(C)lean Messaging With Scott Brown
Posted by John Livesay in podcast | 0 comments
We all think that people make decisions based on rational numbers, but that’s not how humans work. How can you find a way to tap into the emotional side and deliver clean messaging that is memorable? In this episode, John Livesay, aka The Pitch Whisperer, talks to actor-turned-experienced startup founder, investor, and speaker Scott Brown. Scott reveals how he helps founders sound human and effectively deliver their message to their audience, may it be investors, employees, or customers. He touches on the challenges of building a company and how the founder of a startup is not the hero. Scott also discusses how trying to solve a problem and being able to communicate your solution is at the core of the game.
—
Listen to the podcast here
(C)lean Messaging With Scott Brown
Our guest is Scott Brown. Scott Brown is a former actor turned entrepreneur, having started eight companies over the past years. From topical analgesics to bounced emails, Scott’s background is diverse, to say the least. Scott is the Executive Director of UpRamp, which leads ventures and startup engagement for the global connectivity industry in Boulder. He has the dubious honor of spending $2.5 million on the 21st worst Super Bowl ad in history. As an active advisor, investor and author, Scott shares his unique blend of startup, grit, technology and clean messages with startups around the world. He’s also credited with inventing the world’s first bacon-wrapped tot. Scott, welcome to the show.
John, thanks so much. This is going to be a lot of fun.
It is indeed. I like to ask my guests to take us back to their own story of origin. For you, it can be childhood or college, whatever it was. You were a former actor, that might be an interesting place to start, then we want to know how that pivot became an entrepreneur experience.
It’s a funny story. I was in beautiful Milwaukee, Wisconsin in the early ‘90s. I had come in to do I think Henry V. I’m there and I got invited to this fabulous dinner party. I’m hanging out and we’re drinking and talking and I met this guy who had invented a new topical analgesic, this pain-relieving gel made out of red peppers. I’m talking to this guy and we’re drinking, laughing and having a great time. About 2:00 in the morning, he says, “Scott, I think you could help me sell this.” I’m like, “Yeah.” Lo and behold, the next day he calls me and says, “I was serious.” I’m like, “All right.” We wrote this little deal on the back of a napkin and it turned out the previous summer, I did a season at another Shakespeare festival and one of the board members happened to be the CEO of a large pharmaceutical company. Six months later, we sold the patent rights and now this thing is in every Walgreens in the world. I went from being an actor to an entrepreneur through dumb luck and happenstance.
Clean Messaging: When talking to your customers, share experiences other people have after using your product rather than talking about yourself.
It’s fascinating to me because I love to double click on this concept that following our passions will lead to success, even if we don’t have an exact step-by-step roadmap of how it’s going to happen. Being in the right place at the right time is something we’ve been taught as kids but there’s something besides dumb luck involved. It has to do with energy, purpose and alignment. Can you speak about that?
There’s something about the magic of happenstance, those happy accidents that happen in your life. When I look back, all of the amazing and great things that have happened to me are all attributed to leaning into those happy accidents. When that happens, great things can come about. That’s how I met my beautiful bride. It’s how I started my companies. Everything falls from moving into those opportunities as they appear.
I have to ask about creating a bacon-wrapped tot. I know what a tater tot is. I’ve seen bacon wrapped around little hotdogs sometimes in the Midwest where I’m from as well. That was considered fancy appetizers in my day. Tell us how you created this.
The bacon-wrapped tot is the culmination of human cuisine. Bacon and a tater tot, it’s the most perfect thing ever. It happened at a random restaurant here in Colorado. I was out with a number of startup founders. We were trying to come up with the best food ever and I stumbled on the bacon-wrapped tot. I convinced the restaurant to make it right there, they did and it’s on their menu as The Scott.
Going back a little bit to the Shakespeare launching you into the entrepreneur thing, you’ve got some food named after you. You’ve also been called Hamlet, the entrepreneur, I’m assuming that ties in somehow to your Shakespeare background?
There are amazing stories in Hamlet. It’s probably one of the greatest works of art ever written in the English language. I probably go back and read it once a year. One of the things that I found in that, is that most of the lessons we need as entrepreneurs as startup founders, as business people, it’s all buried inside that text. We could do an hour on Hamlet as entrepreneur.
Let’s talk about this whole concept, especially for people in the tech world, I love this phrase, “What if your message was as clean as your code?” You created something called (C)lean Messaging, but you put the letter C in parentheses. You’re trying to separate the word clean and lean, I’m guessing. Tell us how you came up with (C)lean Messaging while also using that double play on words.
I’ve spent the last years building my own company, as an advisor, investor and mentor to a number of startup founders around the world and one of the things we found is that the tools we have developed to figure out what to build, have changed the dynamic. The Lean Startup methodology that Eric Ries put out, build, measure, iterate, all of that stuff. It helped us figure out the what, then we had great tools to figure out who the value prop canvas to help us figure out who we’re building this thing for.
What I found in talking to these entrepreneurs is that they would get through that phase and then stop. They would have this brilliant idea, they knew what they were building, who they were building for. They’d go out to the market and try to sell it or try to find investors and then complain twelve months later that there was no market for their product. 42% of founders after the fact, say they shut down their company because there was no market but how could that be true? Nobody starts a business knowing there are no customers. We all do the work, we do that customer discovery.
What I figured out was that these founders were taking all of the information they gathered in those amazing customer discovery conversations and interviews. Repeating it back to random people, to customers or potential customers and all of that great data they got about the what, ends up hurting them when it comes to the why. That’s why I built (C)lean Messaging, it’s a framework that helps startup founders talk to humans. It’s the next evolution of that lean startup methodology, the what, the who, and now this is the why.
Can you give us a little story of how someone you worked with has used (C)lean Messaging?
I’ve been lucky to work with a lot of interesting founders but there’s a group in New York City, a young startup company called Mutable. These guys have the most incredible technology, some of the smartest people I’ve ever met. They’ve done good work to figure out how to take all of these data centers that exist around the world and put little computers inside of them to run hyperlocal low latency edge compute and when they sat down and told me that, I thought, “That’s cool.” Except, nobody understands what that means.
