When my parents needed to keep the kids busy during the long drive in the country, my parents would occasionally start the game of 20 questions. For those who are not familiar with this game, it is a rather simple, yet challenging, game: the keeper has to imagine a thing, person or animal, and the others have to determine what is the object, etc., with no more than 20 questions. The one who figures out the actual object, etc., with the fewest questions wins. Only one freebie is allowed: Is it animal, vegetable or mineral? Once that is determined, the game begins. One memorable challenge was the actual bathtub in which the mathematician exclaimed “Eureka” for the displacement of water by weight.
How is this relevant in a pitch to investors? Only a few days ago, I observed several Finnish companies pitching to a panel of 3 investors. They had a time limitation in which to present their business for potential investment within an allotted time of 5 minutes. Virtually all had failed the game of 20 questions in their short pitches. One described his business that related to laser equipment. After several interactions, one then knew that the company is simply an integrator. Another presenter did not know the extent of the competitive environment. Others left gaps to understanding the business.
Meanwhile, the panel, composed of 3 potential VC investors, is challenged by not having a complete understanding of what each company brings to the table. Like the game of 20 questions, they are attempting to grasp what the company manufactures, what the competitive environment looks like, and the size of the market potential.
First, it behooves the presenter to understand the perspective of the investors. In the case of one company, it was simply an integrator of hardware — nothing proprietary. Why bother presenting to an audience interested in 10x companies while the integrator is worth 1x EBITDA?
Secondly, investors are an impatient group. They are emailed to death, sit through countless pitches, and participate in many panels. The last thing they want is to face unclear pitches, when they have observed excellent ones in the past. Even if the startup has an excellent product, a bad pitch will taint the true value of the company while irritating the panelists.
One must state in one line what are you as a company (animal, vegetable or mineral/ service provider, manufacturer of devices, etc.), the size of the addressable market, and the unique proposition (the technology). Then focus on traction and team. These topics have been discussed in previous blogs. And, if you start to treat the 5-minute pitch as a 20 question game, then you’d know what to present to potential investors.