Ep. #611 - How to Pitch to Investors

Matt DeCoursey 0:00
And we’re back. Back for another episode of Startup Hustle, Matt DeCoursey, here, with Matt Watson. Hi, Matt.

Matt Watson 0:06
Hey, what’s going on?

Matt DeCoursey 0:08
Part 19. Right. It’s been 19 weeks. We’re only three weeks behind. I think I think I think I haven’t been tracking our goals and output, but I’m pretty sure we’re three weeks behind. And that said, we’re gonna give some pitches. We’re going to talk about that today. And, you know, this is something you and I have both done. And we have to we’ve been on both sides of the table for, and I love this topic. Now, before we get started, I want to let you know, and you specifically know that today’s episode of Startup Hustle is brought to you by Our Crowd, do you wish you were in early on some of the best-performing IPOs of 2019 and 2020. Because Our Crowds investors, were not enjoying them in what you can join up with what’s next, you can join them, you can get rid of your FOMO with Our Crowd accredited investors, and I believe we both are have access to invest directly easily and more importantly, early. Our Crowd investors have benefited from our crowded companies IPO and like beyond me and being acquired and purchase it by companies like Intel, Nike, Microsoft and Oracle. Go to ourcrowd.com forward slash hustle, there’s a link in the show notes ever really cool platform, it’s worth checking out now. You know, one of the things that a platform like Our Crowd does is vet investment opportunities, which every single place that writes investment checks is on some level in the business of doing and in many cases that begins with the pitch. And you know, we’ve been kind of walking our way through creating the series and how to start a tech company. And last week, we we bootstrapped it a little bit and, you know, talked about how to find free stuff. But you know, what is I think better than free stuff is a big fat check from someone else.

Matt Watson 2:08
I like free money.

Matt DeCoursey 2:11
It’s not free.

Matt Watson 2:13
It’s not like you get more of it.

Matt DeCoursey 2:14
Okay, more money or way more money, more free money or more investment money? Yeah.

Matt Watson 2:21
Oh, yes.

Matt DeCoursey 2:24
All right. So before we get into this, Mat, like, I mean, what what, you know, when I think about how to pitch to investors, I think that people are usually not good at it. And I think a lot of that just comes from lack of experience. I’ve seen some people do really well with it. And some people do poorly with it. I mean, what are your opening? What’s your opening statement, Sir?

Matt Watson 2:45
I think I think in a lot of ways people overcomplicate it, and keeping it simple is probably the easiest, easiest thing. And, yeah, let’s get in.

Matt DeCoursey 2:56
So well. And Alright, so let the games begin. Now, when it comes to a pitch, I mean, you’ve given them before, like what’s going through your head before you give a pitch?

Matt Watson 3:08
Well, I mean, most time, you spent a lot of time making PowerPoints, frankly, right? Like you spent all this time trying to make a presentation and getting some forecast numbers together, and, and all that kind of stuff. And maybe you rehearse the pitch a little bit. I never really did. But at the end of the day, you got to figure out who your audience is, and what they want to hear what kind of investments they like, do and try and simplify the message and build confidence and tell them why you’re the one to give all your money to, you know.

Matt DeCoursey 3:39
Sure, yeah, I think when I think about giving a pitch now, as opposed to maybe where I was at 10 years ago, I’m thinking like, you mentioned simple, short to the point, not long, like, what are the main? What are the main points that I want to make? And I think you are spot on with Who am I talking to? Like, what information is important to the potential investor because that can be a lot different message and content that might then you might find what you want to give to like a prospective client or your own employees?

Matt Watson 4:20
Well, and specifically, they know the industry, right? Like, if I was building automotive software and talking to some random people, it’d be hard for me to talk about what different acronyms mean and this player in the industry, and we have to integrate with them. And this is how we compete with so and so like, they wouldn’t know it and even if it means like they have no frame of reference, right? You know, it’s not like like, Oh, I’m gonna open up a restaurant. We’re gonna compete with McDonald’s and we sell burgers like okay, yeah, I understand all that stuff. Okay, get it. But replace all those words with your industry. They don’t understand any of it. Nothing.

Matt DeCoursey 4:52
Right, right. And a confused mind almost always says no. Yeah, so you know, that’s and that’s thing if you can’t make it clear now, I think you know, what you’re describing as well brings up something that I think is and we’ll go over a couple of do’s and don’ts. But you know, I sent out I used to be a sales trainer a long time ago, I’ve been basically 20, almost 20 years ago at this point, and I’m getting old. And, you know, one of the things that I used to find as that people presenting often do what is referred to as talking over the buyer’s head. And that is similar to what you’re saying like, so you’re likely an industry expert, which makes it real easy to use acronyms to use comparisons to use language to use verbiage that only makes sense to other industry experts. And with that, you find yourself confused in a hurry. And, you know, some of that is like, like you mentioned, I think it is important when you’re considering who you’re talking to, to also consider what their background or experience is. And that’s a great point. Now, I think another thing is, is and one of the things that my book editor taught me was you gotta lead with a need. And, you know, so like, right off, what am I going to do to get your attention? Now? Because if you, you only, I think it’s fair to assume that when you’re pitching to investors, you’re usually pitching to type a people that have other things on their mind. And if you love them to sleep, you’re not going to get them back out of it.

