Pitching: Traction, Team and Product

Advice to first time founders on pitching

How should you approach pitching with a presentation deck? I’m going to share an opinionated perspective. This was originally going to be a long email to two founders. I thought it might be useful to others as well since some of the concepts are not necessarily intuitive to most.

A common framework to understand investment evaluation is traction, team and product. Let’s go through each of these categories and what they actually mean within the context of evaluating an early stage investment.

Traction

Traction refers to metrics. The primary purpose of traction metrics is to de-risk product market fit. A lack of product market fit is one of the most common roadblocks for start-ups. Traction metrics serve as a proxy for product market fit. The most valuable traction sign is paying customers. Paying customers imply you are ahead of the curve. 

If you have paying customers and the investor isn’t interested it typically means:

1. They don’t believe the market is large enough

2. They don’t believe in the team

If you have paying customers, convey that you are talking to customers regularly to improve either your product, distribution or both.

If you don’t have paying customers, focus on selling your team. Concurrently, think about how  you can get traction metrics that indicate you might have paying customers in the future.

Your job as a founder is to categorize investors into the following categories as efficiently as possible:

• Interested now with current traction metrics

• Conditional interest with more or better traction in the future

• Not interested

There is a blurry line sometimes between conditional interest and not interested categories. When in doubt, prioritize who likes you more.

Team

Team evaluation is often mistaken for team experience. I understand why this mistake is common because of language. Most founders have relevant experience but fundraising is challenging. This implies that relevant experience is not the primary determinant for team evaluation.

Let’s deconstruct what “team” really means within the context of early stage investing:

• CEO Selling Ability: A significant component of the team evaluation is simply an evaluation of CEO sales skills. The early stage investor needs to believe you can sell to people other than themselves at some point. How good is the CEO at selling to potential customers, to other investors and to top talent for recruiting? This evaluation is subjective.

• Founder - Market Fit: Why is your co-founding team uniquely capable to attack the specific opportunity? What unfair advantages does your team have in selling to your market?

• Team compatibility: This is actually two components: 1) “How do your co-founders strengths complement each other?” and 2) “How likely are your co-founders going to stick together?”

The most common error in the pitching process is to focus on previous experience and team composition.  It’s really about CEO sales ability, founder - market fit, and team compatibility. 

Product

Pre-seed and seed companies often pivot. The ultimate judge of the actual product is derived from customers or prospective customers.

What’s useful is conveying that customers desire the product. The product conveys the founder’s understanding and perspective on a market. Finally, the product is important in conveying founder enthusiasm. The product is a mirror that reflects the team.

Final Thoughts

Start with a base pitch that has no deck. Slides on a presentation deck should enhance an existing pitch that involves no slides.

The pitch should not require a deck. Pitches that require a deck benefit from complexity reduction.  At least for a first conversation.  The pitch is the beginning of a conversation.  You can share more detailed slides as references if you get questions.

Every slide should directly or indirectly enhance the perception of traction, team or product. Finally, investors are very good at sensing desperation. You want to convey “we are growing - with or without you” in a manner that is confident and positive.

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