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What I’ve learned from seeing 20k company pitches

• ronilan 10y ago
  If you are in a super competitive space - areas like cleaning or food delivery.. Sigh.
  • ljf 10y ago
    Care to explain? THese are areas that people (especially those with disposable income) are prepared to spend their money. Find a problem that people WANT fixing. Sure, other ideas might be cooler, or more 'fun' to work on, but you know - someone has to pay.
    • _pmf_ 10y ago
      Maybe the OP is tired of "disruptive ideas" that amount to siphoning money off minimum wage workers.
    • HillRat 10y ago
      Those aren't just competitive spaces -- those are almost the paradigmatic examples of concepts that have repeatedly failed over the past two decades to demonstrate business value, but that startups and investors keep returning to like Kipling's burnt fool. Those are concepts that are highly competitive because they have near-zero barriers to entry, while the underlying markets are themselves highly fragmented (significantly driving up your acquisition costs), highly competitive (meaning that there isn't much revenue to share with your startup), and already using multiple capture channels for their customers (meaning that you are unlikely to provide killer value to them). But for some reason -- I have my own theories there -- there's always some concept in those spaces getting funded, so they seem more greenfield than they are.
    • biot 10y ago
      I'm picturing ronilan sitting there, despaired, wondering what to do with their startup that delivers food and also cleans your place... having just realized that cleaning and food startups are a dime a dozen.
  • elizyin 10y ago
    Sorry - after reading the comments below, I wanted to clarify what I meant is that investors are currently seeing a lot of companies in cleaning or food delivery. I did not mean to imply / suggest that it's bad to solve problems in these spaces nor did I mean to pass judgement or anything like that. I personally think that competition is good (and proves there is a market), but it's still important to show differentiation.
    • ronilan 10y ago
      Elizabeth, I was just feeling sorry for you... Drop me a line, my email via profile... let's see how far "show differentiation" can go.. :)
• infinite8s 10y ago
  Was that first email reply a thinly veiled fart joke? Seems like they don't really take cold pitches seriously (or people for whom English is not their first language).
  • adambenayoun 10y ago
    Some context is needed. That specific email was a scam email sent to the investment team and Sean (partner @ 500) jokingly replied to it playing along with the scammer.
    • infinite8s 10y ago
      Ok that makes more sense. But not sure why she would use an email that paints her partner in a bad light unless you knew the context.
      • elizyin 10y ago
        Ah sorry - I didn't realize people wouldn't understand this was a spam pitch! Point taken. I address non-native English speakers later in the post.
        • infinite8s 10y ago
          The immediate quote below the email images is: "(In fact, the vast majority of pitches I’ve seen probably fall under this category and these only take a few seconds to read and archive, so this is how you get to see 20k pitches!)" So the majority of pitches you see are spam pitches? As a former grad student in chemistry/biophysics, I would see no reason to read that pitch as a spam. In fact, at first I thought it was quite liberating that 500startups would entertain non-traditional startups trying to tackle real-life hard problems in the physical science industries instead of another startup in the food delivery or cleaning services space, and then the response from your partner was, shall we say, discouraging. You might want to edit your post since it doesn't paint 500startups in a good light.
• paulsutter 10y ago
  No, no, no and no. If you need to meet with 100 investors to raise money you are promoting a shitty deal and you shouldn't be investing your personal time in it. Conversely, if 500 startups routinely invests in companies where 90+ other investors already said no, you gotta worry about 500 startups. > So, I made up a rule of thumb: 5-100-500. Over 5 weeks, meet with 100 investors to close $500k in your seed round. If you want to close $1m, double all of these numbers.
  • rdlecler1 10y ago
    How many investors turned down Airbnb, Uber, and DropBox? A lot.
    • _pmf_ 10y ago
      > How many investors turned down Airbnb, Uber, and DropBox? A lot. Airbnb and Uber barely generate profit domestically and operate at a loss internationally. Every investor not betting on inflated share prices has been smart not investing in those.
      • rdlecler1 10y ago
        By your logic you shouldn't invest in a university education because you're not earning a profit while at University. This is what's important to understanding startup economics: IF: CAC < NPV(LTV) THEN: reinvest your earnings and generate zero to negative profit. Where: CAC: Customer Acquisition Cost LTV: Lifetime Value of the Customer NPV: Net Present Value
      • kenbaylor 10y ago
        Uber brought in close to a billion in profit in it's developed markets (mostly USA) last year
    • draugadrotten 10y ago
      > How many investors turned down Airbnb, Uber, and DropBox? A lot. These naysayers may have made great business decisions both for themselves and for these startups companies. Not all investors will make a startup prosperous. Only the right investor will create that spark.
