Bill Joos on Pitching

Bill Joos (or William Wallace Joos, as he prefers to be called in Scotland) spoke at a Edinburgh Entrepreneurship Club/Edinburgh-Stanford Link event on 11 March 2008. Bill experienced plenty of pitches while with Garage Technology Ventures, and shared the top ten mistakes for early stage/startup company business plans and pitches. While his focus was on pitching to venture capitalists, much of what he said is applicable to any business planning process. This article summarises his talk.

Understanding the Odds

During 6 and a half years at Garage Technology Ventures:

  • 97,500 entrepreneurs submitted information via a proforma.
  • 17,000 of these were invited to submit executive summaries.
  • 1,200 of these got a face-to-face interview.
  • 100 of these got funded.

(And Bill Joos didn’t say it, but likely only 10-20 of those that got funded will develop into successful businesses.)

In such a fiercely competitive environment, with such long odds, perfecting a business plan and pitch is clearly important. So learn from the 10 top mistakes:

1. “Too darn Long”

Venture capitalists have Attention Deficit Disorder. Everything needs to be as short and to the point as possible. Short text is harder to write than long text.

Some benchmarks:

  • The “elevator” pitch: 1 minute, at a leisurely pace.
  • Executive summary: 1 page. The aim is to get a meeting.
  • Initial meeting slides: “The dirty dozen” (certainly less than 20 slides). Aim to keep 40 minutes of a 60 minute meeting for discussion, not presentation. Save detail for later meetings.

2. “Poor Positioning”

A “solution looking for a problem” is not a strong case. While there are exceptions, most funding is for “painkillers” – and for those to sell, someone needs to be in pain. Don’t forget to consider who the customer actually is.

Benefits need to be put into context – given a frame of reference. It is unlikely that those listening to pitches will be experts in the field. Bill cited Molly the elephant: Is a “7,000 pound” elephant over or under weight? Is that good or bad?

3. “Lack of Tight Focus”

Avoid “Swiss army knife plans”: Business plans that attempt to enter every possible market immediately: It is hard to succeed in just one market. Justify a focus on the market segment initially, with an “encore strategy” for developing into other markets over time.

4. “Not Enough Real World Market Analysis”

There are 2 approaches when researching markets:

  1. Top down: Citing overall market research, and then claiming an arbitrary percentage of that market as a target.
  2. Bottom up: Detailed research within a small part of the market.

Bottom up approaches show greater understanding and depth, however top down can still be used to validate bottom up.

Don’t just quote the total available market – understand what is reachable. Oh, and do not state the bleedin’ obvious: “Mobile phones are a growth market in developing countries…”

5. “What are the 3 Drivers of your Business?”

What are the key performance metrics that will determine whether the business operates effectively? A simple question, that many cannot answer.

6. “Unclear Business Model”

How will you make money? Or a profit? Particular care is needed where adoption is likely to be slow or dependant on other companies. For example, large corporation (Fortune 500 businesses) have very long sell cycles – don’t expect to sell to them in the first year. Similarly if customers need to be found from among a handful of businesses, exploratory negotiation with those companies is worth doing beforehand.

How well will sales scale? The first few sales are often the easiest, because they will be made to customers that are already well know to the entrepreneur and their team. Subsequent sales might be much harder.

Finally, don’t quote revenue expectations without explaining the assumptions made.

7. “Poor or Incomplete Competitive Analysis”

The startup needs to be distinguishable from the competition. But it must also acknowledge that competition exists and position itself in the market accordingly. Not disclosing the competition either marks one out as naive or a liar, neither of which is positive.

It is common not to understand the power of the “status quo” in a market. This is a particular problem when entering an existing market, because sales need to displace an existing product or service. Displacement sales are the hardest to do.

8. “Weak Team Information”

Admit to weaknesses in the team (such gaps are often a reason for seeking support from a venture capitalist). Know the function of the first 3 hires. Generally venture capitalists will “bet on the jockey – because they pick the best horses” (although I suspect that varies).

9. “Poorly Defined or Weak Go To Market Plans”

Who is going to sell this stuff anyway? Who will have budgetary authority? And who besides the entrepreneur has a vested interest in success – for example, a partner company?

10. “Goofy Fundamentals that Distract”

Startups are initially an exercise in survival. Sometimes an apparently rational decision can backfire: For example, giving an employee a stake in the business accidentally formalises the value of the company, and makes it harder for investors to realise the true value of the business. So get some “adult supervision”: Establishing a board of advisers shows willingness to take advice, and depending on the people involved, reduces the risk of the venture.