Matt Watson 6:28
So you start with a joke, or dance?

Matt DeCoursey 6:32
Probably not. No, but you know, something, you know, but what’s the need? You know, what is the need? What do you what’s the problem you solve get right to it, then my example would be some people want to give like an eight minute overview of like, who they are, like, I don’t know, goofy shit. All right. So

Matt Watson 6:52
I think you’re absolutely right. It’s, it’s, it’s defining the problem and how we can solve it. And how big of an opportunity is that? Right? Like, that’s the problem with some of it, you’re like, people are thirsty, and we’re gonna sell them water and like, three people are gonna come buy water from us like, Okay, well, that’s not a big enough opportunity. Right? Like it’s, but it’s breaking it down to the that simple part of it. So the investor can understand

Matt DeCoursey 7:15
an example of leading for and leading with a need, and I’ll use your water example. But Matt, did you know that millions of people are literally dying of thirst in the desert? And with that, there’s a whole lot of problems. Our business has a solution that not only fixes that problem, it does so profitably. And I want to talk to you about what we need to make that happen together. Wow, really simple. That’s right.

Matt Watson 7:43
I can save starved starving children along the way. I love it

Matt DeCoursey 7:47
and make money. Now I have your attention. But this but here’s the thing is is and you and I have sat through this, because we’ve talked about this even during the series, like and I know that you’re like me, you’re frank and candid at certain times. But I mean, I’ve had people give me pitches and 15 minutes into it, and you’ve done you’ve said the same thing, like, Okay, what do you do? Like, what do you do? What exactly do you do?

Matt Watson 8:11
It’s the number one problem. They don’t explain it. That’s all complicated, right? At the end of the day, you should be doing one or two things. Usually, I’m gonna help somebody else make more money or help them save money. Right? It’s usually one of those two things. And then quickly, how do you do that? I mean, it should be simple.

Matt DeCoursey 8:30
Now, here’s the reality of it matters. Everyone wants to present the nobility of their solution and how it’s gonna change the world and whatever. Hey, folks don’t overvalue that fact, compared to what the investment firm or company or investor wants, which is to make money that’s more important to them on most days, than the solution you offer. And how is that going to occur? And I think people get that part of it wrong in a hurry. Like, you’re like, Yes, I don’t want people dying of thirst out in the desert. But I’m here to do a job. I’m representing my maybe my money or my firm’s money or whatever. So how does that part makes sense for us? That’s what invest that’s the language that investors speak. And you’re in the business of making yourself and investors money. And then whatever you do is on many levels, and in a realist point of view, secondary to that

Matt Watson 9:26
well, and at the end of the day, you’re selling yourself, right, you’ve got it, you’ve got to get these people to believe in you. You know what, what you’re what you’re doing is important, but you’re the jockey and you’re really selling yourself. So you got to come across as somebody who understands what they’re doing, can simplify it and knows how to solve the problem. And if all I hear from you is a bunch of confusion and complexity, like every time I do talk to you, the future is that we’re gonna get and are you overcomplicating things? Do we know what we’re doing? You know, you got to make it simple.

Matt DeCoursey 9:59
We’ve published it Over 600 episodes of this podcast, and for those of you that have been listening for any amount of time, thank you, because you’re the reason we keep doing this. Thank you for paying attention. But I mean, Matt, we’ve talked to so many investors, so many VCs, so many all of it. And we’ve, we got in the habit, I don’t even know when of asking them the question, do you like to bet on the jockey or the horse? You can only pick one and the 100% answer still the jockey?

Matt Watson 10:25
Yep.

Matt DeCoursey 10:25
Because and that’s the thing is, is you have to prove why you’re a good writer. And some of that is going to be well, it can be a lot of different things. You know, like, why are you an industry expert, what’s your past experience, you have to show levels of integrity, communication, drive resilience, like a whole lot of different things. And that is just as important to come out of the box with early that’s gonna get me paying attention, like Matt and your case, I’ll pitch on your behalf. Hi, my name is Matt Watson. I’m here to talk to you about your software platform that does some stuff going to give you a quick overview. I have had two successful exits. And did so before I was 40 years old. Now, dude, that’s gonna get their attention. Yeah, I’m serious. They’re gonna pay attention to bet on the jockey. That’s someone that’s been there, done it, whatever. And, you know, like, I mean, that’s just that’s how you can get someone’s attention too. All right. Now, before we get into kind of a list on some tips that go with this. Matt, what are a couple of things when when people have pitched you that either drives you crazy, make you fall asleep, or just say no?

Matt Watson 11:34
it’s usually the complexity of it, you know, they usually over explain the problem they’re trying to solve and how they solve it. And, and then a lot of times, you still don’t understand it, you’re like, Okay, so what? There’s this problem, you’re trying to solve it, but so what, like, and then who’s gonna pay for this shit? That’s always and then the other part is the go to market strategy, too, right? They’re like, Okay, this sounds great. Who’s gonna pay for it? And how are you gonna get them to pay for it? That’s usually a big missing component. A lot of times are like, I’ve invented invented a better way to slice bread, like, Okay, well, that’s great. But why do they need it? So what were they going to know? How do they know you exist?

