On pitching

I attended TechCrunch (UK) Pitch last night. It was a well organised event so props to Butcher for putting it on. We were not pitching so we could relax and take it all in. It was interesting for me because I got an insight into how VCs see startups.

I think at some level all VCs think all startup founders are crazy or potentially crazy. The successful ones they put up with but I think there is a basic tension between the two. And it doesn’t go away even if you hit the big time. The John Sculley/Steve Jobs debacle is a classic example.

The basic difference between the two groups is startup founders don’t really operate in a world of rational calculation whereas investors do. Starting a startup is in itself irrational and to go through with it you have to be absolutely convinced that your ideas are earth shattering, otherwise you just would not put in the effort required. So even when you see someone pitching an idea you think is absolutely terrible, what you have to understand is that to the founder it is amazing. You know – all babies are beautiful to their parents.

I’m lucky in that my two co-founders are more natural sceptics than I am. They took persuading that we had a good idea but doing so was good practise. I think the main thing I have learnt is that 90% of investors you pitch your startup to will not be interested. And of the 10% who show any interest they won’t give you any money until you have actually achieved something. In the end business plans and pitches count for naught. Actually building a product is what counts. A good pitch will get across two basic points – what the idea is and how far you have got. Good investors understand that technical guys are often bad presenters and do make an effort to drag those two things out of a bad pitch.

Business models and honesty

A lot of the pitches yesterday were bad in that they struggled to get their ideas across clearly and tried to pack in too much extraneous information. That said there were a couple of promising ideas and potentially good businesses. None of them will be the next Google but the combination of great product/great business model does not come around very often. It would be refreshing to see a few more startups just be honest and say ‘we want to get a lot of users then flip it to a bigger company who can work out what to do with it’. A lot of the big European successes have done this – Skype, MySQL, Last.fm, Bebo  – so I don’t see the shame in admitting it openly. Even Google didn’t come up with their own business model – Bill Gross did.

Good business models are even rarer than good products, what last night taught me is that if you don’t have one don’t tie yourself in knots with nonsense like ‘freemium’ pretending you have.

Pic: Bowbrick