We got together with the founders of Mutable and worked through their product to try to figure out how to talk about this to real people. What we found is that first, I had an amazing origin story about the way the company was founded and how their team grew. Origin stories are great when you’re talking to investors who want to join your journey, but they start to fall down a little bit when you’re talking to customers. When these guys talk to customers, they talk about the experience that other people have after using their product, rather than talking about themselves. They talk about how webpages load 30% faster when they’re running on the system. They talk about how large service providers are generating hundreds of millions of dollars in revenue, rather than paying the taxes and the rent on the data centers they own.
[bctt tweet=”What if your message was as clean as your code? The goal of a pitch is to be memorable. It is about the listener not about you.” username=”John_Livesay”]
One of the mistakes that I see founders make when they make a pitch is treating an investor like a customer and they’re pitching them as if they want them to buy the service or start using it, thinking somehow that’s going to make them want to invest. Do you see that often? If so, how do you help them change that?
It’s subtle. Because an investor and I’m one, we want to understand how the product works and we want to see that founder as if they’re talking to a real human being, contrary to popular belief, most investors are also human beings. There is something cool about seeing a great pitch from a great founder talking as if they’re talking to a real customer and observing that in process. At the same time, an investor, they’re looking for slightly different things but they’re going to make that decision the same way that a customer makes the decision. We’ve got to move that elephant first, we’ve got to hit them in the gut, change their intuition first and let that lead to judgment. Eventually, lead them to the data or the words to help them describe why they’ve made that decision.
A lot of people say, “You get ten minutes to pitch an Angel group or an investor.” I tell people, “You have 90 seconds. You need to grab them at the beginning.” Do you have a favorite pitch that you’ve heard that said, “The minute that founder opened their mouth, I was in?”
There are so many good ones out there.
You only have ten minutes, and every word has to earn its spot. Do not waste time with cliché openings like, “Thanks for this opportunity. I’m excited to be here.”
Anytime I see a pitch that starts with, “Hi, I’m Bill. I’m the CEO and Founder of X.” Shoot me in the head. You’ve wasted the first 30 seconds of the conversation and that was the most critical. What I tell people is that the best way to start, the best way to lead in is to lead with the listener. Start with the person that you’re talking to and then follow up with how you can change their life rather than saying, “I’m Scott and this is what I do.” You could start with, “There are people like you who have this big problem and I’ve invented a way to fix it.”
Do you specialize in a particular industry that you’d like to invest in? I’ve had a lot of investors like, “I want to do mobile. I only do artificial intelligence.”
Most of the work that I do as an investor is around B2B. I’ve figured out after failing miserably at Super Bowl ads that I’m good at enterprise deals and how to talk to businesses and how to find solutions that solve big problems for companies. There’s something that I look for in a business like that, it’s a little different, and it’s not just about a product that you’re going to sell to other businesses. What I like to invest in companies that have figured out something about humans that nobody else knows, it could be in the buying process, it could be a problem or a challenge that a human has that nobody else has identified yet. I look for that human element in a B2B business.
You referenced the Super Bowl commercial. Everyone watches those commercials. Tell us the story there, I’m sure it’s a good one and any lessons learned?
That was my first venture-backed company and at that time, I believed what all of our venture investors said. This was 1999, in those heavy times, we believed that it was all about getting users and we could worry about revenue later.
Facebook was like that, right?
There are businesses that do work that way. Most companies are a lemonade stand, build something that people want and sell it for more than it cost to make and then do that over and over, that’s how it should work. At the time in ‘99, we thought if we get a lot of eyeballs, we get a lot of users, then money will come later or we’ll IPO before there’s a real revenue. We went hard at it and built a large company, 150 people, raised a bunch of venture capital. We had a tough decision to make in that winter of ‘99. We had an opportunity to do a Super Bowl ad and we pulled together the ad and the money. We had a big board meeting and all agreed that we were going to do it.
Clean Messaging: The goal of a great pitch is not only to deliver great content but about being remembered. Find a short, easy, clean, memorable way of communicating your message; then, you’ve won.
In the fourth quarter of that Super Bowl, February of 2000, if you recall, that was the Titans and the St. Louis Rams at the time. The game was close and they’re in that fourth quarter. There were still people watching the game and therefore watching the commercials. Our commercial hit and you had a huge spike of users and people signed up. It was successful by those standards, but of course nobody gave us a dime. Within a couple of months, we had to shut the business down and had to move on. I am on a list now. It is known as the 21st worst Super Bowl ad in history, and at least I got that going for me.
You made the top 30. You also travel the country speaking. Who is your ideal audience and what takeaways do you give them?
There are two groups that I talk to a lot, the first obviously are startup founders. For those founders out there could be around an accelerator or offense targeting startup founders, it’s about how do you find that message? How do you talk about what you’ve built in a way that will help people understand it and buy? It’s tactical, oftentimes about the (C)lean Messaging framework that we bring out there. I’ve been doing a lot more talking to innovation experts and government, strangely enough.
I happened to do a presentation in the beautiful Sunshine Coast in Australia. I was doing a whole session on messaging and afterward, this lovely gentleman came up to me and he said, “I’m the local representative on the council here in the Sunshine Coast.” This messaging idea, this idea of (C)lean Messaging, not only applies to startup founders and entrepreneurship but I bet we could use this to help figure out how to talk about the new initiatives we’re trying to help our region with.
I’m thinking you would be ideal in front of anybody caring about green messaging. If you’re talking about a clean environment and green, clean messaging and the problems because many people feel like, “That’s going to be expensive and you want me to get rid of all these products under my kitchen sink that might be toxic.” If anybody needs help with clean messaging about a clean product, it’s that industry. I know you like to play with words as I do with lean and clean. To me, that seems like a nice fit to help.
I’m all in, ScottBrown.co.
We’ve talked about what makes a good opening. Closing your pitch is as important as a good opening. I can’t tell you how many people will end their pitch with, “That’s all we got. Any questions?” I want to cry. What do you recommend people say at the end of their pitch?
It varies for every single pitch. For me, it’s important to remember that the goal of a great pitch, at least in my mind, obviously you have content you need to deliver but more importantly, it’s about being remembered. Somehow a decision is going to be made. If you’re talking to an investor, that investor has a partner meeting seven days from now, on a Monday afternoon partner meeting. If they don’t remember what it is you were talking about or what your business does, then it doesn’t matter. It’s the same thing with a customer. They’re going to have all of this great stuff and take all of your printouts and your pieces of paper, set them on their desk and they will not read them. Your job, in those meetings, conversations and opportunities, is to help that person remember you. If you can find short, easy, clean ways of communicating your message that are accurate also memorable, then you’ve won.
