How to Pitch Your Startup: Be a Maze Cheater
At Nex Cubed, we deal with pre-seed founders who are heavy on vision, but short on traction. So how do you fundraise and pitch your big idea with some credibility?
One metaphor that I have been using to shape these pitches has been “Cheat at a Maze.”
Most normal people start a maze at the start, and then try and intelligently meander their way to the finish. It is considered cheating to start at the finish and then work backwards.
Worse still, it is considered sacrilege to:
Begin at the finish
Return to the start
Meet in the middle
But that’s exactly what you should do as a founder when you’re pitching – be a maze cheater.
To bring this analogy home, as a founder, let’s break this into 3 parts:
Begin at the Finish
Tell us the story of the big picture. Go big. Be bold. Sell us on the world as you think it can be.
As an investor, we need to understand that there is potential for your company to return 100 times the investment you are currently seeking. This is because this is what institutional investors sell to their investors, or limited partners. The common phrase thrown around by almost every VC is something to the effect of, “We seek companies that can return the fund.” This means you are pitching an investor with a $100M fund, they hope that their one investment in you can return $100M from you alone – and that’s a tall order and they’ve promised it to their investors.
So if you don’t go big in this part of your pitch, then your chances of getting funded go down greatly.
There are lots of examples of this type of vision, and here are a couple from our portfolio companies currently in active fundraises:
The one stop shop for brands to create NFTs to drive loyalty (Alphaa.io)
Bloomberg for Gen Z (PersonaFi)
Return to the Start
This is where you need to talk about your traction. It’s ok if it’s early or doesn’t feel like a lot after pitching the grand vision. Even if small, it is important that you have offered your product to the public and they have given up something in exchange for your product (See For Traction: Go to the M.A.R.T.).
Speaking for myself, I look for founders who consistently test in public and are not embarrassed or afraid to make inroads with a small audience. They fear their traction is too small and “doesn’t scale,” which is exactly the wrong thought. Worse still, many founders then over rely on the founder's intuition or vision and they will launch when “we are ready to scale.” They miss the concept that testing small is a requirement to scale.
Not only is this a commentary on the founder’s bravery and humility, but as an investor, it is a good signal of the capital efficiency and operational discipline I can expect.
Again, some examples of this from our recent portfolio companies’ fundraises:
+2436% chat messages over last 90 days (PersonaFi)
20 prototype interviews surprisingly generated 10 customers willing to pay between $2-5 per user (Leagueswype)
Meet in the Middle
This is where we evaluate your business model, fundraise round milestones, and go-to-market. Now with the start and end of the maze established, investors are asking if the founder can connect the dots.
Said more selfishly, I am asking if this founder can get me a markup at the next round? I may like the previous answers for the start and finish of the maze, but if I don’t believe in the path, I’m out.
For what it’s worth, I don’t expect this part of the pitch to be indisputable, but I do expect them to be plausible. I am really checking if the founder has a plan for success, not the planfor success. In fact, the only thing I expect in this section is what you projected most certainly will not happen, but here I am checking if this founder can take her operational capacity to the next level.
Examples are too long to share in a post here, but rather, here are some of the questions I ask myself for this part of the maze.
Do the unit economics for the business make sense?
Can this team actually pull off the next phase of the go-to-market strategy?
Does this round provide enough runway to accomplish the milestones identified?
Conclusion
It may seem daunting and downright awkward to pitch as a founder. It may feel like you are saying you are going to climb Mount Everest, and yet want credit for tying your shoes.
In fact, I am saying you should. Embrace that. Show the maze in the middle and I hope you will have “cheated” your way to your next round of fundraising.