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How To Perfectly Pitch Your Seed Stage Startup With Y Combinator's Michael Seibel — Transcript

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0:03all right so um I'm here to talk to you
0:07about something boring and
0:09horrible uh that every single founder
0:13hates um how to pitch your
0:17company um we just got through demo day
0:21and helping over 200 companies pitch
0:23investors and pitching investors is
0:26basically the most painful thing that
0:28companies do
0:31what I find fun is that any founder you
0:34talk to can remember every single
0:37investor who said no to
0:40them and they hold a special kind of I
0:44don't want to use the word hatred but
0:46they hold a special something for those
0:49people um and they desire to prove them
0:51wrong and so what I wanted to do today
0:54is give you all the tips that we give YC
0:57companies to be much more successful at
1:00fundraising when you are pre-product
1:02Market fit and that's really important
1:05this is not for raising series A's I
1:07assume most of you here pre-product
1:09Market fit and so what I hope to do is
1:13get you to unlearn some of the
1:15fundraising advice that you've learned
1:16so far which is probably wrong that's my
1:20goal so number
1:22one You Stand Out by being concise and
1:26easy to
1:28understand uh I I've
1:31done I think it's over 2,000 YC
1:37interviews and one of the things that
1:40Founders don't understand is that if I
1:43don't know what your company does I
1:46can't fund
1:48you the number one barrier to not
1:50knowing what your company does is
1:55you not me not the world that's
1:59oppressing you not your users not your
2:02advisors it's literally you a lot of
2:06people think that they need to bring a
2:08bunch of energy and Pizzazz and Sizzle
2:12and shark tankiness to a pitch you
2:15don't you actually Stand Out by being
2:18concise and easy to
2:23understand and so a lot of what I'm
2:25going to do today is going to not sound
2:27fancy because it isn't it just
2:30works there's a talk over there that
2:33tells you about all the fancy things
2:34that don't work so if you want that talk
2:36you can I'm just joking all
2:39right so these are the common elements
2:42of a pitch these are the things that you
2:44need to be able to talk
2:46about what do you do what does your
2:49company do who's on your team what's
2:52your traction what do you know that
2:55everyone else doesn't or would disagree
2:57with you about your unique insights
2:58what's your Market size and what are you
3:00asking for this is a pitch that's
3:05it so let's start with what do you
3:08do you need to be able to say what your
3:11company does in two sentences and you
3:14need to be able to give a specific
3:17example so um let's use Airbnb as an
3:22example right so
3:24Airbnb lets any home or apartment owner
3:28rent out
3:30their apartment
3:32online sentence
3:35one they collect the payment online and
3:39take a let's call it 15% fee for every
3:43booking that's sentence two that's
3:47it a lot of the magic comes in the
3:50example and I'll give you a real world
3:52example imagine that you're a waiter who
3:56lives in Washington
3:58DC and and it's 2009 and the Obama
4:03inauguration is happening in town and
4:05every hotel room is
4:07booked you can make two three
4:11$4,000 by renting your apartment
4:16out and that's the amount of money you
4:18need to pay your rent for the next two
4:20or three months all you have to do is
4:23take some photos of your place and put a
4:25listing on Airbnb and Airbnb will handle
4:27the payments we get you a great guest
4:31you give them a great experience and you
4:33got your rent
4:34paid what's interesting about that
4:36example is it's
4:38specific you can imagine a waiter you
4:41can imagine them being in DC I don't
4:43know how old you all are but you
4:45probably remember the Obama inauguration
4:47or the fact that Obama was President you
4:49can imagine the hotel rooms being sold
4:51out and you can imagine somebody being
4:54able to rent their place out for a lot
4:55of money and pay their rent for a lot of
4:58months that is a great
5:02example what I didn't do was I didn't
5:05give a vague example so let's talk about
5:07where people go wrong
5:09one they pitch something or they explain
5:12what they do in a way a customer would
5:15understand but an investor would not for
5:18most of you investors are not your
5:20users you use jargon with your users you
