Investors don’t invest in businesses. They invest in stories about businesses.
If you want to raise money on favorable terms, you need multiple investment offers. How do you get multiple offers? Tell a good story to several investors at the same time. A good story can’t sell a pile of garbage, but it will keep a gem from going unnoticed.
You can tell a story in a sentence;
you can tell a story in a paragraph;
and you can tell a story in a 20-minute pitch.
Startups need to do all three.
It’s critical to boil your story down to a sentence and a paragraph as well as 20 minute presentation.
The major components of an elevator pitch are traction, product, team, and social proof. And investors care about traction over everything else.
Traction is a measure of your product’s engagement with its market, a.k.a. product/market fit. In order of importance, it is demonstrated through:
- pilot customers
- non-paying users
- verified hypotheses about customer problems.
And their rates of change.
These are also very good markers for your progress in bootstrapping a company
A story without traction is a work of fiction.
This is especially true of the stories that entrepreneurs tell themselves and the team’s perception of their progress. We cover this in our “Idea to Revenue” workshop, defining traction as “the ability to set and hit targets.” We divide this into internal and external traction. Where internal traction involves the ability to make decisions, to define and deliver to a specification on a schedule and get others excited enough to join the team. External traction is the ability to meet the commitments you make to customers and is measured by revenue and references.
They also encourage the very early engagement with the market that’s also required of bootstrapping.
Put your idea on a piece of paper and start testing it with customers: “Does this solve your problem? How much would you pay for it?”
Pitching Hacks a slim 83 page book that packs a lot of insight into each section. Many longer books have a good 4-5 page magazine article trapped inside, this book has already been boiled to the essentials. It’s a nice complement to the wealth of information on the Venture Hacks blog. Definitely worth $20 if you are wiling to follow at least one of the many pieces of advice in the book.