Matt DeCoursey 12:15
And why is that? Why is replacing your system of slicing bread? Anything that people care about? Yeah, you know, for me, for me, yeah, I have many of the same things, the overall explanation, the the lack of, of speed, in the presentation, is usually like, if it’s like, don’t make it a Yahner. Don’t read right off your PowerPoint, like, I can see what’s on the screen, I can see it, you don’t have to read it word for word I know how to read. You know, like that kind of presentation stuff. I think, you know, when people want to turn a pitch into a product demonstration, here’s all the features that my software offers. And I’m like, God, I don’t give a shit about that. Not right now that so for those of you listening, that’s for a later stage look, the pitch, the very first pitch it much like a one pager or something, you’re you’re not, you’re unlikely you’re not getting a deal right there, like the people that you’re talking, they didn’t come with their checkbook, that’s not how this works. Your goal is to get this to spark their interest, and make them want to dive deeper and to whatever it is that they want to dive deeper into, not to be force fed, whatever funnel you’re trying to shove them down.

Matt Watson 13:33
I have to be honest, you know, if you’ve ever watched the show Shark Tank, I think they do a pretty good job of coaching those people on their on their pitches, at least in the short pitch you see, like, or it’s like they get it down to like a 62nd pitch or whatever. And then of course, the conversation goes wherever it goes. But, you know, I think they usually do a pretty good job on that show of getting it down to like a 62nd pitch where the investor can understand.

Matt DeCoursey 13:54
And that’s the thing is in an afterword any of the whoever’s in those seats that’s watching, or that potential investor, they then ask questions, yeah, based on whatever it is that they want to know how they want to know, or to clarify things. And, and so here’s the thing is, you have a finite amount of time to get these pitches down. There are some things that in places that will literally just, hey, yeah, two minutes to go. And some are, you know, you don’t want to burn up all your time, like going down a features list. And also, that’s not even a good approach, because you should be talking about the benefits that people get. So here’s a quick, basic, quick outline. Who are you? What’s the problem you’re solving? How do you solve it? How are we going to make money doing it? Do you have any questions? Let’s go do you care about anything? Do you care about anything else past that?

Matt Watson 14:46
Nope. Write me a check.

Matt DeCoursey 14:48
I don’t, I don’t, well, I’m in as an investor. Alright, so we’ve got a list of tips and things and we’re going to we’re going to either agree or disagree. And, you know, give you a little more information. Now before we get into those tips, just a quick reminder that today you can join our crowds investment and zipping as they’re innovating the trillion-dollar retail industry with Checkout free technology already deployed by the world’s largest food service companies IP, and that’s CIP bi N, by the way is ahead of the game. As the retail world adopts the safety and efficiency of contactless payments, you can get in early on zip and other unique opportunities by going to our crowd.com forward slash hustle. And by the way, use that link, and go check it out, sign up accounts free. And you know, part of why we want you to explore that is I mean, we kind of want our crowd to keep paying us to because we’re pitching, I’m pitching there.

Matt Watson 15:48
Now, I don’t know what the zip is to be honest. But I was at the airport the other day. And it was like a self checkout thing, where I like put my soda and my chips, like on a little counter. And then I paid like I didn’t scan it or anything. It was like the super school thing in the world. So that’s what zipline does. It’s pretty damn cool.

Matt DeCoursey 16:08
That was a nice catch. By the way. I saw that Matt got excited about contactless and automatic checkout and actually somehow shot his pen out of one hand up into the air. And because Matt is actually like a world class athlete that no one ever realized catlike like Ninja-like, just reached up and grabbed it. While continuing to talk that NAT That was impressive. I’m a pro. You know, if you watch Startup, Hustle TV, especially the early episodes, you can see Matt performing feats of athleticism, which are just mind blowing, mind blowing, all right. Anyway, our craft.com forward slash hustle. So we’re gonna talk a little bit about like, you know, look, there’s a lot of tips out there when it comes to giving pitches. But number one on this list is that your your investment pitch really needs to be and should be no more than 10 minutes long at the longest. Do you agree or disagree with that? Matt?

Matt Watson 17:09
I think that’s absolutely right. It’s got to be super quick.

Matt DeCoursey 17:13
Right. And I even think 10 minutes is kind of long that I

Matt Watson 17:19
did with q&a. But I think that first part of the pitch should be like, two or three minutes.

Matt DeCoursey 17:25
Like Blaze right through it. And here’s the thing, if you do that, and you travel through what I mentioned, who you are the problem, you solve the your solution for doing it your go to market strategy, you know, and then maybe what you need to get that done. And then you said like q&a, like, cuz the thing is, is if you take forever to give your pitch. Well, first off, everyone’s just gonna, like be ready for you to stop talking. And they’re not going to have any questions you

Matt Watson 17:54
already. They’ve already decided they like this or don’t like this. Yep,

Matt DeCoursey 17:58
go quick. Go quick. Don’t be afraid to move fast and break things along the way. And then like, here’s the thing is the answer the questions, but you have to ask. Like, I think one of the things that we really need to put in there is like making sure you ask and think of what some of those questions could be and they can be hit. Now we’ll do a little roleplay. Here, Matt? I mean, is this is this? Is this opportunity, something that you’re interested in?