I tell people if you tug at people’s heartstrings, you can get them to open their purse strings.
It’s like, “What if your message was as clean as your code?” For a technical founder, they strive every day to polish that rock and make their code as perfect as possible. They don’t think about how they message or talk about their company. Something like that, message is clean as your code, goes right into that long-term memory for a startup founder.
The other thing is sense of urgency. I feel that when people are pitching, they have to answer two questions which are, why are they uniquely qualified to execute the idea and why is now the perfect time to do it? Do you have any thoughts around that?
[bctt tweet=”Nobody starts a business knowing there are no customers. ” username=”John_Livesay”]
That’s right on but you’ve got to lead with that. Too often, people put that stuff at the end, “Here’s all of the stuff. Here’s the history of the internet. Here’s the thing I’ve built,” then after they get through a bunch of other stuff, “Here’s a little bit about the team.” Especially in a seed stage funding opportunity, it’s about the team first and then the problem or the market that you’re trying to solve for and then about the product. As founders, we spent so much time building the product that we want to talk about and we forget that the decision is going to be based on, are you the right people to fill a need in this big market and do you have something interesting to do? That something interesting is further down the road.
What’s the one takeaway you want people to get from reading your book, (C)lean Messaging?
The thing I tell people often is that building a company is hard. It’s difficult and we have to invest a lot of time, energy, blood, sweat and tears to figure out what to build, but once you go out into the world, sadly, nobody cares. You have to remember as a startup founder that when you are talking to other people, it’s about them and not about you. Your message, the story that you tell, the big interesting clean messages that you build have to be focused on the listener. They will then imagine what their life is like after using your product.
I’m constantly telling people, “When you tell a story, you’re not the hero of the story, your client is.” You might be a Sherpa and someone climbing on a mountain or Yoda in Star Wars, but it’s not all about you, which is why we’re on the same page, from the same mom.
Brothers from another mother. There is something cool about this, this idea that you’re not the hero. That is absolutely true, especially when you’re talking to customers. There is an opportunity where you are the hero and that’s when you start to get into a deeper conversation with investors or potential employees. There, you want those listeners to join your journey, to join the journey of your company. You’ve got to be mindful of the duality of this.
Scott, how can people follow you? ScottBrown.co, standing for Colorado, which is where you live. Is that right?
That’s right, John. Beautiful Boulder, Colorado.
Any last thoughts? A book to recommend, a quote you like that you want to share with us?
If nothing else, if we remember that it’s about the listener and not about you. That’s going to be a big thing. I would love to chat with anybody about how to help build that clean message. There’s an opportunity here to help startup founders take all of the great work they’ve done and figuring out the what and now help communicate the why. John, I bet between you and I, we can solve this problem of all of these startups that only last eighteen months. Let’s do that together.
I would love that, Scott. Thanks for being such a great guest and sharing your passion, your humor and your wisdom.
Thank you.
Important Links
- UpRamp
- (C)lean Messaging: A Framework to Help Startup Founders Talk to Humans
- (C)lean Messaging
- The Lean Startup
- Mutable
- Better Selling Through Storytelling Method Online Course
Wanna Host Your Own Podcast?
Click here to see how my friends at Podetize can help
Purchase John’s new book
John Livesay, The Pitch Whisperer
Share The Show
Did you enjoy the show? I’d love it if you subscribed today and left us a 5-star review!
- Click this link
- Click on the ‘Subscribe’ button below the artwork
- Go to the ‘Ratings and Reviews’ section
- Click on ‘Write a Review’
Love the show? Subscribe, rate, review, and share!
Join The Successful Pitch community today:
- JohnLivesay.com
- John Livesay Facebook
- John Livesay Twitter
- John Livesay LinkedIn
- John Livesay YouTube
The Titanic Effect: Helping Startups Navigate Through Icebergs with Drs. Todd Saxton and Kim Saxton
Posted by John Livesay in podcast | 0 comments
Hitting icebergs is just part of the business, especially when you are in the startup stage. Nevertheless, it does not mean that you can’t steer away from them because the fact remains that these mistakes can be costly. We double up the insight in this episode as host John Livesay interviews business professors Drs. Todd Saxton and Kim Saxton. Giving us a preview of their book, The Titanic Effect, they help startup founders navigate the icebergs that so often sink startups in the ideation and early stage of development. As they touch on the four oceans that startups have to get across and how they can do that, they also offer great advice on practicing your pitch.
—
Listen to the podcast here
The Titanic Effect: Helping Startups Navigate Through Icebergs with Drs. Todd Saxton and Kim Saxton
Our guests are Drs. Todd and Kim Saxton. They’re award-winning professors at Indiana University’s Kelley School of Business as well as co-authors of The Titanic Effect. The book is a practical guide to help startup founders, as well as their investors and supporters, successfully navigate the icebergs that often pop up that sink startups in these early stages. They’re going to share their decades of academic and professional experience, business strategy, marketing, venture-funded startups to help you navigate these deck burgs that often sink early startups. Drs. Todd and Kim, welcome to the show.
I’m fine. Kim is fine. Thank you so much for having us. It’s a pleasure.
I’m excited to be here and chatting with you.
Let me ask you to each tell me your own little story of origin before you became professors, married and all of that stuff. I love to hear one of you start and say, “When I was growing up,” you can go back as far as you want, “my dream was,” and give us a sense of how you became a professor. We’ll get into the story of how you started working together and got married.
Here I thought you were going to do the origin story of how we got together, which was already dialing back many years.
I’m always fascinated, especially people who dedicate their lives to teaching the university level. Did you know in college this is what you wanted to do or did you as a young girl know, “Someday I’m going to be a professor?”
