but I don't think this is the correct conclusion.

I get where that quote is coming from. And there is some truth to it. But having no idea how big the market is doesn't necessarily imply that you timed things well and have a great opportunity.

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).

I think market sizing is a fairly valuable activity. Worst case you are forced to think about it and write down assumptions you can test. The initial guesstimate might as well be throwing a dart but you can use it as an orientation to see what direction you are way off in.

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).

>"If you know how big the market is, you're too late." -- quote I saw somewhere

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....

Yes, but...

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.

What's Talima? All Google is giving me is a resort in the Philippines. Since I'm an aging boomer, maybe it's something I need :-)

I searched "Talima crunchbase" and came up with this:


Not sure if that's accurate, but they have received ~20M in funding.

Sounds like it did not go so well. What was the postmortem.

The first one, "What do you do?", should potentially be renamed "What do you do for your customers?". It took me a while to realize the importance of the distinction when pitching.

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?".

I would even refine this down more to "What do you do for your profitable customers?". Using google the answer would be "We bring targeted and motivated leads to your website".

At Google's early stage, would that have brought investment? At the time they would not have had distribution/market penetration, which is what the search engine does for them.

When Google started they didn’t really have a plan for how they were going to make money or get customers (as apposed to users)[1]. This is fine, but just be aware of this when you pitch investors. If you don’t have a plan for how you are going to make money be explicit about it.

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.

No, that is a poor refinement.

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 am not sure where I said users don’t matter, but users are not customers. Google sells users to their customers the advertisers so of course users are important to Google. If happy users gets you more customers then creating happy users is a good strategy.

Somewhat analogous I believe to previous post I have seen from a YCombinator investor is basically: "Why You, Why This and Why Now?".

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-...

[2]: http://atdc.org/atdc-news/why-this-why-now-why-you/

Any chance the original post you're talking about was http://codingvc.com/why-this-why-now-why-you/ or http://blog.asmartbear.com/five-whys.html?

Aha I think I have found one of the originals: http://altos.vc/2013/05/why-big-why-now-why-you/

IMO the above is very good.

Great article. Thanks for sharing it after you found it!

No it was like 2-3 years ago. I thought it was by one of the ycombinator folks but I can't seem to google. I'm sure it wasn't the first but it was the first time I have seen the questions (since then I have seen similar things reposted a dozen or so times).

"4. What’s your unique insight?"

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.

>What is the ratio between what you’ve done and how long you’ve been working on it?

>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.

I guess it helps weed the 6 year old product that is just a landing page?

Of course. I'm talking more about cases where exceptional products are born out of early failure. There's usually a transition phase in between failure and success that doesn't involve tangible work. Sometimes it takes months just to figure out where to go next.

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.

This is good advice not just for how to pitch a startup but also for how to pitch anything - say, a project within a company, or even yourself for a job. Obviously the market size would be more about quantifying the potential return on whatever it is you're pitching. And the one about the founding team might be more about focusing on just the most relevant factors for why the people involved are well-suited for the task. But overall these are great recomendations for making compelling pitches for any business decision.

I am surprised that anyone would be against hearing genius ideas unless they mean ideas that are not really genius ideas. True genius ideas are so rare that they inherently interesting to hear about even if you don't want to invest in the startup.

This advice applies to a lot more than just startups. Any time you're asking someone for (real) money -- grants, etc -- the evaluation will be like this:

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.

Kind of piggy backing on the business model, you may not be thinking about how to monetize your business today, but investors want to see you have a theory around it. If not, you won't get their attention. We're in Techstars right now and it's something we're hearing constantly. We know we don't want to worry about monetizing the platform for the next 18-24 months, but we have to show a path to get there. Whether it's for the individual developer or small dev shops, we had to come up with some sort of answer that shows we're thinking about it today. Super helpful and it should be included in this blog post. Otherwise, spot on post!

> I want to feel impressed with how much you’ve done in the period of time you’ve had to do it.

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)?

What is causing your productivity to be so low?

Fix whatever that is, get productivity back up.

>I also tend to value product development and customers first and other things such as fundraising or biz dev deals a distant second.

Can you walk me through the difference between customers first and biz dev deals?

Generally, customers are a direct source of revenue.

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.

Very similar to the general pitch process we emphasize for startups coming out of UWaterloo, just this article was a little too vague on the details. I summarized our pitch formula (with some overlap but more concrete tips) here: https://medium.com/@dannyyaroslavski/perfecting-the-3-minute...

All you need to do is bring us a guaranteed globally successful viral mega product that no one has ever thought of before, be perfect is all ways with no risk to us and we will graciously back you with terms that are crushing and ensure you as the entrepreneur get next to nothing in the event of a liquidity event.

What I found most valuable: what he tells entrepreneurs they don't need to spend a lot of time on, in building the company and in presenting it. I've seen so many decks and pitches devoted to the team's credentials and past work experience, and about deals they've done or are doing.

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 I like about the list is how it forces focus on how value is being created and added. Often when you have selected an idea you start looking for reasons why it will work, rather than looking for reasons to shut it down by testing that it doesn't work and instead it just keeps growing.

It seems like this article is written for a small group of people that recently pitched him!

Anyone else have trouble figuring out how to determine market size? Do I have to spend thousands of dollars for independent research online or is there another way that I'm just too naive as a developer to be aware of?

> "7. What do you want?"

What would be a good way to ask something specific, without coming off as too arrogant or needy?

General outline: To achieve X, we are looking for Y and thought you might be in a position to help us out with that.

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…

i like how the article is simple and to the point. thanks.

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