Matt Watson 18:27
Ah, yeah, I think so. But tell me more about your go to market strategy.

Matt DeCoursey 18:32
And boom, there you go. Now you can revisit it. And now it’s time to get a little more in depth. Our go to market strategy involves x, y, z, we’ve determined that these two approaches are the best we’re going to try them first, we do need to do a better job of determining what our customer acquisition cost is, what are you know, and some of that, but those are, that’s the approach. That’s the focus. And in the event that those don’t work. We’re also going to try this other thing off to the side. But this is where we’re going first. Well, it would be and then and then everything else.

Matt Watson 19:07
And I really liked the second tip on our list here about turning your pitch into a story, right? You could say, hey, look, today, I wanted to tell you about Matt DeCoursey. He works at Full Scale, and his job is to recruit employees. Currently, they’re having a hard time recruiting costs and millions of dollars a year in revenue because they can’t hire enough people to fill up positions. We can solve that problem. Here’s how we solve that problem. We can boom, boom, boom, boom, boom, boom, right? And you just frame the story, right? You talk about who the problem is, you know, relate it to a real person and a real problem and a real solution and make it into the story. I think it’s a great way to do it.

Matt DeCoursey 19:42
And that and that can be exactly that, which also tells better and I can even do the same thing. So three years ago, my business partner Matt Watson and I became business partners. For this reason, we quickly we then soon realized that there was a massive opportunity that we were really well positioned for, and it was right in front of us. And you know, like we did this we did that we encountered these problems we, we survived a pandemic. And now we’ve gotten better here, we still suck here. You know, there’s a couple things and

Matt Watson 20:16
stories. And that sounds a lot better than reading some lines off a PowerPoint.

Matt DeCoursey 20:21
Please don’t do that. Just please like, just send your fucking PowerPoint and let someone else read it. Don’t. Don’t do that. And by the way, like I tell, I just literally gave this advice to someone yesterday, consider making a pitch video instead of a slide deck. Like make a video and tell your story like and let it be you and here’s the thing is people want that raw, that doesn’t have to be like a studio production. The pandemic gay put everyone on it on an equal playing field for how how raw your content can be. I was watching ESPN a month ago, it’s clear everyone was at their own home, you know, and that’s the bar and you have, you probably have a 4k camera in your pocket. That’ll record Well anyway, try it out. All right. Next tip, be laser-focused, please be laser-focused. What’s your core message? And how are you going to stay on point. And you might find yourself having to refocus your pitch, because distractions can occur. People may have questions in the middle of it, you need to be prepared to get things back on track and keep them on track. In the event that stuff happens,

Matt Watson 21:38
it’s easy to go too deep in any one spot, like you mentioned earlier. Like, if you’re the product guy, you can be like 20 minutes later, doing a product demo and talking about all the little details of the product, which nobody cares about, right? Like, you gotta, you gotta have like an agenda and really stay focused and not get too deep into any one thing, or you’re gonna lose them.

Matt DeCoursey 22:00
So with that laser focus, at some point, you’re going to be explaining what your what your product or service does. I don’t care about all the features. I care about the benefits.

Matt Watson 22:14
Yep. Who needs us?

Matt DeCoursey 22:16
People people that use Full Scale are, are almost always associated with rapidly growing companies that are having a hard time recruiting top software talent. We make it fast, easy and affordable. There you go. That’s what we do. I mean, that’s like what we do. And I that’s was that one sentence, one long, longer sentence or two sentences, Max. I’m not great with grammar map. And with that, go check out my books on Amazon. All right, can you spell entrepreneur today, Matt?

Matt Watson 22:55
Yeah, it’s on the screen, e n t r e p r e n e u r?

Matt DeCoursey 23:03
Wow, congratulations. You’re a cheater. It’s really funny. You know what I also realized? Didn’t you misspell that last week and we made a screen in front of us. But now you’re not reading right off the presentation. So I’m going to I’m gonna let that slide and learn. Okay. You know, here’s the next thing on our lessons got a really good point. Why are you why are you unique? Like, what’s your differentiation? Like? Why are you better, faster, cheaper? What’s your advantage? And other people to do what you do?

Matt Watson 23:37
And that’s always a problem, right? You’re like, well, if I want to open a restaurant that sells hamburgers, like immediately people are like, well, how the hell are you going to compete with all these other people? And you’ve got to have a really damn good answer. And sometimes the answer is, and it’s a great answer. Well, it’s kind of an old industry. And there’s like these two industry leaders that everybody uses, but it’s ripe for disruption. You know, like, everybody uses taxis. But there’s got to be a better way. I got this idea for self service, you opened a mobile app. And this is a new, easy way to do it. You’re like, oh, shit, maybe you can do that. Right? And really?