If I say what my real childhood dreams were, honestly, my first dream was to be the president of the United States. I went to MIT because at some point in high school I discovered I was good at math and computers. I worked in a debit processing center at the local junior college and got to play with some of the first personal computers that were coming out. By the time I got to MIT I had realized, that whole be the first American female president was going to be a tough way to go and would be fraught with a lot of icebergs even though I didn’t know that term. I thought, “I’m going to go make money instead. That’ll be a lot more fun.” We both got into consulting directly out of college, helping companies identify what they’re going forward, strategies ought to be as what I did. Todd did something some related. Todd started to want to go back and get a PhD and follow in his dad’s footsteps of being a professor. I pulled out my SAT scores and I discovered that what I told the SAT when I took that exam to get into college was that I wanted to be a professor as well.
[bctt tweet=” Practice your pitch on your least likely prospect first. ” username=”John_Livesay”]
I can’t wait to hear. Your dad was modeling for you, Todd, what a professor’s life was like?
The academic connections, it’s funny because Kim and I have both been out six years from college and working in business consulting on the East Coast. Circle back a little bit, I’m a Jersey boy. I grew up selling newspapers on the Jersey shore. My mom bought the lawnmower in exchange for me mowing our own lawn for free, which meant I could use the lawnmower to mow our neighbors’ lawns. That’s my connection back to your network.
I can relate to you both well of Kim talking about early computers. I was at the University of Illinois in Urbana-Champaign and we had Plato where you can touch the screen back then. That was totally cutting edge. I don’t know if you’ve ever remembered or heard of those. I also had a paper route, Todd. I would do the entrepreneur thing, knock on the doors, “Do you want to subscribe?” You sell it, you deliver it and you’ve got to go collect it at the end of the month.
If you’re good, you make your money in tips.
Don’t throw it in the bushes.
There are things you throw in the bushes in New Jersey, but it’s not your customer’s newspapers.
Ironically I skipped over that. My early pitching was as a Girl Scout, I went door-to-door. Those times you had to haul the boxes with you. After a little while, you only had one type of cookie left.
You had pushed those. The mints are gone. Now we’re pushing peanut butter or something. I can relate.
You learn how to message pretty quickly so that you don’t have to haul those cookies back to the house.
The Titanic Effect
Let’s hear those story of the origin of how you too wonderful people connected. You can make it as romantic as you want or as academic as you want. The choice is yours.
I’ll share the non-romantic part. Our first jobs out of school were at the same consulting firm in the DC area. Kim was the sixth and I was the seventh person hired. This was a relatively small entrepreneurial consulting firm. For the first few months, we struggled to work together. We did not get along. Kim may ask me to cut this out, for now, just between us, when we started dating and it got serious enough. We were like, “One of us probably has to leave.” Kim went to talk to the founder to say, “I’m moving onto something else. Part of the reason is I’m dating someone here.” He went through every member of the company, including some that were married, the other women, the janitor, the company dog and the only entity left was me. It was like, “It can’t be Todd.”
We got to keep that in. That’s at least likely to be dating. Kim, what’s your version of that story?
It’s pretty much like that. In fact, at that time, I was conservative and he was clearly liberal. There were so many different ways that we should not get along at all. As we tried to work together, that same founder one time said to me, “Would you stop yanking his chain already?” I didn’t realize I was. What ended up happening is that over a weekend thing, we realized that there was some attraction. We thought, “You can’t ignore chemistry so what we ought to do is probably date and get this over with so we can move on to the real love of our lives.”
It’s fascinating because I talk about going from invisible to irresistible in a business sense but also in a dating sense. If you have so much pressure that this has to be the investor that funds my startup or this has to be the customer that hires me or this has to be the love of my life. It’s too much pressure. If you think instead of, “Let’s get through this and we know we’re not going to be a fit, there’s no pressure.” The irony of that, if people could take that away from this show, I’d be thrilled that if you start to hold things a little lighter in your hands, how much that shifts things.
That’s interesting as a way to think about it. I never connected these two before. I counsel entrepreneurs when they go to their first pitch, whether it’s for money or a customer, go to the one you think is going to be most challenging and least likely first because you’re going to screw something up. You’re going to mess up the value proposition or the connection or frame of reference, whatever that might be. You’re going to hit icebergs. Get an iceberg that isn’t your biggest opportunity, whether it came from funding or a customer perspective because you’re going to get beaten up. You’re going to learn something from that and get better. As you get better, you got closer to home and the bigger and better opportunities because you fit some of those icebergs but survived.
He gave me that advice. He’s had to do some cold calling and I said, “Here are my best prospects.” He said, “Don’t call them. You’re not great prospects. Get them out, burn through five or ten of them. By then you’ll be ready for the good ones.”
Practice your pitch on your least likely prospects first, that’s unique advice because you’re not attached to the outcome.
[bctt tweet=”Be accountable as you scale.” username=”John_Livesay”]
Maybe it’s a phone instead of practice. There is a chance to compare it. We’re still married for many years.
Honing and practicing for me. We are rewriting everything already. I know in your book The Titanic Effect, originally, this metaphor was a sideline. It became something that anchored the whole concept. Let’s hear the story of origin for how did you come up with the idea for the book?
It started with the term technical debt, which you’re familiar with and some of your audience, for those that are not when particularly software. Any physical product that you’re trying to build it, you can’t invest enough time, resources, energy to build it all the way into the robust version that you might envision eventually. You have to cut some corners. You’ve got to build your software on some code that might be a little bit flimsy to go out there and get that minimally viable product or that early testable model to get feedback. The challenges, as you start to scale, as you move from that one pilot customer to five customers to hopefully ten, twenty plus, if you’re building on this weak foundation, it’s going to collapse upon itself. That’s from a technical standpoint, from a product standpoint, and that’s the term of technical debt. There are equivalents in our metaphor, these other oceans.
You have the people that you work with, who you surround yourself with, how you allocate equity. You get advice from who helps guide you, who you hire as your early employees. In the human ocean, all of those are important decisions, but also have associated debt with them. As we thought about it was all of these decisions look obvious and easy when you are resource-strapped, and that’s the part above the water. There’s all of this mass below the water that you can’t see or anticipate because you’re making decisions under conditions of uncertainty. That connoted the image of the iceberg, and at least many of us, when we think about iceberg and failure, we associate that with the Titanic. I’m like the superficial naming guy was like, “We’ll call our presentation The Titanic Effect, then something after to make it a little more specific.” They were like, my co-authors, Michael and Kim, “It’s a good idea. It’s catchy. We should probably make sure there is some substance.” I was like, “Substance, that’s your bailiwick. I’m out of here.”