5:24assume a lot of common experience with
5:26your users if your investor is not your
5:28user they don't have that experience you
5:31have to use Simple language that they
5:34will understand not complicated language
5:37that makes you sound smart so one thing
5:39we tell YC companies is you need two
5:42different answers to what do you do one
5:44that you give investors and another one
5:46you give customers and they're different
5:49the words on the front page of your
5:51website are for customers if you're
5:53using that for investors more often than
5:55not you're doing it
5:57wrong number two
6:00they try to be 100%
6:02accurate there were a lot of details I
6:04left out of Airbnb in that two- sentence
6:07description with the example but it was
6:09clear and easy to
6:12understand your goals should be 80%
6:14accurate 100% clear not 100% accurate
6:1850%
6:20clear I talked about an example that's
6:22too
6:23general what I could have said about
6:24Airbnb is for example if you are in a
6:27place that has a big event
6:30and you need to pay your rent you can
6:32rent your place out and then you can pay
6:35your
6:36rent same basic
6:39story none of the little facts that make
6:42it stick in your memory and make you
6:45understand next up in their example they
6:49don't illustrate the problem and
6:50solution right I talked about that
6:52waiter inherent in that is that waiter
6:54doesn't make very much money and they
6:56need to pay their rent and Herb helps
6:58them pay their rent so instead of having
7:00a complicated problem solution slide I
7:02just told you what the problem and the
7:03solution was right up
7:06front and then last but not least and
7:09this is one that I think a lot of
7:10Founders screw up you do not want to
7:13leave the first slide of your
7:15presentation without investors knowing
7:16what you
7:18do so many Founders have the first SL of
7:21the presentation with a nice logo on it
7:24and they say like and then they move on
7:27and investors are sitting there saying I
7:29have no [ __ ] idea what this company
7:30does and now I'm looking at graphs and
7:34charts and [ __ ] and I I don't have no
7:37idea what's going on don't do
7:40that one thing you can actually do is
7:43just ask hey so now that I've explained
7:46what we do do you understand or would
7:48another example be
7:49helpful you can do that it's really
7:52simple next your
7:55team um people screw up the team slide
7:58all the time the purpose of team is
8:00really just to talk about who's on your
8:02team what do they do what Their
8:03impressive accomplishments and
8:05credentials are and if
8:08possible how they've personally
8:10experienced the problem if we go back to
8:13Airbnb they could literally talk about
8:15how they were starving startup Founders
8:19who couldn't pay their rent and the
8:21first time they did this they set up a
8:23website for design conference hosted
8:26three guests so they could pay their
8:28rent
8:30if you can weave how you've experienced
8:32the problem into the team slide suddenly
8:35I think of you as an
8:38expert now what do people screw up no
8:43titles I don't know what the roles are I
8:46don't know who the CEO is if I'm a real
8:49stage investor I'm trusting the CEO with
8:50money if I don't know who they are who
8:52am I
8:53trusting number two who writes
8:56code number three telling telling long
8:59Stories the team side is not the
9:01opportunity to tell your life story
9:02here's a hint there is no opportunity in
9:05your pitch to tell your life story
9:07unless the investor asks explicitly for
9:09your life story and you should double
9:11confirm they want to hear your life
9:14story no life
9:16stories and then the one I always love
9:19missing specific accomplishments there's
9:21one company in this badge that literally
9:24worked on the Mars
9:27rover um the founder was like worked at
9:29JPL and like build software to make the
9:32Mars rover project actually
9:35happen didn't talk about
9:37it I didn't even know when we accepted
9:40him I'm in office hours with him a month
9:43two months into the BR and I'm like what
9:44was what' you do at GPL and he's like oh
9:46have you heard of the Mars rover I'm
9:47like yeah I'm not a [ __ ] idiot and
9:49and he's like yeah I I did did and I'm
9:51like can we talk about that
9:54please if you've done something cool say
9:57it without the Li story just say that
10:00you did the software for the Mars rover
10:02it'll be
10:04impressive next