Matt DeCoursey 24:12
Yeah, yeah, there’s no way that founders of Uber or Lyft didn’t, like, I mean, think about that, you know, you’re like, why what if someone trusts me? They gave pitches to a ton of people that are like, Why would anybody use this? I don’t want to ride in a car with a stranger. Right? Well, why are unique or different? Well, first off, we open up a whole world of entrepreneurship and the gig economy to people that want that want it but also, have you ever tried to call for a cab? Yep. Like if you’re not in an area where they are driving by like, you’re gonna wait 45 minutes, if it even shows up, and then it’s super, super expensive. It’s better. It’s faster, and it’s cheaper. Now,

Matt Watson 24:55
something like reach stockpile is an example. Right? It’s like well, we compete With all these people, well, why are unique? Well, we target a certain industry or a large companies or small companies or specific persona, right? Like it and all of those are valid answers. But you’ve got to have an answer of like, why are you unique? You know, why isn’t your competition going to kill you, you found your little, you know, spot your little niche. You know, that’s all you need to know, and know and be confident that that you can do well in that niche.

Matt DeCoursey 25:26
And you just, you just dragged us right up to the next item on the list, which is having you need to have the ability to identify and quickly explain who your target audience is. Yep. So Matt, do you know at Full Scale that the majority of our clients are software companies that have between 10 and 100 employees? Now? That explains the company that that you are running. Right?

Matt Watson 25:53
Well, and it’s like at Netrio, right, our average customer is like a billion dollar plus customer now that has like 10,000 servers or devices. So that cuts out like 90% of companies like now don’t care about them. Right now, we have other products that they can use, like the stack five products, but metros like the core product they’ve always provided. It’s a very limited, you know, segment thereafter.

Matt DeCoursey 26:17
So with that, and still using Full Scale as an example, which go to FullScale.io, if you want to learn more about the software development services we offer, but So Matt, you know, Full Scale, okay, if I’m given an investor pitch, I would say I wouldn’t say most of I’d say, We have found that our fastest growing longest lasting, most profitable clients are North American software companies that have between 10 and 100, employees, and then paths that I can even say, all of which have either a CTO, a product or a project manager, or a lead developer locally led, and they don’t outsource 100% of it, we help them build a team that complements the existing assets and resources they have. And and look that took 15 seconds to describe and that’s who we’re chasing. That’s who we’re trying to reach. And now the next item on the list is how do we intend to acquire these customers? This is your go to market strategy. Now let me talk a little bit about that.

Matt Watson 27:20
Well, to your to your point, right, you figure out like we we want to do business with software companies that look and feel like this? Well, it’s also easy to say, Oh, we can service every software company there is, and there’s like millions of software developers in the world and 10s of 1000s of companies, right? So then you gotta narrow it down. It’s like how do I how do I find the exact ones that fit into my box of my perfect customer. And that’s always the trick is trying to figure out how to how to find them. And, you know, one way that we did it Syfy was content marketing. On the Metro side, actually, the way we get most of our business is through partnerships. We have partners that deal with these kinds of people. And so through partnerships, they know how to find them, then however they do it,

Matt DeCoursey 28:03
it’s gonna be different. It could be different from from you could be in the same industry and have two companies that have remarkably different approaches. Totally. Yep. Absolutely. Yeah. And, and these, that’s what makes sense. And, but these, these things should also line up or be accentuated by your strengths, both as a founder, and as a company. And, you know, like, we would be lying if we said that Startup Hustle wasn’t part of our go to market strategy with Full Scale, because it not only let people listening, were were interested in what we were saying what we were doing. So we’re our guests. And then on top of it, we even took some other unique approaches, because we wanted to build relationships with people, part of our launch strategy was a thing that I dreamed up called sweetened green, and we got local sweets for concerts and sports. And we invited entrepreneurs to bring a guest and come hang out with us. It accelerated our ability to get to know the people that we wanted to do business with, or just gave us an excuse to hang out and maybe get more info about what some of the needs were and whatever. There’s a whole lot of different ways to get in front of your people. But like you mentioned, Matt, so you meant you talked about the bread slicing startup, right. Okay. Do you know anybody that makes those decisions at Wonder?

Matt Watson 29:36
No. But there’s not very many back and go find them.

Matt DeCoursey 29:42
Right? Yeah. Right. Now in some cases, though, you have to be ready, ready to Okay, so if all right, let’s take, for example, solutions in healthcare. Those are big, big companies that might move slow and who the hell do you need to talk to you? They could vary sometimes they could be very easy. You’re gonna have difficulty explaining how you’re going to get in front of those decision-makers, how long it’s going to take, how much it’s going to cost and the relative speed at which they may make a decision. So some things are really simplistic. Like, we’re back to the water startup, okay? We have water, and we’re in the desert and people are walking by.

Matt Watson 30:21
That makes it easier

Matt DeCoursey 30:22
you go, Okay, it’s a lot easier

Matt Watson 30:25
in the real world. But in the real world, like me at Metro, I’m the Chief Technology Officer, I’ve got a three year roadmap of really important shit to do. I honestly don’t give a shit what you’re trying to pitch me unless it’s going to help me on any of this stuff for my three year roadmap, you’re wasting my time. Yep. And that’s the reality when you’re talking to people at big enterprises, is they’ve got a roadmap, they got things to do, they got lots of problems. And unless you can actually help them solve one of those really important problems, you’re just adding to their list of shit to do what’s in the way of them solving the real problems.

Matt DeCoursey 30:57
And when you that’s, that’s when you hear the word next.

