Ditching the Pitch

The seventeenth century polymath Blaise Pascal famously quipped that he was sorry for the length of his letter – he didn’t have time to write a shorter one. Woodrow Wilson extended his point to say that he needed a week to prepare a ten minute speech, but could talk for a full hour off-the-cuff. Nowadays, thanks to the success of The Dragons’ Den TV show, startup founders are realizing the real cost of the five minute pitch.

This piece originally appeared in the Sunday Business Post on 14th July 2013

Business Model as a Stage Performance

Startup pitching competitions have become a regular spectacle in Startupland, featuring contestants in the shape of founders, attempting to adequately explain their high-tech plans for global domination in five minutes or less. Startups are investing a month or more of research, rewriting, polishing and practice to produce a condensed stage performance version of their business model.

Pitching Culture in Ireland

Ireland’s early-stage startup funding landscape has adopted the Dragon’s Den format wholesale. Angel investors have recast themselves as Dragons, mimicking the TV format in hotel conference rooms. Each startup accelerator programme runs a finale event of pitches, featuring prizes, judges and an audience.

The pitch competition is the centrepiece of the Web Summit and the Startup Weekend, while open-mic pitching events like Pitchify and Inventorium IdeaJam attract hundreds of people. Business consultants, powerpoint gurus and speech trainers have sprung into action to ensure that Irish startup pitches stand shoulder-to-shoulder with those from the US and Britain.

If a startup ecosystem can be judged by the quality of its pitches, then Ireland should be proud. Whether from the stage, the judging panel or the sidelines, I’ve been watching for ten years, and the quality has soared. Our startups can now pitch with the best. Despite this progress, the money still isn’t rolling in for the contestants.

Hopeful Contestant vs. Unstoppable Founder

Founders ultimately learn that pitching from a stage is not an auspicious way to open investor relations. They cannot make a personal connection with any investors who might care, they are subject to hecklers in the form of wannabe Dragons, and they are damaged by the context of being a hopeful contestant applying for approval. Meanwhile, interested investors are turned off by the prospect of competing like pigs at a trough, and instead spend their time catching up with one another and talking shop.

Defending the Pitch

Many people will defend the pitching culture by saying that a startup founder who cannot sell to investors will not be able to sell to customers. This reasoning sounds great, but is easy to pick apart.

First, the charisma that often carries an audience along with a great pitch is increasingly irrelevant for today’s digital startups, whose founders will never personally meet their customers.

Second, investors are looking for startups that have already figured out how to sell to their customers. The investor pitch is not a practice session for the sales pitch.

The Pitch is Not the Product

Thanks to the Dragons’ Den culture, the pitch has become the real product in many startups. Winning prizes and grants is now the revenue model, and the grant-giver and competition judge has become the customer. It takes courage and conviction for a new startup entrepreneur to avoid getting stuck on this conveyer belt of startup drip-funding.

The Investor is Not the Customer

The real tragedy is that the conveyer belt rarely leads towards serious venture funding. Serious investors know better than to judge a book by its cover. They look carefully to see if there are customers who care about what the startup is doing. On the winding journey of the drip-funding conveyor belt, pitch perfect startups lose sight of their customers, and put investors in their place. Ironically, this means investors will turn them down.

Stand Out: Go for Coffee

It’s time for us to leave Dragons’ Den entertainment on the TV, where it belongs. It may be great for PR, but it does few favours for the startups or investors who are taking the real risks, putting their cash and careers on the line in the name of building business and employment.

Wise founders will instead seize the opportunity to stand out from the crowd, and ask an investor out for a coffee.

Do you agree or disagree? Let me know below.

Posted in Enterprise, Ireland
6 comments on “Ditching the Pitch
  1. DC Cahalane says:

    I completely agree with the principle behind what you’re saying Sean, which I’m guessing is that Startups should focus more on important stuff. No-one is more anti-Dragon’s Den culture than me, but I do think you’re being overly harsh on the benefits that come from a certain, controlled amount of pitch practice.

    For a young startup, its often very difficult to correctly articulate their business model or what they’re trying to do. Worse still some startups actively avoid dealing with these issues in favour of focussing on their super cool technology. Pitching is a way of having to air your dirty laundry in public and force yourself to be able to prepare and present a full picture of the business that your startup is hoping to become.

    The other simple truth in Ireland is that Investors are incredibly difficult to access for those without existing relationships. Compared to other countries where Investors routinely host open office hours, investor relations in Ireland is still a dark art. There’s a few notable exceptions but for most investors they’re still back in the Moneylender days in terms of approachability. Pitching can sometimes be a chance to get in front of people that you’d never have a chance to.