You have images of all the different icebergs and things. I’m a big Titanic fanatic. I’ve been to the museum, the menus, touched the cold ice and watched all the documentaries. You’ve got me in a minute. The research that you showed people that it’s not what icebergs are not all the same, Kim?
We started with that idea originally of marketing debt and human debt. We started thinking, “Let’s name the debts and all that.” We got onto the iceberg. We started doing iceberg research. It turns out that icebergs are super cool. They have such a variety of size from little bergy bits. Imagine a berg all broken up to iceberg islands. It’s huge masses. They have different shapes. Some are downed, tabular and all this stuff. We started getting into it. It was easy to envision these debts as different icebergs. Even since I focus in the marketing area, I have a visual image of each one of the ones as something a little different. In the book, they all look the same. There was too much granularity to try and talk about size, shape and all that. It was pretty exciting. I’m the researchy person to do that background work. I said, “If my very creative co-author and partner here is going to come up with a fancy title, I need to figure out if it has any legs. I started researching it and it turns out that there’s a lot that’s been written about the Titanic.
There are many resources too. We’ve read books, documentaries, online research. The museum has a lot of information too. We started finding thing after thing that matched up. Todd usually tells the story of a change of investors bringing on a new investor caused them to change the shipyard that they use. You can imagine what the ramifications of that are going to be. They have three different segments, this luxurious class and the steerage as we know about. The groups of people are trying to do different things. What was cool is that the first-class luxury passengers were Americans and the third-class steerage was from Eastern Europe. Can you imagine trying to have a successful marketing program that bought those two different groups of people into the same boat?
The Titanic Effect: If you don’t have alternative opinions, you’re not going to be able to aim your product into the market and understand the variety of needs that are out there.
Never were they supposed to interact. The romance went out as it did with your relationship. Did you dance to Celine Dion’s song at your wedding?
Can you imagine doing that in 1912 like share difficulty of that is mind-boggling?
I hadn’t thought about it like that. The buzz of getting the wealthy people, you’re like, “I’m sure everybody wanted the glamor of all that.” The masses, what would make them want to get on that versus all the other ways to get across? One of the things I want to talk about what you have in The Titanic Effect is the four oceans, the human ocean, the marketing ocean, the technical ocean and the strategy ocean. I know you have a whole chapter devoted to each one of those things. It’s such a great incentive for people to start thinking of this metaphor in a way that, “I want to buy this book now because we started dabbling in the marketing ocean there a little bit.” You can each talk about each one or you can split it up however you want to do it. Let’s dive in on what’s the human ocean? What’s the biggest mistake people make when they’re putting their team together?
The human ocean has these different seas within it. I know geographically that doesn’t quite work, but in the metaphor, please forgive us and allow us there that you have your co-founders. The biggest mistake that I see early-stage and first-time entrepreneurs make, and frankly even seasoned entrepreneurs, are allocating all the equity early and equally across co-founders. Your three people go out for coffee or a beer and they sketch out this idea on the napkin. They get all excited. They’re going to start this company. We’ll split everything three ways equally. A few months later, how many times that everyone is completely pulling their waiter or even able to fully contribute? The co-founders, how you allocate equity, whether you have the appropriate mix of people. Those are some of the debt bergs on the human side within co-founders.
The next sea that we talk about are the investors and advisors. Those are the people that you enlist their help, ideally some money as well. You need that feedback, encouragement, support, connections and how you go about doing that. Who you choose, how many you choose and how you interact with them are some also important sources of either resource or in some cases step bergs as well that can limit your success moving forward. Finally, within the human ocean are the employees and who are those early employees that you hire? Do you go after the cheap but enthusiastic interns who may be graduated or aren’t even through college and bright, but don’t know a lot and maybe can’t help the venture as much and spend a lot of time training, etc.? The other end of the spectrum, the giant whale hunter who has had the huge success and demands $250,000 salary and a lot of equity. It turns out they’re a one-hit-wonder and don’t know what they’re talking about. That can also be a huge source of a debt berg. Who those early employees are, how you leverage outside resources, that’s one of the other major elements we talk about in the human ocean.
In the employee sea, Todd, I wanted to add, the iceberg that’s named our debt berg has named the dearth of diversity is one that deserves more attention. We have been working with some incubators and looking at some of their companies. I was struck that out of all of the companies and all of the founding teams, there were four people who did not look like everybody else. Academic research is interesting when you have people who are much like you, more homogeneous, you get along better. Startups are a hard path to go. Getting along better is probably good. On the other hand, if you don’t have those alternative opinions, you’re not as well going to be able to aim your product into the market and understand the variety of needs that are out there.
Let me ask you about advisors within the human ocean. How important are they, is the first question, which they’re very important. What’re the criteria of what makes a good advisor? How often should you expect them to talk with you? What equity do you have to give them over time? I have so many questions about advisors alone. It’s one little grand of sand in the ocean there of human odds. It’s something that you are expertly qualified to answer. I haven’t heard many people talking about that granular level if you don’t mind.
[bctt tweet=”Get an iceberg that isn’t your biggest opportunity because you’re going to get beaten up. ” username=”John_Livesay”]
I can’t pretend to have all the answers on that as you suggest. It’s a complex and nuanced question. At some point, it boils down to rapport. The fact that you like working together. It’s going to be a slog when you’re involved in any new activity, innovative activity, new project, and especially a new venture. It’s a long journey and they’re going to be hard moments. You want to be with people that you genuinely like, respect, appreciate and have fun with. That’s an important underlying element. The more objective criteria, I wouldn’t dare call it a rule. I’ll have somebody who documents and shows me, it only took X, but it’s a 50 and five rule that it will probably take you meeting with 50 people having a cup of coffee, a beer, whatever, lunch to share your idea. To get five that you feel are truly in that inner circle that is our trusted advisors that you have a good rapport with that get back to you.
One of the mistakes I see some entrepreneurs make is they try and maintain connections with 50 people and you simply can’t do that. The goal isn’t to make your network as big as possible. You want to be more engaged and activated, but also it takes a lot of networking and searches to find those five, settle with the first five you get. Within those five, you want some people who are not exactly always devil’s advocates in your face, but at least aren’t yes people that do challenge you. That you’re willing to have that and that gets back to that alternative perspective that Kim talked about and having a diversity of perspective is important.
