Pitching Me Softly

Aug 2012

(Based on a talk at a Pitching Workshop.)

 

“The older I grow the more I listen to people who don’t talk much.”

– Germain G. Glien

 

Dressing up is inevitably a substitute for good ideas. It is no coincidence that technically inept business types are known as ‘suits’.

– Paul Graham, YCombinator

 

I’m really bad at pitching. I haven’t really done many but know enough to know I’m awful at it. But my awful pitches tend to be memorable which may or may not be a good thing.

If you had to zoom in on the cause of startup failure to find an inflection point, I think it probably starts with pitching. Pitches are not real things. It’s actually an optimization process. Investors are busy and it’s a way of condensing the point of a company into a compartmentalised bite-sized bit of information. So investors can process large volumes and churn through lots of companies.

A good way of thinking about it is compressing a company into a grain of hay. The investors are searching for the needle in that haystack while all the grains of hay are pretending to be needles.

But there is an emphasis on pitching which seems mistaken. Being good at pitching does not equal being good at starting a company, I would even argue they have an inversely proportional relationship. Like the better at pitching a person is, is in like a magician holding a blanket over their magic trick kind of way, concealing the flaws in the company.

It’s a bit like looking at your feet and saying “Aha, I have such great feet… I must be the best runner.” But actually being a good runner is a totally separate skillset from having good feet.

It’s common for pitches to appeal more to what the founder thinks an investor wants to see rather than what the company actually is. The founder thinks investors are looking for certain things so she tells them what they want to hear and shows them what they want to see.

A good example is financials and forecasts. A startup with a huge market and great execution shouldn’t really have financials because it is like creating a false floor. The upside should be limitless. If you can give a financial forecast, it is like placing dots on an axis which implicitly aligns the trajectory of the company.

 

But if the point of pitching is to signal to an investor and having a good pitch does not equal having a good company, then it means investors are drawn to the wrong metric and startups run by sales people end up getting funded. Or startups that fit a particular mold which is a subset of a stereotype in the mind of the investor and is a kind of investment fashion trend.

Like a form of pattern recognition. But if you know the pattern, then you would augment yourself to fit to it prematurely since that’s what an investor is looking for.

That is the same as saying startups founded by technologists aren’t. Empirically a technology company founded by someone who understands technology does better but if all you see is good pitches getting funded regardless of good technology, you might start to think otherwise.

So when the funded startups who were founded by sales people or people who fit a particular mold end up failing, nobody seems to know why. But the why lies in that they were misled early on because investors valued a metric that didn’t matter.

Because a lot of really great companies are started by people who don’t look like they could run or build a great company. They look like people who are just good at something very specific and often that thing isn’t people.

So this is a lot like a computer built by a person who doesn’t know how computers work so he asks his friend how computers work and his friend is like, well I know how to build a car and so he’s just like well that’s cool. Computers are basically cars anyway. So are wondering why the computer doesn’t function like its supposed to. It is because it is structurally unsound.

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