10:07traction everyone's got this traction
10:09concept a little mixed
10:11up for traction you do a clear
10:14explanation of what you've accomplished
10:15since you started working on your
10:17company and only use a graph if the
10:20graph is up to the
10:22right what people screw up with traction
10:24all the time is that you can have
10:26traction if you're pre-launch you can
10:29have traction if you don't have a great
10:32graph all traction is communicating is
10:35what you've done since you've started
10:38and why that's
10:39impressive if you've built an IOS app
10:42and it's now in test flight in the hands
10:44of 100 users in one month that's
10:48impressive even if they're not using it
10:50a ton even if you're not launched
10:53publicly on the flip side if you're
10:56building an IOS app and it's been 2
10:57years and it's in test flight with 100
11:00users that's not
11:02impressive so taking too much time and
11:05not getting anything done is the
11:08opposite here what investors are looking
11:11for is momentum they're looking do you
11:13get things done
11:15quickly they're not necessarily looking
11:17for do you have a ton of Revenue or a
11:19ton of users if they're investing in an
11:21early stage company they know that you
11:23might not have those things and they'll
11:24still invest if you communicate you get
11:27things done quickly
11:29and the only way you communicate you get
11:31things done quickly is if your traction
11:32slide includes how much time you've been
11:36spending right the biggest mistake YC
11:38Founders make here is they say this list
11:40of things and they didn't tell me do
11:42they do it in a month or four months or
11:45a year or two years without the time I'm
11:48not
11:50impressed next they put fake
11:53work advisor surveys like fake work work
11:57that's not
11:59really furthering their company and then
12:02last and here's a tricky
12:04one you don't need a traction slide if
12:06you don't have any
12:08traction putting a bad traction slide is
12:11worse than having no traction slide at
12:13all if this is weak two of your startup
12:16you probably don't have any [ __ ]
12:17traction putting a bunch of fake stuff
12:19on that slide just makes you look like
12:20an idiot just don't include it they're
12:23obviously funding the
12:24team just talking about the
12:27team so fake is
12:31worthless next unique insights what are
12:34the non-obvious things you've learned
12:36about the problem the customer or the
12:38potential
12:40solution this I think is the most
12:42intellectually interesting
12:44part of a pitch but you only get the
12:47right to do this if I know what your
12:50company
12:51does and if I'm impressed with your
12:57team a lot a lot of Founders try to skip
13:00to this point and if I don't know what
13:03your company does I can't tell whether
13:04your insight's good or
13:06not
13:07so when you think about unique insights
13:11I love using Airbnb as an
13:13example Airbnb had one that was very
13:17unique all of the other products that
13:20came before it that let people do time
13:22share and list their spaces online
13:25didn't process
13:27payments and as a result processing
13:31payments in a low trust environment
13:33where you have never met the host and
13:35the host has never met you is
13:37scary and it prevents hosts from hosting
13:40and it prevents guests from
13:42booking whereas if a third party stands
13:45in the middle and processes
13:48payments both parties can trust that
13:51third party more than they trust each
13:52other and it facilitates the marketplace
13:55working that's an important unique
13:57Insight but if if I had said that [ __ ]
13:59and not mentioned what Airbnb does you'd
14:01have no idea what I was talking
14:03about common mistakes your insight's not
14:06unique if you were to survey 50% of the
14:09people in this room or greater would
14:11agree with the thing that you're saying
14:13when you say it it's not
14:16unique number two not being specific
14:19with your examples this is another place
14:21where vager comes in like you can tell a
14:24story here about your unique Insight you
14:27can tell a story about how you learned
14:28it
14:29if Brian was up here he would talk about
14:31he learned this Insight when he went to
14:34South by
14:35Southwest on his platform when it didn't
14:37do payments and forgot to bring money
14:40and had a super awkward experience with
14:42his host who thought he was trying to
14:44rip them