Following that, it is having some diversity in terms of their backgrounds that you have one or two advisors that are more industry experts. You have one or two that perhaps have started a company, have grown one or two that are more on the investor perspective, that’s financial savvy and hopefully, connections that when it comes time to raise money. I think of it as this critical mix of elements that are all part of the stew that or ocean that helped you be a successful startup, but also help you identify different types of debt bergs in different oceans. You want advocates and advisers who can help you navigate that journey.
I wanted to have Kim speak to this one particular thing you said, which is that you’re not hiring a bunch of advisors who agree with everything you say and being comfortable enough to be coachable, to hear other people’s perspectives or maybe even criticism like you’re going down the wrong path or whatever it might be?
Nobody likes to have Negative Nancy around all the time. You have to be tough with yourself and say, “Who is going to be the person who’s going to see all the bumps in the road?” Who’s going to be able to point out those hazards to me and it’s going to tell me 1,000 ways that this isn’t going to work. For some of us and me, if you tell me all the challenges that I’m going to try to cross them, surround them. It’s good from that perspective, but also you want somebody who maybe can see things that you can’t see. There’s this hard thing about being the founder of a startup or the founding team is that you have to be enthusiastic. You have to be persistent. Sometimes you need to go a different path and to be doggedly persistent and not to be able to hear or listen is tough.
The ultimate pivot that everyone ultimately ends up doing. That’s why people invest in the team more than the idea and that awareness is something that a lot of people don’t register with or they feel embarrassed sometimes that they have to. I’ve seen it time and again where you have to be willing to let that go a little bit. We obviously don’t have time to go into all the oceans. I did want to have maybe you talk one little bit about the strategy ocean because some people think, “Why does strategy have its own ocean or its own chapter?”
But before we go on, I’d like to close on one more thought on that advisor side because we frequently get asked to be advisors. In fact, some years we’ve done hundreds of lunches and coffees and things like that. As advisors, we have a talk and a coachability metric that we use. We’ll take the first coffee with anyone and we’ll have lunch sometimes. You go away and if you ask a second time, we’re very likely to take the second one as well if we’ve already given the first one. If you come back in the second one and you have tested nothing that we said in the first one and/or you are doggedly holding to ideas that we suggested negative things about the first time, we recognize you as not being coachable.
The Titanic Effect: One of the mistakes entrepreneurs make is they try and maintain connections with 50 people.
That’s great criteria or excuses of why you haven’t done something yet.
Moving into the strategy ocean, we recognize that we don’t have all the oceans in the book. We pick solutions that were in our sweet spot, our comfort zones. There are regulatory issues and legal issues and all that. The challenge that we see with some startups and probably most startups at different points in time are that because you have these different arenas that you’re moving forward. You’re moving forward the human stuff. You’re moving forward the funding. You’re moving forward what your customer relationship is going to look like. You’re moving forward the product. The whole thing gets unwieldy.
You get something that’s very in-depth on the product side. There’s no understanding or recognition of how this could be marketed or what’s valuable to customers or you get something at the sales and marketing side starts promising something that employees can’t do. That’s why we call it out the strategy ocean because that’s the place to bring the other three oceans together. To remind people that you have to be coordinated, you have to move one piece forward a little bit. The next piece forward a little bit.
That lack of coordination, one department sales promising something that engineering can’t deliver or is a nightmare even at a small scale.
Measurement, what happens, we’ve seen a lot of startups is they get so busy doing and they’re shorthanded, that they don’t even have metrics in place. They know the metrics that they’re going to need to see if they’re going to go do an angel pitch or a VC pitch. They’re not effectively running the business with metrics. We advocate different metrics at different points in time, but identifying what those metrics are and having somebody look at them. The third sea in the strategy ocean is about accountability, which is, we all think we’re heading in a certain direction, but until you put a name to it, it doesn’t happen.
Always be the founder or even the founding team as you grow up a little bit, as you start to scale, that accountability has to start to transfer to others within the organization.
What you’re saying is sometimes accountability is delegating stuff too. It’s not doing it all yourself. It’s been a fascinating look at the Titanic as a metaphor and the oceans that we all swim in, whether we’re starting a business or working in a business and all the challenges that we face. The book is called The Titanic Effect. Is there any last thought or piece of advice you each want to leave us with?
I’ll cut in on one and it comes back to very much the theme of a lot of what you talk about and making sure in your picture, in your story, you know what you’re trying to get out of it and that it is both stage-appropriate and context-appropriate in a very personal sense. We’ve talked about our own interactions with each other. When we’re looking for feedback, I’m going to characterize two different types and try and make this brief. We do a lot of writing. If I have a deadline that I’ve got to get it out by midnight and into a journal for review or whatever, I have to signal to Kim, “I’ve got a tight deadline. I need these superficial and it’s okay if you say, “That’s great, Hon.”
[bctt tweet=”If you’re good, you make your money in tips. ” username=”John_Livesay”]
At the early stages of this project, however, when we were trying to flesh out this metaphor and extend it, we needed to be ruthless with between all three of us. What may have created some challenging discussions, but that early stage, that’s the time to be open to much more discursive conversations about what’s going to work, what isn’t, what is clear and what is not? Understanding where you are in the journey and what you were looking for in your pitch, whatever that might look like is an important part of the process. As you very well know when articulate in many ways, a pitch is not this model with the constructed. A pitch varies a lot by what you’re trying to accomplish, who your audience is, etc. That’s certainly very true as you’re navigating from an early stage of launch and ideation through the later stages of growing a venture.
Keep on sailing, that’s the goal.
If people want to follow you on social media and track the book, what’s the best way for them to do that?
They can check out the website at www.TitanicEffect.com. We have a weekly blog and we email out little tips once a week so we don’t clog your inbox, but it’s fun when people email or text us and say, “I love that.”
Thank you both for sharing your expertise, navigating the waters that we all face.
Thank you so much. It’s been a lot of fun and good luck with your endeavors. To the audience, good luck with your pitch, whatever that might look like.
Thank you.
