Yo, what's up, everybody?
Dan Martell here, a serial entrepreneur, investor,
and creator of SaaS Academy.
And in this video, I'm going teach you
how to pitch investors.
Yes, this is a laptop.
It's not-- I'm just going to throw this down for a second.
It's not-- there.
I just broke my laptop.
It's not about pushing your pitch on investors.
I'm going to teach a wholly different framework that's
going to allow you to get investors to react positively,
to want to take the meeting, and very likely invest
in your company if you follow this structure.
And be sure to stay to the end where
I share with you a credible training called the Fundraising
Like A Pro, where I teach you the three
phases of fundraising to help you crush
your next round of funding.
[UPBEAT ELECTRONIC MUSIC]
So I've been super lucky and blessed over the years
to have raised millions of dollars in venture capital
for my own companies as well as helped
dozens of entrepreneurs raised over $200 million in funding.
Now, that all being said, when I first got going,
I totally screwed everything up.
I still remember the first investor meeting ever.
I was sitting there in the back alley behind a coffee
shop in San Francisco.
This is when the iPhone first launched.
We're on the-- not even the Bluetooth headset--
the cabled headset, me and my co-founder
Ethan, and we're talking to this investor, Matthew.
And he's asking about the product--
it was called Flowtown-- and where we were at.
And he's like, oh, wow.
Congrats on the traction because at that
point we had just got Ramen profitable, about 20k a month
in reoccurring revenue.
And then he goes, well, what kind of terms
are you raising on?
And both of us, we had agreed we're
going to do seven on seven.
700,000 pre-money on seven million post--
700k on seven million pre.
And the reason why we said this is because San Francisco was
called the seven-by-seven city.
That's how little scientific market research
we put into deciding our valuation,
and also we heard that mint.com did a 600k, six million
pre fundraising.
So we were like, we're better.
We're Ramen profitable.
We're a revenue-generating, et cetera.
And Matthew just was like, oh, how
are other investors responding to that?
And we're like, oh, everybody's super-supportive
and positive and da da da da da.
And he's like, well, congratulations,
but unfortunately, this may not work for me.
And we're like, oh, totally great, Matthew.
Really appreciate the time.
It was really great getting to know you, et cetera.
We hung up the phone a little deflated
and quickly went to our mentor.
So we are lucky to be friends with Nivvy from AngelList.com.
Back in the day, it used to actually be an email list.
And he gave us some incredible advice
on approaching and pitching investors
that I'm going to share with you guys today in this video.
So number one-- get an intro.
No investors-- write this down.
No investors want to meet you.
They want to be introduced to you.
If you are cold emailing my inbox, my DMs on Instagram,
they're full of entrepreneurs pitching me cold.
Hey, Dan.
We have this incredible opportunity for you
to invest in our bleeding-edge AI blockchain technology
startup, and we would love to give you the opportunity.
And it's like, come on.
That's just not how it's done.
To me, investing is very personal.
Most investors I know--
they would prefer to be introduced to you by somebody
they know, like, and trust.
So here's the tip--
find other entrepreneurs they've recently
invested in-- ideally like the last two deals they've done.
Email those entrepreneurs for advice.
Go in for a 15 minutes-- hey, congrats on your last round.
I'd love to get seven minutes on a call
to talk about our startup.
Here's where we're at.
Here's what we're trying to do.
Just be honest-- like revenue, these are our numbers.
This is our churn number.
Give them the real numbers.
Get on a call, and if you do things right,
at the end of the call, the entrepreneur is going to say,
hey, sounds really exciting.
Let me know if I can ever be helpful.
And that's when, if you're ready to raise, you say to them,
hey, well, I noticed that you raised from this investor,
and I'd love an introduction.
And this is the pro tip.
Normally, I don't even share this.
This is the ninja tip.
You actually say, I'll send you the email template.
Feel free to edit or send your own email just to help you out.
So I actually send the email I want
for them to use for the intro.
But number one, make sure you get an intro to investors.
They don't want to meet you.
They want to be introduced to you.
Number two-- research the investors.
I can't tell you how often I've gotten on a call.
Somebody introduced me, I took the meeting,
and I get on a call, and I can tell right
from the beginning this entrepreneur has
no clue about my previous investments,
even though everything I've ever done is public on Angel List.
I'm very public about the investments I've made.
You can talk to the founders.
You can go online.
I blog, I tweet, I share everything.
And these founders have no clue about any
of the things I've done prior, not even about
my investments but my own companies
that I've built and sold myself.
So that, to me, is a big no-no.
If you get a meeting with an investor,
do yourself the courtesy of the other person
to do the research, understand who
they are, what they like to invest in,
and use that in your conversation and your questions
to them.
Number three-- present the problem.
I can't tell you how often I sit down,
and I get a pitch, a demo of a product,
and they don't tell me a quick story
of the problem that they've had and why
they're solving this problem.
And if I don't understand the problem, then you showing me
your solution doesn't really connect me with it,
especially if it's something that I've never had
or have experience in.
If you're doing some farm technology,
and I don't understand that drought and irrigation
challenges is a real problem for a farmer,
then why would I be even interested in looking
at your demo?
So make sure you start with the problem.
Number four-- demo the solution.
The reason I say that is you want
to actually show the product.
The worst thing you can do as a founder
is open up a pitch deck or just talk.
Talking is probably the worst.
Pitch deck and just narrating through screenshots
is even worse because look, we've
been doing this for a while.
Any investor that's looked at a ton of technology companies--
we want to see the product.
I don't want to see a refined, polished, pixel-perfect design
mockups.
I want to see the product from a customer point of view.