14:45off right bam that's a real good
14:47learning and then last but not least not
14:49using numbers and facts especially if
14:52you're talking about unique insights
14:53you've learned from your users quote
14:55numbers quote facts it makes it feel
14:57more real it makes it
15:01real next up Market size everyone screws
15:04this up um everyone thinks that the
15:07number is what's important how big the
15:09market is is most important the reality
15:12is how you calculate the number is
15:13what's
15:14important as an investor I don't know
15:17how many potential users you might be
15:19able to get you have to educate me about
15:22that you should do that research I don't
15:26know how much you're going to charge the
15:27users and I I don't know why you're
15:30going to charge them that much money I
15:31don't know if there are other products
15:33that they're buying that cost this much
15:34money I don't know how much value you're
15:36creating for them showing me this
15:39Bottoms Up calculation of how many users
15:41and how much you can charge them and why
15:44teaches me a
15:46lot if you teach me in a pitch I think
15:49of you as an expert and I want to fund
15:52experts so how do people screw up they
15:55quote some report JP Morgan said that
15:58the online e-commerce Market is 120
16:01trillion and growing 20% it's like who
16:03the [ __ ]
16:05cares you're not teaching me anything
16:08number two not showing the
16:10math show the math there are this number
16:13of users we charge them this much show
16:15me the math and then three not talking
16:17about comparable products so if we're
16:20going to replace
16:22figma and your pricing competitive with
16:25figma tell me that tell me figma charges
16:27this much and we're going to charge this
16:29much hell tell me you're going to charge
16:31more because you're going to create more
16:32value than figma but throw in a
16:34comparative so I understand why that
16:36price is that
16:39price all
16:42right next up is the
16:45ask um this is I think the really
16:49interesting one um and I can kind of
16:51share some personal stories about
16:53this in your pitch you actually have to
16:56ask for
16:57money you would be be shocked at how
16:59many pitches people do and they don't
17:02ask for
17:03money um I think that it's on the order
17:06of
17:0870% where the pitch is done the founder
17:11asks if there are any questions the
17:13investor says no the meeting ends no
17:17money was ever asked
17:19for now I want to put you into the
17:22mindset of an investor for a second I've
17:25been an angel investor for I don't know
17:27seven years
17:30um there are three mindsets I have when
17:34I'm listening to a pitch mindset one is
17:36I will never fund this
17:38company most common will never fund this
17:41company mindset two is I will definitely
17:46fund this company least
17:49common extremely rare most Angel
17:52Investors are rich like they don't
17:53really understand what you're doing why
17:55your customer needs it they just met you
17:59least common I'm excited to find this
18:00company category three that people don't
18:03talk
18:04about if they ask me it will be
18:08uncomfortable for me to say no so I will
18:11write them a
18:15check I'll tell you that in my
18:18experience this is up to 10% of the
18:22time I am hoping the founder doesn't ask
18:25me for
18:26money because I largely suspect that
18:29instead of saying no I'll say yes
18:32because the pain of saying no is way
18:35worse than writing a $25,000
18:38check how [ __ ] is
18:41that and the only way you tap into that
18:45is you ask you got to ask put them on
18:47the
18:48fire and this is especially true for
18:52Angels this is especially true for
18:54Angels got to
18:57ask so what are the common errors this
19:00is pretty simple not asking right not
19:04talking about social proof here are the
19:06people who've invested here's how much
19:08we
19:10raised talking about who you will hire
19:13on the ask slide nobody cares who you
19:17will hire they care what you're going to
19:19do with the money and more specifically
19:22what Revenue Milestones you're going to
19:23hit or what usage Milestones you're
19:25going to hit with the
19:27money hiring is a means to an end the
19:31end is revenue and usage of your product
19:34so your ass slide needs to be we're
19:36raising this much money we want to
19:38accomplish this Milestone within the
19:41next 18 months or 24 months or whatever
19:44it