    I’m sure we’d completely agree on the ridiculousness of some of the ‘pitch opportunities’ that have sprung up in recent years, which often seem more like The X Factor than anything else, opportunities to stroke the egos of investment gurus and give them an opportunity to release their inner Simon Cowell. They’re right up there with our new generation of professional ‘mentors’, who love to focus on ‘helping startups’ despite having never achieved anything themselves or having even the most basic ideas on how startups function as business units.

    One piece that we completely agree on is the ridiculousness of the drip funding approach, where startups bounce from one incubator/accelerator/programme to the next, nothing shows lack of direction more than a startup who just moves from one to the next, constantly putting off having to deal with the real world and market forces. Tough love, commercial approaches in terms of pitching and accelerators is where Ireland needs to be. More Scalefront and Wayra types where commercial is at the heart, less 3rd level academics pretending them know how the real world of business works.

  2. Great comment DC! Thanks for taking the time to write it.

    I think we’re in pretty broad and deep agreement.

    You’re right that pitching helps young startups focus on their mission instead of their tech. However, I think there’s easier ways to do it. Discipline about the Lean startup technique (business modelling, hypothesis validation etc) drives you in this direction.

    Also, we ditch the pitch around here, but not the deck. We still deliver a presentation when meeting investors one-on-one. We’ve put a lot of time into crafting and adapting this presentation, which has helped us understand our message from an outside viewpoint. However, we haven’t focused on great delivery – the presentation is essentially a conversational aid. Our only goal is to ensure that the person on the other side of the table comes away with a clear understanding of our strategy.

  3. Would agree with a lot of what you say – it is close to impossible to make a meaningful connection with an investor at most pitching events, and many serious investors seem to avoid them – instead some at least, seem to draw the types of “Dragons Den” wannabe people who like to call themselves investors, but rarely actually invest. I have pitched at many of these events, have occasionally done well, but have never gotten investment through them – all our investment came through personal connections to real investors.
    Also there is a cost issue – both in terms of money and time – which can be quite high for the startup attending these events.
    That said, I think the ability to pitch is still quite important – it is useful for presenting to partners and large customers, it helps you fine-tune your message, and helps get word out about your startup.
    DC’s point about the difficulty in accessing investors in Ireland is an excellent one – the unfortunate truth is that the more accessible the investor here, the less likely they actually invest!

  4. Mark Sugrue says:

    We must have done 20+ pitches before we got investment a couple of years back – and the investment we got wasn’t the result of a pitch. But… I think its unavoidable. You have to be out there giving pitches – its whats expected, and its the only way to meet people and get a name for yourself in those circles. My advice is do the pitches but don’t let it distract you from building the business.

  5. John Dineen says:

    Great post. Let me open my comment with a caveat – Every time that we are given a pitching opportunity, we take it. Its generally too good a marketing opportunity to pass up.

    But It rarely has anything – directly – to do with raising money. Those conversations almost always happen in a face to face and only after you have built a strong relationship with the prospective investor.

    Spend all your time focusing on investors and not on building your customer base or developing your product and you will make yourself unfundable.

    The format and role of the pitching events though, I think, is part of the bigger debate about how we think about funding start-ups. As a sector, we are being mis-sold on finance. Venture funding seems to be the only game in town and if you don’t go big on funding, then you are clearly not ambitious enough to justify an investment – of any size.

    And everyone seems to be in on this. When was the last time that you read an article on Techcrunch or ReadWriteWeb where the focus on the article was on a big customer win? Or where the founding team exited the business still owning 100% of the equity?

    Looking at VC funding as a type of customer validation is nonsense. How about getting out there and do your customer validation with some real customers? You know the ones who give you money and don’t require a % of your business in return.

    Most of us are NOT building the next Facebook or hyperloops. Its important that you admit this to yourself because it will help you understand two of the most important lessons for your startup:

    1. Customers pay you real money. While you might be building a web based business, its real people who actually do the buying. Meet them for coffee (or tea!), get to know them and understand why they purchased from you.

    2. You don’t need as much money as you think. And the money you do need, try to get it from customers that PAY for your product. This has benefits way beyond cashflow – by taking money, you will be laser focused on getting your product right.

    Paul Graham wrote a great post recently titled “Do things that don’t scale”: http://paulgraham.com/ds.html – its almost the antithesis of how people normally think about how some of the Valley’s shining lights built their businesses.

    On funding, listen to David Heinemeir Hansson’s take: https://www.youtube.com/watch?v=fPrvnlvnu-k&feature=youtube_gdata_player

  6. Terrific response John! Thanks for taking the time. I can’t agree more, especially about the constant media noise around VC funding.

    Tech journalists should remind themselves that venture rounds are not an end in themselves. The best companies are under the VC radar, self-funding from customers who are enjoying great products and services. Some of the most refreshing examples are found in successful kickstarter campaigns – the antithesis of venture funding.