Matt Watson 31:01
Yeah. And sometimes it’s timing. Like, you could call me back in three months. And like, oh, yeah, now that thing is a big problem for me. It wasn’t three months ago, but now it is.

Matt DeCoursey 31:09
So just never what’s what’s, what’s your revenue model?

Matt Watson 31:15
How are we going to charge for this thing? People are going to pay? Are we going to go sign up a million customers, they’re going to pay a $7 a year like Netflix, or we didn’t go find seven people that are going to pay a million dollars a year? Right? Like those are business models.

Matt DeCoursey 31:31
Do? Do you ever consider Have you considered investing in a business that hadn’t already defined this?

Matt Watson 31:38
It’s hard. I mean, sometimes we’ll take I verify as an example, right, which was a really successful exit here in Kansas City. When Toby initially initially pitched me on the idea, he’s like, Okay, we got this, this patent, and we can scan, you know, the eye, and it’s a unique biometric. And it’s like, what are you going to do with this? Like, well, we don’t know exactly yet. But we think we could use it and health care and, you know, banking, and, but we don’t really know how we’re going to charge for it. And we’d have to integrate with all these other partners. And there’s a lot of stuff we don’t know yet. And I’m like, I’m out. Immediately. I’m like, I don’t know. Yeah, I’m out. Because they didn’t know exactly what the model was. Now, it took them several years. Eventually, they figured it out. And they sold the company for $100 million, or whatever. But as an investor, I look that on LinkedIn seems like a lot of risk, because we don’t really know how you’re gonna make money.

Matt DeCoursey 32:26
And if you can’t clarify this, if you can’t explain it to an investor, that means you’re very you’re doing a poor job of explaining it to a potential buyers. Well, yeah. You don’t have your buyer back to that and or your or it’s too complicated. So someone gets to like you ever go to like you think you find some product online? software’s probably the easiest example. And then, and then you go to their hair, oh, I’ll click this pricing link, and it just looks like a rat’s nest of chaos. And you’re like, I’m out. And how much does this actually really cost? You know, like, I think the most successful products are simple and straightforward. And they can quickly explain like, the usage like, okay, like we use type form to collect data places, and for $50 a month, I know I’m going to be able to get 10,000 forms filled out. Right, straightforward. That’s my most recent example of purchasing actually. Also, Grammarly was another one. Our writers, our blog writers, we bought them subscriptions for Grammarly to speed things up, it was $11 a month per person if we paid annually. Okay, so we made it really easy to figure it out.

Matt Watson 33:44
You may you may know, you know, we have this free product that was part of stack phi called prefix. And we’ve rebuilt it and we’re actually having all these conversations right now about the revenue model. We’re trying to figure out, is it still a free product? Is it free? And then there’s a paid a paid version that has additional functionality? Or are we just gonna go only paid? Or maybe it’s free for private use, but it’s paid for commercial use? Like there’s all these different things? And then, are you charging $100 A year or $200? A year? Like, there’s a minutes complex? Like, you know, these things are difficult to figure out sometimes. And as an investor, you want to know like, Do you guys know what you’re doing?

Matt DeCoursey 34:24
And if you don’t, then if you don’t, or it’s very clear that you may not understand it, or haven’t had it defined, then in my opinion, you’ve also just shot like a million holes and everything else that you may show me later. So Matt, how can you give me projections in a burn rate and a runway and like a possible exit strategy or any valuation or future cash flow needs? If you can’t even tell me you don’t even know how you’re bringing in money?

Matt Watson 34:53
Well, as an investor, I’d much rather put gas on the fire than give you money to go build a fire that you hope one day We’ll grow

Matt DeCoursey 35:01
well require gas or to stand to rub together or a lighter or a fuse, or I don’t know what I need. I just know that now I just know that I’m building the fire later. Call me back when you got that shit started. Call me back when you got it. That’s when you’re out. Oh, wait, this is a good opportunity. These are things that VCs have said to me. You ready? Oh, god. Okay. Get back to me when I love the idea. I love your energy. Get back to me when you have a little more traction. How am I did that before but that’s in you’re going to hear that at that point, without a doubt. Without a doubt?

Matt Watson 35:41
How am I going to get my money back out of this thing when you don’t even know how to get a customer to pay for it?

Matt DeCoursey 35:46
Yep. So I’m saving this next question for you. Because this is truly your area of expertise. You know, as As humans, we all have some kind of superpower. And things that you know, you can do I believe mine often Jen around generate around hype and promotion and stuff like that. Matt, you are Mr. Exit. So I will ask you, what is an exit strategy?

Matt Watson 36:13
Well, if you’re going to take money from an investor, at some point in time they want their money back or they expect some sort of dividends or something, right? Like they want their money back eventually, usually. And everybody wants to know, what is the exit strategy? Right? Okay, I give you a million dollars, you’re gonna run this business for five years or 10 years? How do I get my million dollars back right? Now, if you’re investing like in commercial real estate, it’s clear like, Okay, well, we’ll sell the we’ll flip it, we’ll sell it in 10 years, right? But if it’s a software business, it’s like, who are we going to sell this thing to? Who would want to buy this, right? And that’s usually where the exit strategy comes in, is trying to figure out, who would we sell this business to? Five years from now? 10 years from now. And by the time it’s huge, by the way, it’s usually a long time from now, it’s not a short a short time, it’s a long time from now. Which is another reason it’s hard to raise capital, because I gotta give you my money. And I may never get it back. Or if I do, I’m gonna get back in a very long time from now. Because I don’t have.