19:45is um I think what's interesting is that
19:49if you don't have that
19:52goal of where you want to be 18 24
19:54months from now you're not going to be
19:56good at this ask slide so make the
19:58[ __ ]
19:59goal and make it something that people
20:02would be excited
20:04by and then ask for money all
20:08right
20:10so we've gone through the individual
20:12elements here the mistakes that people
20:14make
20:16overall they don't order their points
20:18from most to least impressive the format
20:21that I gave you you can mess around with
20:25after what do you
20:27do which should be at the beginning
20:29that's pretty [ __ ] clear and the ask
20:31which should be at the end that's pretty
20:32clear the elements in the middle need to
20:35be ordered by which is most
20:38impressive if you've got a ton of
20:39traction great traction should come
20:41right after your team slide I'm sorry
20:43right after your what you do slide
20:45you've got an amazing team great team
20:47should come right after I think what a
20:49lot of people screw up with these decks
20:51is they think there's some super
20:53standard format they can't leave and
20:55they don't realize that like there is
20:57flexibility to make your most important
20:59points
21:01early a lot of people think that an
21:03investor is going to sit down for a
21:0530-minute meeting and give them 30
21:06minutes of their time it's not true
21:09especially on Zoom it's very not true
21:13you earn every two minutes of that
21:16meeting if the last two minutes sucked
21:19that investor is checking their
21:22email so don't leave the good stuff till
21:26late that's dumb
21:28after I know what you
21:31do put the best stuff you have right
21:34afterwards earn that next two minutes
21:36earn that next two minutes earn that
21:38next two
21:39minutes um next is treating your pitch
21:44like you're delivering a book report in
21:46front of a
21:47class your pitch should be nothing like
21:49what we're doing here right now it
21:52shouldn't be you are delivering and they
21:55are waiting and
21:57listening
21:59ideally your pitch should be a way that
22:01you can draw them into
22:03conversation now doing this is hard like
22:05this is actually a very hard skill it's
22:07a lot easier just to deliver the pitch
22:09and then ask for the grade but what most
22:12people don't realize about Investors is
22:14that you're not really convincing an
22:15investor to invest they're convincing
22:18themselves to
22:19invest the more they can
22:22talk the more they can talk themselves
22:26into giving you money and if any of you
22:29have done sales you know that like a
22:31common sales coaching technique is to
22:33look at a call recording and figure out
22:35how much time was the customer talking
22:37versus salesperson talking if the
22:39customer is talking 50% or more of the
22:41time it's much more likely that they're
22:43going to
22:44buy if the investor is talking 50% more
22:47of the or the time it's much more likely
22:49they're going to buy so one of the best
22:52techniques is anytime you see a peak of
22:55interest in any part of your
22:57presentation
22:58run with it oh you looked interested in
23:01that did you have a common experience oh
23:04I see you fund that X Y and Z I think
23:06they had to deal with something
23:08similar like get them
23:12talking if the investors is like oh you
23:14know I'm really interested in this D
23:16thing and it's the third or fourth slide
23:18in your deck just skip to that [ __ ]
23:20slide don't say oh let's wait like I'm
23:22going to get to that don't get me out of
23:24my order like it's like [ __ ] you like
23:26get them talking
23:30because the more that they're
23:31contributing ideas the more that they're
23:33making their own Connections in their
23:34head about why this thing's going to
23:35work the more they're going to convince
23:37themselves to give you
23:38money so I can't tell you enough this
23:40isn't a book report it's not a
23:43paper right what's weird is that you
23:45don't really have this experience with
23:47any teachers in your life it's not
23:49really taught in educational
23:52environment get them talking um next not
23:56paying attention to the investor
23:59um a lot of pitches nowadays are on Zoom
24:01you got a closeup of that person's face
24:04and if you actually look at it you can
24:07tell whether they are interested in what
24:09you're saying or
24:10not if you look I'm a really crappy
24:14poker player but I tried this once