Important Links
- The Titanic Effect
- https://www.TitanicEffect.com/successfulpitch
- Better Selling Through Storytelling Method Online Course
Wanna Host Your Own Podcast?
Click here to see how my friends at Podetize can help
Purchase John’s new book
John Livesay, The Pitch Whisperer
Share The Show
Did you enjoy the show? I’d love it if you subscribed today and left us a 5-star review!
- Click this link
- Click on the ‘Subscribe’ button below the artwork
- Go to the ‘Ratings and Reviews’ section
- Click on ‘Write a Review’
Love the show? Subscribe, rate, review, and share!
Join The Successful Pitch community today:
- JohnLivesay.com
- John Livesay Facebook
- John Livesay Twitter
- John Livesay LinkedIn
- John Livesay YouTube
Pitch Secrets From Top Investor with Vic Pascucci
Posted by John Livesay in podcast | 0 comments
Episode Summary:
—
Listen To The Episode Here
Pitch Secrets From Top Investor with Vic Pascucci
Our guest is Vic Pascucci, who is the Managing Partner at Lightbank in Chicago. He’s been a venture capitalist with over nineteen years of professional experience including Fintech investing and he has an amazing background with Fortune 130 companies and early-stage ventures. He’s really big in corporate strategy as general counsel. His specialties are Fintech and consumer. He’s got over $650 million in venture capital in M&A transactions. Welcome to the show, Vic.
It’s great to be here. I appreciate it.
I like to always ask my guests to take us on their own story of origin. Are you from Chicago? Did you dream of being a venture capitalist when you were in high school? How did this happen to you?
I think in high school, I dreamed of being in Chicago. Growing up as a kid in Cleveland, I became infatuated with the city like this although I didn’t get accepted to any colleges around here. Once I started working, I became infatuated with becoming a venture capitalist. Just like everything else, nineteen years later, you have an overnight success. When it comes to my career in venture, I like to tell people when they ask how did I get into venture, “I did it in a completely non-traditional way.” I fought, punched, kicked, kneed, elbowed and scrapped my way into it. I didn’t go to school in the right part of the country. I don’t have the right degree. I didn’t work for the major consulting companies. If you look at most venture capitalists, they have this punched pressed resume of Ivy League, consulting startup, went to the right country clubs, and worked their way up. I’m speaking broad-brush just to make it more exciting, but if you look at most people’s resume in venture, that’s what they look like.
[bctt tweet=”What is your unfair competitive advantage?” username=”John_Livesay”]
I started my career as an attorney, which a lot of venture people do. I started as a trial lawyer. I was trying cases right out of school. This is the early ‘90s to mid-‘90s and I was going to court every day and just was tearing things down. I was a trial lawyer. I would go and beat the hell out of everyone, witnesses, statements, and I’ll just destroy. I’ll put on a bunch of drama in front of a jury, go to win and move on. I noticed all these brilliant people around me that I meet, they were in technology. The way I look at it, they were building things every day. They are building technologies, building companies.
I had a midlife crisis in my mid-twenties, “How do I want to spend my life? Building or destroying?” The only way I knew how to get into venture from that standpoint was to teach myself how to do technology law, teach myself about corporate finance, and start my own law firm that did those types of things. From starting my own law firm with no clients, this is in the late ‘90s, beginning of 2000, so after the first technology crash. I was starting a firm with no clients, focused on technology companies. Building that from no clients, no business, to enough work to keep five lawyers busy. One of the guys I was working my ass off to get his business finally said, “I’m not going to give you my business, but I will give you a job as my first general counsel.”
Up into that point, I was doing a bunch of advising on venture and finance. I have always loved the venture side of things, representing some financiers, representing the State of Illinois for their seed stage investing. Before I knew it, I was out there raising money, managing teams. Once I got inside the “the belly of the beast” on the startup side, I loved it. From there, I progressed from one software company got bought by another. I ended up in Texas where I got a job. I sold the software company, then end up with a job with a Fortune 130 company which was the completely other end of the spectrum, working in this huge 25,000-person company. It was highly regulated with all these processes, completely conservative and conventional. I came in as the young guy that was supposed to represent their CTO, CIO, and CISO.
As their lawyer, what I’d see are deals that come across their desks. They would be an early adopter for desktop virtualization or security or some internet-based business. I just kept forcing them to say, “We should do deals with these companies.” They say, “We are.” I’m like, “No, you’re not. You’re just buying stuff. We need to invest. We’re going to rely on them. They’re going to rely on us. The best way to align is by investing.” They said, “No, we don’t do that here. Shut up. You’ll get fired.” After breaking that ice after a couple of years, I turned around and fast forward a couple of years, I’m managing a $330 million venture fund for them. It’s a top performing fund. We have a bunch of IPOs. We have a bunch of acquisition exits and a really active pipeline. That started it all officially. Throughout the course of those investments, I was able to meet my partners here, Brad Keywell, Eric Lefkofsky, this fund that they had started. They traded some deal flows, traded some pings and deals on sectors, and then a couple of years later when they were ready to bring in someone else to manage and run this fund, it’s how I got here.
Pitch Secrets: People just assume that all teams have great relationships, but that’s not the case.
That is quite a journey. I think that there must have been some skills around storytelling being convincing as a trial lawyer that has helped you on your career path because you obviously had to get other lawyers to join your team when you were starting your own firm and then getting people to engage with the vision of other startups.
Getting them to accept my bullshit, specious legal arguments in front of them, it helps to tell when people are telling a story with passion versus the people are just posing in bullshit. When it comes to entrepreneurs and pitching, there are the big picture things I am looking for and then the micro. The big picture, I’m looking for that compelling visionary that truly believes that they’re doing something bigger with this company. When I say something bigger, “I don’t want to sell more loans. What I’m trying to do is sell for the financial security for families everywhere because their incumbent banks won’t take care of them.” I need people to see something bigger and I need them to communicate it and tell that story in a compelling way.
That storytelling capability, I need to know that they’re exceptional at because they need to be able to inspire people to come work for them because I invest at the earliest stage of startups. I have the seed and Series A. These companies go through amazing ups and downs. They’ll face death and go out of business almost on a monthly basis. Unless you are that inspiring leader that can keep people going in the good times and bad, you’re not going to be able to do that. It starts with how well can you pitch. Not only do they need to be convincing me and their employees and their partners, but they’ve also got to convince the later stage investors. They’re going to be the type of person that can tell a compelling story to them. Get those people to part with their funds and invest in the companies, and give them the understanding that this is an incredibly competitive business on both sides. Both with VCs like myself trying to get deals, but also entrepreneurs pitching venture capitalists.
