30 West 3rd

Very Early Stage Technology Investing

Throwing Out the First Pitch

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After a week of hearing pitches and working with a portfolio company on a presentation for a venture investor, it seems a good time to provide some general thoughts on pitches.  Despite my general dislike of pitches, I have surrendered to their prominence in the early stage/venture investing world.  That being said, I think most pre-revenue start-ups are far too interested in building an investor pitch and miss the first step:  building a compelling sales pitch.

The first pitch to build, I think, is for the target customer.  This will force you to encapsulate and clarify your product and value proposition.  This should include a compelling example/case study that details the economics of the purchase for the buyer.  Then, before talking to any prospective investor, I would run this presentation by real prospects, advisors, influencers to see if the product/value proposition makes sense.

Why?  Because that’s what investors will do after you pitch them for money.  They will take their interpretation of the product/value proposition and test it with real prospective buyers and industry experts.  If they get a negative or luke warm response, they are not going to dig much deeper.

Pitching your imaginary product with a posited set of benefits/packaging/pricing to buyers or buyer proxies will undoubtedly yield refinements to the overall plan and product.  While no amount of homework and pre-fund raising pitches will persuade an investor, it will give you confidence that their initial diligence has a much better chance of leading to interest.

One other advantage of developing the pitch is it will get you out of the echo chamber of your own ideas.  You really need to test and mold your idea in the real world as much as possible in the early stage, while development is notional.

You also have to be willing and open to the possibility that the idea is just not a good one.  I have had many business ideas in my life, nearly all of them imitative, late, poorly thought out, uneconomical…you get the picture.  Only through exposure to the real world does an idea become properly vetted, improved, adjusted, and validated as potentially of interest to the market.

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Written by Mike Venerable

July 17, 2009 at 10:03 pm

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