Matt DeCoursey 37:12
And it’s going to exist in a very non liquid way. Right. Yeah. And illiquid. You know? It’s, it’s what what could this be worth? Who could buy it? And if possible, potential comparable acquisitions?

Matt Watson 37:26
So in the second two, yeah. So back to the VinSolutions days, it was easy, because there was, you know, three or four big industry players that always bought up all the companies. So it was always usually pretty easy. Like, oh, we’ll sell to ADP or Reynolds and Reynolds or Autotrader, or whatever. And, and Sharon, behold, we did these days, it’s more common to also just sell a random private equity. That’s, that’s always an option these days, too. But like on the standby side, it was always like, Oh, we could sell to AWS, because they need developer tools to bundle into their, their, you know, Amazon, server hosting and stuff, right? Or it could be another one of their competitors like Alibaba, Alibaba cloud, right? The virtually not unknown in the US. But if they had a tool like ours, maybe what helped us or usually our answer was like, There’s dozens of companies that sell it software, and we would just be another product in their catalog, right. And that’s kind of where we ended up where Netro acquired us, they already had a product, and were a secondary product in their catalog at this point, basically.

Matt DeCoursey 38:24
So to kind of snap on to what Matt said, there, you know, there’s, there’s a few basic things that investors are generally looking for, as Matt mentioned earlier, and invest at an industry that they’re familiar with a management team, they believe in an idea with a large market or competitor or some competitive advantage that you have, oh, a company with momentum or traction, and an idea that will generate cash flow. World, rewind that and listen to it, I did it fast on purpose. So you can hit that backward 32nd thing and hear it again. Industry they’re familiar with a management team, they believe in an idea with a large market or your competitive advantage. A company with momentum or traction are an idea that generates cash flow, some things generate cash flow right away, and there are that’s really attractive to a lot of investors because you’re you’re not pitching an endless money pit that will always need money. All right, now we’re gonna breeze through a real quick things you should never do. And then we’re out man. We’ll be through part 19. So Matt, you want to go back and forth and then on this one. So first off, there are some things you should never do when you pitch an investor purse First off, you know, like, hey, I want your commitment, but I don’t have a plan.

Matt Watson 39:51
That’s not good. All right, so the next ones on the list next, lying or exaggerating your financials, which we always know the finance entrails are always going to be wrong, like financial projections are always wrong. But you definitely don’t want to lie or exaggerate about your existing financials or upcoming financials.

Matt DeCoursey 40:09
Right? Right. That’s actually called fraud. Next, forecasting unprecedented growth without supporting evidence consider like what Matt said, like, look, no one thinks your your projections are going to be 100% accurate. In fact, they expect you that they shouldn’t. But when I look at some things, and it’s like, six months, and this hockey stick is like in the stratosphere, and on the moon, I’m like, Yeah, you’re not it’s not happening. So I like this next one, man, this is what I hear I hear this a lot.

Matt Watson 40:42
So I love this one, stating you don’t have any competitors. Now, at the VinSolutions days, what I would always say is our competitors. Were everybody or nobody. Yeah, because it was like, we had so many products. It’s like, we competed with everybody. But we also competed with nobody, because nobody else did all the things we did together. So that was my, that was always our line, we compete with everybody and nobody.

Matt DeCoursey 41:09
If someone tells me, they don’t have any competitors, I, I, and I’ve heard this a bunch, I can usually find them within a couple months. And then on and then on top of that, that actually is not a selling point. Because at this point, and 2021 and beyond, if you don’t have any competition, I wonder if there’s even a market for what you’re selling like you better have a remarkably unique something. Because if you don’t have any competition, then there’s a market.

Matt Watson 41:36
Yeah, I mean, imagine being the first person to pitch to people that you should take your own house and listed online and let random people stay in it one night at a time. Right, like creating a

Matt DeCoursey 41:48
new competition for that, like creating a new monetization for that

Matt Watson 41:52
for something like Airbnb is really difficult. Now, once the market gets big and going, it’s easy to be part of the ecosystem. But when you’re first a market, sometimes the things sound really crazy. And it’s hard to get traction. So a lot of time being first.

Matt DeCoursey 42:05
Investors want that though. But yeah, but in doubt, there’s a lot of investors that like that, and they’re like, Okay, this there’s there’s some some room here, okay, claiming you don’t have any gaps or blind spots in your business or your management team. Look, Matt, if there’s only one thing that I had to say that I’ve learned at being an entrepreneur, is that all businesses have problems. Absolutely. Yeah. What do you got next?

Matt Watson 42:31
Focusing only on the positives. I mean,

Matt DeCoursey 42:35
there’s no problems. There’s no problems at my business now.