So when I say demo the solution, it
means here's the problem we saw, and then
boom, here's how we solve it.
Show them the iPhone, open up your laptop, go to the website,
show them the product so they get a sense of how the customer
experience would look, as well.
Number five-- market size.
If you're pitching to an investor that's
not familiar with the market, you
need to tell them how big it is.
I still remember-- I was looking at a deal called Foursum.
It was in the golf space, and at first, I
was like, oh, this is interesting,
but I mean, how big could the golf space be?
I didn't play golf, and I honestly
didn't know a whole lot about it.
And then they told me that it's a multi-billion dollar market,
and they had an opportunity for capturing
20% of this specific kind of coaching, training, and then
wagers and betting, all this stuff.
And I was just like, OK, whoa.
How big is this market?
If you don't explain to them the market size for your solution,
then your product may be too small
or not interesting enough, especially
for a professional investor, sophisticated investor that
invests in tech.
You need to tell them about the market size.
So do the homework, get the research, and present it.
Number six-- business model.
So one of the most important questions
that an investor is going to ask you is, how are you
going to make money?
So you could wait till they ask it,
but I would just add it to the narrative.
Add it to the conversation when you're showing the product.
You talk about the market size.
Then, you say the way we make money is bam.
If you've ever watch Shark Tank, you've
seen them ask this question.
It's like, hey, man, I love your fluffy little gizmo
thingamajigger there.
That's great, but how do you make money?
Is it a licensing deal?
Is it direct to consumer?
Is it through a distributor, a partnership, et cetera?
The big question that investors are
going to-- if they believe everything else
you've said so far, they need to understand the business model
is sound based on fundamentals, maybe
some level of market comparison so that it's
based on logic and not just like pie in the sky
like we're going to charge $1,500 for this thing,
but nobody's ever charged that before.
So understanding the business model, explaining it clear,
simple.
Oh my gosh, this just reminded me.
Don't add multiple levels of revenue streams.
I've seen companies say, well, today we're
going to make money this way.
And then, in the future, we're going
to add this and this and this and this,
and then all of a sudden, it's this dynamic star diagram
of revenue streams and proprietary licensing and data
selling on the back end.
You confuse the investor.
Just keep it simple.
You charge x.
This is how big the market is.
This is the revenue opportunity for the business.
Number seven-- proprietary tech.
Ideally, if you're building a software, a technology,
you have some level of proprietary unique technology.
Yes, I know most products today are web apps,
they are databases and front ends, and it's more workflow,
and I get that.
But there should be some kind of unique hook.
You should have something in your product that stands out,
and it could be an interaction design.
For example, Tinder-- swipe left.
That was a unique proprietary interaction
design that seemed to have higher engagement, higher
virality.
So if you can figure out what is it about your product that's
unique, that really stands out, and kind of front-load that
and talk about it.
Number eight-- open Q&A. So this is
where my pitch structure, if I was on a stage,
and I was doing a formal pitch, would have
a whole bunch of other stuff.
But at the end of the day, if you're sitting down,
and you're just having a one-on-one conversation
with an investor, and you talk about the problem
that you solve.
You demo the solution.
You talk about the market size and the business model,
how you're going to make money, what's unique
and what tech proprietary stuff you've got in your business,
then it's really just a conversation.
And this is where you need to be prepared.
So what I always say is have reference
slides if you want to.
If you want to open up your laptop and show other
slides, but they might ask about your architecture.
They might ask about the competitive market.
They might ask about the distribution opportunities.
They might ask you to see your business model canvas.
I don't know.
But to me, it's just open the Q&A
because if an investor starts asking you questions,
they start getting more inquisitive
about your business--
I'll tell you-- the probability of them going to invest
in your company goes up.
So you want to create a scenario where
you give them enough to get them excited,
but then it starts the conversation.
It starts the flow.
It starts the questions, and it's an open Q&A
that you are 100% prepped for.
You have your slides.
You have your answers, your team, you
and your co-founder-- holy moly.
One time, I had two co-founders disagreeing with themselves
in a pitch.
Do not do that.
So make sure the open Q&A happens
but that everybody's on the same page,
and that will get the investor feeling comfortable.
The first pitch is a first meeting.
It is not by any means where you're
going to close around funding.
You build that relationship-- quick 30 minutes,
here's what we're doing.
All this happens in 30 minutes.
You bounce, you follow up, you have a secondary meeting, maybe
a third to bring things to wrap, and then you
add them to the composition of the round.
So that's what I got.
So quick review-- number one--
get an intro to the investor.
Number two-- research them before the meeting.
Number three-- present the problem you're solving.
Number four-- demo your solution.
Don't show a slide.
Just show the product.
Number five-- market size-- how big is it?
Number six-- the business model, AKA
how you're going to make money.
Number seven-- proprietary tech-- what makes you unique?
And number eight-- open up the Q&A to have a conversation.
So if you do those things, you will absolutely
slam your next investor meeting.
And as I mentioned at the beginning of this video,
I want to share an incredible training called
the Fundraising Like A Pro.
You can click the link below to get access to that.
In it, I break down everything I've
learned about raising capital for myself,
the structure, the spreadsheet, the way I get introductions
to investors, the meeting format, how I close.
There's the third phase, which is
all about closing the round, also known #moneyinthebank.
That's all available for you in that training.
Just click the link below.
You can get access to there.
If you like this video, be sure to smash that Like button.
Subscribe to my channel, and if there's
anybody else you think this video could serve
that you care about, feel free to share it with them directly.
As per usual, I want to challenge
you to live a bigger life and a bigger business,
and I'll see you next Monday.
If you walk on water and then walk on Shark Tank,
they'll be like, hey, I like this guy.