How To Tell Startup Investors a Winning Growth Story
Think about your investor pitch for a minute. Does it tell a compelling and believable story, one in which good ultimately vanquishes evil? Is your hero relatable and your enemy hateable? Does the end of your pitch deserve a standing ovation?
Those questions aren’t as silly as they seem.
From the first slide of your deck to the last, your startup should be the protagonist in a tale of rebellion against an entrenched empire. The antagonist is the problem you’re attempting to solve, with all of its dark-side pain and frustration neatly translated to time and dollars.
The rest of the deck covers your battle plan, your ragtag army, your innovative new weapons, and exactly how you’re going to navigate the trenches to take out the space station by firing a couple of torpedos into a shaft no bigger than two meters.
Here’s the thing: While a story-driven startup is a recent trend that aims to push all the right psychological investor buttons, unlike some of the more iconic stories we’re all familiar with, you can’t just hide the science and the data behind futuristic terms and emotional twists.
Even when you can tell an Oscar-worthy growth story to investors, you need the calculus to explain exactly how a couple of magic, glowing rocks will find an unprotected target that can cause a chain reaction that destroys a planet-sized fortress.
In other words, you have to explain, in detail, exactly how the Force works.
This is because a good story means success in the market, while good calculus proves your theorem. For your business model and your pitch to succeed, you need to nail both.
Let’s talk about how to do that.
But first: A word about the connection-driven pitch
It is no secret that whether your pitch is story-driven or calculus-driven, the easiest way to land an investor is either through an existing relationship or by springboarding off of a prior success.
I’m not here to tell you that all it takes is a silver tongue and a half-baked app idea soaked in mythological plot devices to raise VC money. In fact, I’ll go the opposite way.
The cards are stacked against you.
Very rarely does the best idea, the right team, and the proper plan win based on merit alone. This sucks, and it needs to change, but it is what it is. I just need you to know that there are no guarantees when you’re raising institutional money — there are only attempts that put your idea, your team, and your execution in the best light.
Those entrepreneurs with the existing relationships and the prior wins, most of them know how to balance story and math. They understand that they’re not trying to get a movie greenlit, but at the same time they’re not preparing investors for a pop quiz in machine learning.
Your growth story will not only put some much-needed emotion and passion into your pitch, it’ll construct a path that forces you to stand strong on the elements of your model that will ultimately be the catalysts of your success, and thus, the investor’s return.
No good story ends with the hero riding off into the sunset after making the empire think long and hard about ever destroying another planet. Good stories end with the Death Star exploding. Twice. Maybe three times if you count The Force Awakens.
Pick a theme and stick to it
You’re not laying options out on the table and hoping one of those crazy ideas just might work. Every element in your story works in concert towards an ending.
One mistake I see entrepreneurs make often is blurring the lines between storytelling and referencing. For example, all the Star Wars references in this post are just that. References. If I were to stop there and just tell you that you need to be the Luke or Rey Skywalker of your pitch deck, that’s a reference, which is cute, but ultimately means nothing. Just filling your deck with the words “machine learning” isn’t going to sell investors on the opportunities your startup is presenting in machine learning.
So make sure you’re not jumping from story to story or reference to reference. Your story may be good versus evil (disruptor versus incumbent), or it might be about how two or more established macro-economic trends create a new market with a new need for a new product. It might be a love story or a horror story, Utopian or dystopian.
Whatever theme you decide, stick with it. Because you’re not trying to throw nostalgic emotional switches, you’re trying to relate complex notions about a future state to outcomes that can be realized.
Now, all good stories tend to fall apart when it becomes obvious that there is a lot of manipulation and magic moving the plot forward. This is known as deus ex machina — roughly, a sudden and unexpected solution that feels contrived.
Your story can’t be fiction, no matter how great. Use facts instead.
Story assumptions are derivatives of facts
This is where I see a lot of growth stories fall apart because, like a bad movie, assumptions become just a bunch of high-octane action scenes and explosions cut together.
Revenue that’s coming in at a clip of say, $10,000 annualized, doesn’t suddenly explode into $1 million or $10 million annualized just by pouring on the gasoline of an investor’s money.
When your startup is low revenue or even pre-revenue, the facts you base your story on need to be more assumptive, but they still need to be based in reality.
You need data on potential product-market fit, market penetration, customer acceptance, and customer engagement, with “plot lines” tracing back to the results of spending the investor’s money. Those lines need to originate from feature set improvements, sales acceleration, marketing reach, or whatever catalysts are going to push your product into more customer hands.
How confident are you in those lines? Can you put a number on that? Because that will determine the success of your pitch.
Margin and profit are inflexible plot points
Margin and profit are where you have to draw a line in the sand. These are declarations, so to speak, that must be the most provable with the most data behind them.
When you’re pre-profit, your focus needs to be on cash flow break-even, and while your financial models for revenue can be somewhat speculative, your models for costs can not. You need a firm, crystal-clear breakdown of the hires, the spend, the output, and any other liability on the books.
Now you’ve got facts on the table that are inflexible. So now your story is about moving levers — increasing numbers here and reducing them there — that will allow your startup to get to cash flow break even.
You’ll want to lower the cost per unit, the cost and the time to sale, and narrow your focus to the segments of your market that produce the highest margins in the shortest amount of time. This is the battle you’re fighting, and the one you need to win to produce the outcome and the ending that everyone expects.
Growth and scale are your sequels
A lot of first-time founders spend way too much of their pitch focused on telling the story of the billion-dollar, unicorn version of their company. Investors aren’t playing the lottery. They don’t need you to draw a line from point A to point Z.
But they’re just as curious as anyone as to what point Z will look like. And since every good story becomes a franchise when it succeeds on revenue, every good startup story should have a sequel or two outlined in the deck.
So point to your catalysts and how your company will execute on the effects of those catalysts and capitalize on them. You need numbers that use small milestones and reachable levers to get to big numbers.
By the way, this is where it helps to have a brilliant chief financial officer (CFO).
Just keep in mind that I’ve never been involved with a startup that didn’t change its unicorn story several times over between $1 million and $20 annual revenue.
So your sequels are outlines, not scripts. Don’t fall into the trap of having to follow detailed future plans that may become cumbersome as you grow. Use your facts to stick the ending, then worry about what happens next.
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