Matt Watson 42:38
Yeah. And where are you raising? Everything

Matt DeCoursey 42:39
we do is lots of good question. That’s a problem. Wait, I don’t have enough money. Yeah,

Matt Watson 42:46
I think I think it’s I think it’s key to be honest with the investors of like, Hey, this is what we’re good at. This is what we’re bad at. This is what we need to improve. These are the things we need to figure out. You think you got to be honest with all that, because at the end of the day, the investors are gonna smell otherwise, like this guy’s just full of shit. Yeah, not trusting us.

Matt DeCoursey 43:05
They’re, well, they’re going to die. This point. I whenever I talk to people about this, I advise everyone to be fully transparent, and just own your problems. Because now how long was the diligence process you went through on your latest acquisition?

Matt Watson 43:18
It was like six months.

Matt DeCoursey 43:21
Today uncovers? Was there anything you could have hidden now? No, no, it was extensive. And Alright, so next, though, it while it’s important to admit your shortcomings and potentially talk about how you’re going to fix them, don’t dwell on them just admit, you know, say, hey, look, we have some strengths. And there’s some areas that we need to improve upon, this is what they are 123 Looking forward to working with you to fix some of those and then move on. You don’t like sit there. And

Matt Watson 43:52
we’re going to use some of the proceeds to hire a new sales manager and we’ll get that problem solved. Or whatever it

Matt DeCoursey 43:58
is. Would you read the next slide here?

Matt Watson 44:04
Reading your slides.

Matt DeCoursey 44:06
Yeah. Oh, right. Dude, I gotta be honest with you, man. That’s like a frickin pet peeve that I don’t get. I mean, I literally want to, like, get up and just like, Shut someone’s laptop. It is really I can’t even hear I can’t even hear what you’re saying. When you’re doing that, because the voice inside my head is yelling to stop doing that. I’m like, I can read asshole. That’s what goes through my head. The next thing and I think this is an important one is your pitch really, and your messaging and the vibe you give out shouldn’t just only be that you care about the money. I mentioned earlier that that that that in the eyes of the investor. That’s important over and above your solution in many cases, but if you seem like a money grubbing whore, it doesn’t go well. You know, like I just want your money man. If nothing else, I don’t want it. Just give me your money. So give me your money. Like, it doesn’t add doesn’t land well, doesn’t land well. All right. So once again, I want to give a big shout out to our crowd.com, for helping us bring you today’s episode that go to our crowd.com forward slash, hustle, stop by YouTube, check out the show that we produce, they are a sponsor of that as well. And you can learn more about their investment platform and how accredited investors are using their platform to invest directly easily and early. Matt, we’re gonna go real fast here. What’s the biggest takeaway or advice you can get from all of us?

Matt Watson 45:31
I think you’ve, when you’re early stage, you got to know what your niche is, you’ve got to be focused on we have a product or we’re solving his very specific problem for a very specific set of people. You’re actually worse off if you’re saying I can solve everybody’s problems, right? Like, that’s like opening a restaurant and saying we serve all types of food. Right? We sell Chinese food, Vietnamese food, Italian food, pizza, hot dogs, like we chicken nuggets, we do it all right, and you’re like, Well, who would buy it? Who would come here? Like doesn’t even make any sense? Right? And why are you how are you good at all? Yeah, you gotta be specific at one thing. And that makes it easy to sell your product to people. And they can quickly identify like, oh, they solve my need. Where for like, they steal every kind of food. I don’t really know if I want to go there. There. It’s just weird. So be focused. That’s my that’s my.

Matt DeCoursey 46:25
I think you nailed it there. And you know, you just reminded me of like, really, really early in the series you pointed out. You referenced a chicken restaurant that only makes chicken fingers raising. Yeah, and look, that’s real. That’d be really easy to explain. Hey, we are and by the way, the chicken fingers there are Outstanding, outstanding. They better be good at it.

Matt Watson 46:48
And if you think about taking this a place you think of.

Matt DeCoursey 46:51
That’d be a chicken fingers. Yeah, like, Don’t come here because you want it on the bone. We don’t make chicken nuggets, chicken fingers, man. And we got them and we’re good at it. And they are good at it. Now. I think. Just keep your keep your keep it brief. Get to the point, leave time for questions. Explain who you are. The problem you solve the way you solve it, how you’re going to sell it, how people are getting paid. Keep focused on that. And breeze through it and then ask questions and but you got to be Now look, do be prepared to answer the myriad things that come in there. And I think that’s my last advice. Look, show up ready to play. Show up ready to play come prepared. Like, like, especially if you’re going to give a short, concise presentation, like be good at it. Like you only got you only got five minutes, man, I needed to be good for five minutes. Okay, so try and by the way, I’m kind of guilty like you I don’t practice a whole lot because I kind of like the spontaneous side of things. But I am prepared. I am prepared to discuss the different things there’s a difference between being prepared, and not quote practicing. And by the way, if you if you have a difficult time, with public speaking, we’ve seen that we’ve seen people freeze up on stage it is almost always because they’re trying to memorize every single word that they say. And when they get knocked off track just a little bit. They’re off in the wilderness. So anyway, thanks again for joining us for another episode of Startup Hustle, hoping your pitch goes well. I think that our team prepared a great amount of info and data and I am going to rest assured that this was a good episode. See you next time, Matt.

Matt Watson 48:34
See you.