24:17playing poker like spending most of the
24:19time looking at the faces of the people
24:21around the poker table and not like
24:23looking at the hand that I was about to
24:25lose money on and I learned a lot
24:29investors have a ton of tells they're
24:32not trained they're not trained poker
24:34players who like hide their TOS put
24:36sunglasses on and like headphones and
24:38[ __ ] right their face is an open book
24:41you can tell whether they're interested
24:42or not if you're
24:44looking and last but not least is
24:46distracting slides I hope you noticed
24:49these slides are the most boring basic
24:51[ __ ] design slides in the universe
24:54right and there's a reason I want you to
24:57look at me and not look at the cool
25:00background image on the [ __ ]
25:02slide if your slides are visually
25:05interesting that means I'm not focused
25:07on you the person I want to give money
25:09to or not I'm focused on some designer's
25:12work if you need a designer to build a
25:14slide deck you're doing it
25:17wrong and here's an even deeper most
25:20more important Point your designer has
25:22no idea what the most interesting and
25:24important points of your pitch are so if
25:27you hand them your pitch to design they
25:30will emphasize the wrong things and it's
25:33not their fault it's your business you
25:37understand the most important things not
25:39someone else so a designer is going to
25:41try to create something visually
25:43interesting counterintuitively you want
25:45something visually
25:49boring visually boring remember clear
25:51and concise not sexy and Sizzle so no
25:54distracting
25:56slides all right so I'm GNA try to do
25:59this live let me see if I can pitch
26:03YC I'm G be tricky all right so what do
26:06we do we're a startup
26:09accelerator we fund early stage startups
26:12with $500,000 standard
26:14deal and we've invested in some of the
26:16best technology startups in the last 18
26:19years including stripe Airbnb Dropbox
26:22coinbase instacart door Dash
26:25Etc that's two sentences
26:30example um when I did
26:35YC I started a company called twitch it
26:38was called Justin TV at the
26:40time we were 23 and 22 years
26:44old we filled out an application
26:48online we got an interview and after a
26:5110-minute interview we were funded we
26:53participated in a 3-month program with
26:55other Founders where we we encouraged to
26:58build and launch our product quickly at
27:00the end of that process we raised money
27:02at demo
27:04day and within 3 months we had money we
27:08had a new friend group that encouraged
27:09us and we had reached a new top speed of
27:13productivity and those are the things
27:15that YC provided us that's the example
27:18really
27:19simple
27:21traction uh what's a good traction staff
27:24for YC YC has funded somewhere around 75
27:29companies that generate over $100
27:31million in
27:32Revenue um that's pretty good TR slide
27:36uh
27:38team right now as group partners of YC
27:42are people who have started funded hired
27:45fired and done everything that you are
27:47going to do as a startup founder and
27:50they've also participated in YC so not
27:53only the best to give you advice about
27:55your startup they're the best to give
27:56you advice on how to get the most out of
27:59YC most investors have never been in
28:02your shoes every YC partner has
28:06been unique insights there are three
28:09unique insights for YC they're really
28:11basic one filling that application and
28:15not needing warm introduction gives us
28:17access to better deal flow than any
28:19other investor in the
28:20world two funding people in a batch
28:24means that batch supports one another
28:26and helps one another
28:28and gives each other advantages that
28:30competition don't have and three running
28:33a demo Day means that you're running a
28:36fundraising auction and everyone knows
28:39you're trying to get the highest price
28:41for any product good or service you want
28:43to run an auction so YC companies tend
28:46to raise at a higher valuation and
28:48dilute less than people don't do YC
28:52those are three unique insights Market
28:54size since YC started they're about 40
28:57plus
28:58Tech IPOs VC backed per year generate
29:01about $10 billion in returns per
29:05year uh and
29:07ask
29:10apply that's the YC
29:12pitch not much
29:15Sizzle clear
29:18concise that's the
29:24game

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