• duncanawoods 10y ago
  One thing I found interesting was "PR is cheaper than marketing" in the slides she references. I think I lazily assumed PR was the expensive end of marketing that also required luck and special access - I have never really seen the numbers that show it might be be better value. "Speed as the primary business strategy" Dave McClure: http://www.slideshare.net/dmc500hats/best-strategy-is-speed-startup2startup-may-2008 http://www.slideshare.net/dmc500hats/best-strategy-is-speed-...
  • jonstewart 10y ago
    The author of the slides is Mike Cassidy.
  • elizyin 10y ago
    I completely agree w/ you re: PR - that is the one part of Mike's slide deck that I disagree with.
  • tim333 10y ago
    The costs of PR vs paid advertising are going to depend on the case and how interesting the story is. As a couple of bits of anecdote, we used to be in the games business and getting a page in a newspaper through PR was like 1/2 to 1/4 as much as paying for the same space as an ad (that was in the old days pre Google). Also PG in The Submarine implies he got value from PR for Viaweb: >Our startup spent its entire marketing budget on PR: at a time when we were assembling our own computers to save money, we were paying a PR firm $16,000 a month. And they were worth it. PR is the news equivalent of search engine optimization; instead of buying ads, which readers ignore, you get yourself inserted directly into the stories. [1] >Our PR firm was one of the best in the business. In 18 months, they got press hits in over 60 different publications.
  • davemel37 10y ago
    >I have never really seen the numbers that show it might be be better value. I think people misunderstand the function of PR vs. Advertising. PR is a way to build credibility through third party validation. Advertising is how you convert that credibility into sales. They both have their time and place and you really need both to build a big brand. If you run PR as your only marketing, you will be disappointed by the lack of direct sales and quantifiable ROI it drives. If you run advertising without PR (or other third party validation) you will get frustrated with how expensive your cost per acquisition is from advertising.
• jkaljundi 10y ago
  Either it's pitching in person, via e-mail or via your landing page, the most common mistake is: sorry, but I don't get what you do and why it matters or differentiates.
  • onion2k 10y ago
    "If you can't explain it simply, you don't understand it well enough." Albert Einstein This applies to startups just as well as theoretical physics. If you struggle to get your idea across in a pitch then something is fundamentally wrong, and it's quite reasonable for an investor (or a customer) to move on.
• _pmf_ 10y ago
  > At the seed stage, there are companies who have been around for 5 months and others for 5 years. And what is the reasoning behind considering the former as better than the latter? The latter most likely has a more mature product with less technical debt and has shown that it can shoulder its operational costs for 5 years. The former has "speed" ... great. > Demonstrate that you can pull the trigger on things quickly — whether it be getting customers, hiring / firing employees, or product development. Quick turnaround is first and foremost an indicator of something wrong, not something right.
  • jasonshen 10y ago
    Speed is the denominator that any progress or success is measured against. More progress in less time is a better thing. Another way of thinking about it is: what company would you rather invest in, one that hit $1M in annual revenues in 1 year, or one that hit $1M in annual revenues in 5 years? The former implies there's a lot more opportunity still to come, the latter suggests a small market, a mediocre product, or a team that isn't good at selling.
• crdb 10y ago
  The section on referrals was very interesting. Effectively, she states that cold emails are fine, since on balance many referrals are low quality. Investors reading this: do you think cold emails and referrals are equivalent in terms of deal origination, or do you stick to referrals only? Please also mention your geography.
  • ig1 10y ago
    It depends on the type of fund. For VC funds almost all deal origination is referral or outbound, virtually none is cold inbound. For seed accelerators the majority is cold inbound. 500Startups sits in a slightly odd category between those two so it's behaviour is likely to be unusual in any case. But she makes a good point about the quality of referrer as well, who gives you the referral to a fund makes a huge difference to how much attention you'll get. As a fund if you treat all referrers as equivalent then you're inevitably going to get a lot of junk (anyone who works in VC has a huge network). Some funds go so far as having formal categorisation of referrers (platinum, gold, etc.) based upon the quality of their dealflow and rewarding them based upon that.
    • alain94040 10y ago
      A huge difference between two referrals is whether the person recommending the startup is investing some of their own money or not. Saying "Joe is a great founder, check out his startup" is not as strong as "I'm putting $50K in Joe's startup and you should look into it".
