How to Pitch Angel and VC Investors: 10 Tips on Communicating Traction

Unfortunately, Gary misinterpreted the key takeaways from Brendan and Hiten's class

I went to a class last week taught by Brendan Baker of Greylock and Hiten Shah of KissMetrics on how to communicate traction to investors.  I won’t bore you with their backgrounds, but trust me, these guys absolutely know their stuff.

Here are ten things I learned about how investors think and what they are looking for in a pitch.

(1) Investors respond to a story.

Don’t talk about  how your product works. Tell them how well the business is going.

(2)  Ultimately,  traction trumps everything.

What is traction?

It is YOUR story of momentum told though quantified evidence that shows a path to world domination

Good examples of quantified evidence in order from best to worst: profits; revenues; active users; engagement; customers/clients; registered users; downloads; partnerships; traffic.

If you can show that your startup is profitable or cashflow break even, you are golden in the eyes of investors (assuming of course that you didn’t simply achieve profitability by cutting costs so much as to stifle growth).

(3)  Just because you got featured on TechCrunch doesn’t mean people are going to invest.

Investors do not view press and testimonials as good examples of traction.  According to Brendan, “every shitty startup can get good press and glowing testimonials.”

(4) De-risking is important.

The reason investors like to see traction so much is because it mitigates their risk.  I’ve written in the past that  the less likely it appears that your company will go belly up, the more likely investors are to invest.   Taking this a bit further, Brendan and Hiten explained that at each round investors want to know what you are going to de-risk. These steps will vary for each startup but here are some common risks that investors will look at at various stages of funding.

Can they build product? [team risk]

———————————>  Will people use it?

———————————————->Will people pay for it?

——————————————————–> Will people come in mass? [growth]

(5)  Be Concrete. Don’t be fluffy.

Baker’s Rule: Actual progress is inversely proportional to the amount of times you use these words in your pitch:  gamechanger, visionary, next-generation, seasoned professional, groundbreaking, innovative, disruptive.

Pitch decks with fluffy language get tossed in the trash.

(6)  As an add-on to the above list, don’t tell investors that your product is “inherently viral”.

“When people say their product is inherently viral. I say bullshit” – Brendan Baker

(7)  If you have a weakness, address it up front.  Be blunt and get it out of the way.  

For example, investors often don’t like investing in husband and wife teams.  If you are a husband and wife team you might start off your pitch by just laying it out in the open:  “We’re a husband and wife team.  If this is a problem for you, let us know now.”

(8) Don’t put up graphs without annotation.

You need to tell a story.  Graphs without annotations don’t tell a story.

(9)  Be clear and concise in communicating your traction.

For example, let’s say you pitched an associate and she liked you.  In order to get the next meeting, she has to be able to clearly communicate your message to the partners at the firm.   You win when you make her job easy. Think about it this way: if she had just one minute to describe your status and progress to a partner, what would you want her to say?

(10)  Pitch and iterate.

The more you pitch, the more you get a sense for what parts of your pitch resonate with investors.  Keep the parts that work and ditch the parts that don’t.  Keep iterating until you nail it.

Stil interested in learning more?  Check out their entire presentation on Slideshare

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24 thoughts on “How to Pitch Angel and VC Investors: 10 Tips on Communicating Traction

  1. Great breakdown. Love the concise breakdown and the emphasis on making the job of the people you are pitching easier.

  2. Dean Collins says:

    Every shitty startup can get press???

    I’d love to get an article on Techcrunch for our startup http://www.LiveFanChat.com

    So far we’ve had articles for http://www.LiveBaseballChat.com / http://www.LiveFootballChat.com and / http://www.LiveNascarChat.com in fan blogs etc but Techcrunch etc have never responded to any of our emails.

  3. Jennifer Simonds says:

    “For example, investors often don’t like investing in husband and wife teams.”

    Ooooh, ummmm… that could be a problem with our future startup. If investors tend to be prejudiced against husband & wife teams, did they say how to mitigate the risk? (I suppose we could get divorced……nah)

    • ethanaustin1 says:

      I don’t know if there is a way to mitigate the risk per se. Some investors will be okay with it and some won’t. I think you just have to find the ones who are cool with it or have invested in husband/wife teams in the past.

  4. Anonymous says:

    Great post, with more great stuff outside of traction. I especially like the “de-risk” terminology.

  5. chris hough says:

    Excellent Read. Thank you.

  6. Jeffrey Levy says:

    I am in the middle of raising money for a new start-up called CaseNetwork (www.casenetwork.com). I have pitched 6 VCs and 20 angels over the last 10 weeks and I am starting to get traction. I would say that your top 10 list is right on the money. Momentum and communication have been key for me. You are definitely right about the pitch. Mine is more refined every time I give it. Thanks for the post. I will share it with my colleagues.

    • ethanaustin1 says:

      Glad to hear it. But all the credit goes to Brendan and Hiten. I just summarized what they said in the class. Good luck with the rest of your round. When you’re finished if you have any additional tips, please feel free to share in the comments.

  7. Great post. I picked up a few tips.

  8. Great post on making the inevitable investor question about ‘traction’ more actionable for startups. Should be compulsory reading before pitching to AngelHub.

  9. […] Highlight your traction – By the time we applied, we had already processed $1 million in donations on our site and had […]

  10. […] traction to investors.  I won’t bore you with their backgrounds, but trust me, …Via ethansaustin.com ← 6 Mistakes That Will Kill Your Product Launch Entrepreneur Mindset – Do You Have It? […]

  11. […] Highlight your traction. By the time we applied, we had already processed $1 million in donations on our site and had received a number of nice stories in the media. If you have any traction whatsoever, don’t be bashful about highlighting it in your application. Put it at the very top with gold stars around it. According to feedback we got from the director of Excelerate, the $1 million in processed donations was the number one reason we were accepted. […]

  12. […] $1 million in donations on our site and had received a number of media hits. If you have any traction whatsoever, highlight it in your application. Put it at the very top with gold stars around […]

  13. […] made as a company.Here are four tips based on our experience that can help you improve your chances:Highlight your traction. By the time we applied, we had already processed $ 1 million in donations on our site and had […]

  14. […] Highlight your traction. By the time we applied, we had already processed $1 million in donations on our site and had received a number of nice stories in the media. If you have any traction whatsoever, don’t be bashful about highlighting it in your application. Put it at the very top with gold stars around it. According to feedback we got from the director of Excelerate, the $1 million in processed donations was the number one reason we were accepted. […]

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  16. […] Brendan Baker of Greylock puts it more succinctly: "When people say their product is inherently viral. I say bulls**t." […]

  17. […] Brendan Baker of Greylock puts it more succinctly: “When people say their product is inherently viral. I say bulls**t.” […]

  18. […] Brendan Baker of Greylock puts it more succinctly: “When people say their product is inherently viral. I say bulls**t.” […]

  19. […] Highlight your traction. By the time we applied, we had already processed $1 million in donations on our site and had received a number of nice stories in the media. If you have any traction whatsoever, don’t be bashful about highlighting it in your application. Put it at the very top with gold stars around it. According to feedback we got from the director of Excelerate, the $1 million in processed donations was the number one reason we were accepted. […]

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