• cloudjacker 10y ago
  > Use a company domain name as opposed to a Gmail / Yahoo / Hotmail / AOL email address. I've seen more and more professionals not do this so it is good to see it reiterated now Sometimes I'm not sure how I want to be perceived : as a big firm or as an individual Sometimes company emails scare people off, other times personal emails do
• erikb 10y ago
  Seeing 20k pitches does not mean a lot. How many of the 20k got funding, are still around, have become ramen profitable, and why? I don't think the author really knows what's important for pitching. That doesn't mean I know, but I'm quite sure it's not "make sure you stand out". The author got that feeling because if you read 10k pitches a year, it gets boring as hell, and you are happily surprised by anybody and anything that achieves to look different. However there are different ways of being different. For instance, spelling errors stand out to her immediately. But it doesn't make her give you a thumbs-up. Yellow jackets and loud music will probably achieve "standing out", but are not something that brings you a step forward. To me the blog post reads like her not having figured out the important thing yet, but she certainly wants to make sure that you make her job a little more interesting. Honestly, is it not weird to advice three times to stand out, then name a thing that stands out to the author (spelling), and then saying that people who stand out that way go to the trash bin? (This is not to say she or the post is bad. But it doesn't give the value it's promising.) Again, I'm no expert either, but usually what stands out positively to investors(!) is traction. Traction is growth of leads -> possible sales. And traction is important because that is what an investor is buying. He buys a ticket at making X-times more than what he gives you. Everything else, like team, color of your jacket, spelling capabilities, features in your prototype, are only important in that regard as that they give a hint to the investor about your traction or lack thereof.
  • elizyin 10y ago
    The purpose of standing out is so that you don't get inadvertently ignored. The point of the post wasn't to talk about what I look for in pitches. It's to illustrate what happens when you're an entrepreneur sending a deck to an investor. This is a viewpoint that I didn't have before as an entrepreneur and thought would be useful to other entrepreneurs. Investors see lots of decks and realistically don't have time to do a deep dive for an hour or more on each one given the volume. This could be a flaw with the industry, but these are the circumstances that entrepreneurs have to work with right now to get noticed to even get that deeper dive meeting.
    • nickpsecurity 10y ago
• InclinedPlane 10y ago
  I see this notion that ideas are worthless, or that everyone has the same ideas, a lot and I could not disagree with it more. I think this comes from a fundamental misunderstanding about the nature of novel ideas. For one, novel ideas are often difficult to communicate effectively, and difficult to grasp. Ideas that are notably different and blatantly obviously advantageous are typically few and far between, because such ideas would have already been implemented, being obvious, after all. Most good novel ideas have some degree of subtlety involved in them, or require a paradigm shift to truly understand well. Trying to digest such ideas without having that shifted mental model will often lead to misunderstanding. Additionally, communicating complex ideas can be very difficult. Consider how often book adaptations into movies fail to carry over even the core ideas or zeitgeist of the original material, and in that case you have a richly detailed (multi thousand word) source material as well as the resources of thousands upon thousands of folks who have read it to aid in that translation. In comparison, the idea that a complex idea can be easily and trivially transmitted from one mind to the next without error through a short pitch is ludicrous. And even less likely the more novel and interesting the source idea happens to be. For another, novel ideas are often quite subtle, and don't look as revolutionary until the revolution has passed. Consider, for example, the transistor, or heavier than air flight. Neither of which received a great deal of press at the time, both of which were, undoubtedly, some of the most transformative inventions in history, based on numerous new ideas. The transistor seems, on the surface, to be little more than a different kind of thing in the same vein as the vacuum tube, and thus to be met with a similar level of success as the vacuum tube. But, of course, it is a different beast entirely. Solid state, miniaturizable, more suitable for mass production, more reliable, etc. It would lead to a revolution immediately in transistorization of electronics such as radio sets, making them smaller, cheaper, and more reliable. But, of course, it would also lead to the advent of the integrated circuit, digital logic, micro-processors and the personal computer revolution. Yet to someone like this silicon valley marketer if they saw a pitch for the transistor they would almost certainly think it was nothing special, and not a new idea. There are countless similar examples across the tech industry, and across history. The web, for example, was not all that different, per se, from gopher or FTP or other forms of information exchange from the early years of the public internet. But, of course, it was the specifics of the web that truly made it not just slightly different from other "ideas" for sharing information but transformatively, revolutionarily different. If you look at cells under a microscope they mostly all look the same. Yeast cells, bacteria, even animal cells, they all just look like little mostly circular blobs. But just looking at a cell tells you almost nothing about it, you can't see the DNA, you can't see the cellular machinery. You can't see the difference between a cell that belongs to a sea sponge and one that belongs to a human being. Ideas are similar. When you view ideas by buzzing over them at the 10,000 ft altitude level of a pitch deck that you stare at for a few minutes they're going to blend together a lot.
• CiPHPerCoder 10y ago
  You counted 3 twice...
• javajosh 10y ago
  Cool note about speed, but I was hoping to read more about the patterns she sees in the value people are hoping to create. For example, there are a lot of "let's build a marketplace" ideas. There are relatively few "magical technology" ideas. And I bet there are plenty of ideas that are well-meaning but address problems that people don't realize they have yet (like privacy and digital autonomy). Oh well, maybe next post.
  • elizyin 10y ago
    Thanks Josh. That's a good idea for a post. :)
• matchagaucho 10y ago
  These are lessons learned by a seed investor with bias and pressures coming from Limited Partnerships, term of fund, liquidity, and portfolio harvesting demands. These are not necessarily good practices for starting an enduring company.
• asah 10y ago
  another amazing post, I'm so impressed.