There are hundreds and thousands of deals we’re looking at. What is it that’s going to help them stand out and are they able to tell that story? Storytelling is a critical part of things. On the more tactical side, what I look for in every pitch and entrepreneurs are actually really good at doing this, they’re actually pretty blatant about it. I want to see an unfair competitive advantage. “Why are you going to win versus everybody else?” Tell me, “Why you? Why this company? Why this team? Why?” Unless they can articulate that, then I know they’re not really going to have what it takes to get through. There are so many deals, so many opportunities, so many people chasing financial services or banks or this and that and the other consumers.
Some of that unfair advantage could be a distribution channel. It could be a technology architecture. It could be the team itself in their relationships. It could be their approach. Something has to be there. I invested in Coinbase back in 2014. Those guys were really clear. Fred Ehrsam was like, “Here’s my competitive advantage. We have the best UI. We have more people. We are the biggest Bitcoin company in the world right now. We have the power law of scale on our side and then here’s our roadmap of how we’re going to take that and expand it.” It was clear. They did have an unfair competitive advantage at that point.
I love that you spelled out what the unfair competitive advantages are because so many people will think, “Is this one or is that not one?” It can be something as basic as a distribution channel. A lot of people have Uber on their phone, maybe they’ll do one other one like Lyft, but they’re probably not going to do a lot of other apps. That’s a distribution channel example. When you talk about the relationships that the team has, I think that’s a really interesting angle to take a look at. A lot of people just assume that all teams have great relationships and that’s not the case. Especially if you’ve got really great advisors who also have great relationships who was just part of your team to not overlook.
Pitch Secrets: I’m getting people to engage with the vision of other startups.
Through that storytelling, are they able to bring on great advisors? Through that storytelling, are they able to keep the relationships they have? We just invested in a company, it hasn’t been announced yet. It’s in the legal tax space, bringing automation to the legal field. This founder, this is the second time he’s doing something in that space. He’s got connections throughout the industry. It’s not exactly what he did before, but similar. His people on his team, they worked with him in the past. Then when we mapped the marketplace as to where his technology fits and where it’s going to go and what is his distribution channels, the people he’s going to rely on are the CMOs, the CTOs, the EVP of sales and distribution. All these were major channel partners that he’s going to rely on to go to market. You map it out, you see it and there’s the unfair competitive advantage.
I love that you paint the picture that once you explain what your unfair competitive advantage is, then here’s the roadmap of how we’re going to use that. It’s the next step of connecting the dots for people to really understand it. Sometimes an unfair competitive advantage can be traction that the competitors don’t have. It could be the technology, but also even if it’s just something that is so complex and needs a lot of SCC requirements around it and you figured out how to do that and that’s a barrier to entry to competitors, any of that is considered an unfair competition.
It can even be your subject matter expertise. There’s a company we invested in that I’m on the board of, Clearcover. It’s championing the concept of incidental insurance. I’ve been in insurance and Fintech for a while and everybody comes in to pitch with, “Incumbents are slow. They’re stupid. They don’t have the technology. It’s a huge market and I’m going to win.” Kyle Nakatsuji, on the other hand, has been in insurance for ten plus years. We walked through the entire regulatory roadmap of how he’s going to get his products approved in each of the 50 states. How he’s going to establish the laws of adjustment expense ratios. How is he going to run the rate combined? What is going to be his underwriting factors? His unfair advantage is one, he’s an awesome entrepreneur. Two, he goes deeper on this space than anybody else out there.
Here’s another important qualitative aspect because at the early stage, it’s truly a qualitative game. You’re betting on the non-tangibles because it’s early. We all think we know where these companies are going to go, but at the end of the day you don’t know how the market’s going to react, competitors, regulations, anything like that. For me, when I’m looking for an entrepreneur, you need to see that level of grit. There’s got to be that hustle, that grind and grit because despite what you read in WIRED and TechCrunch and everything else, startups are not fun and glamour. You’re in the trenches biting it. Are these the type of people that at the first sign of difficulty, are they going to turn? Are they going to give up?
[bctt tweet=”Can you tell a great story when you pitch?” username=”John_Livesay”]
I’m always looking for those people that are hustlers, they’re grinders. Are they going to grind it out no matter what? Are they going to see what’s going on in the market and see what’s going on, make the necessary pivots, and also hold their ground when it’s time to maintain those visions? The entrepreneurs, that it was too easy for them or they have layups or they were spoon fed a bunch of opportunities. They look great on paper but again and again, you can stand back and just watch flame out after flame out. We’ll always bet on those grinders and those hustlers that are able to articulate their unfair competitive advantage and can tell a great story.
Especially for you and your background, that makes a lot of sense. You had to be scrappy and not be spoon-fed to get to where you are so you can appreciate that in other people.
Generally, if something turns off an investor in someone’s background, those are usually the things that turn me on like, “What do you mean you’re waiting tables for three years in Brooklyn?” He was doing that to pay back student loans while he figures out this business plan. I’m like, “I’m good with that. That’s what I want to see.” “What do you mean you took two years off between high school and college?” He was selling Cutco Knives in order to pay the bills to help his mom. It doesn’t have to be about dire straits. We have people like, “Yes, I want to pursue my dream of becoming a musical theater actor in New York. I went after it and I realized after two years, I wasn’t that good at it. I went back, got a part-time job, got my MBA and dropped out of there because I thought this was wrong with financial services. I thought I’d go after this untapped market.”
Let’s change gears a little bit and talk about what’s happening in the blockchain since you said you were one of the early investors in Coinbase. I see a lot of investors who are Angel investors of the Seed round or a Series A saying, “ICOs and blockchain stuff are really not our business model, yet we want to get into it but we don’t know how to make it work.” I’m fascinated that you’ve figured out a methodology. Is it a different criterion? How does that all work for you? You’re typically not getting equity in ICOs, you’re getting tokens.
I watched the first craze and bust happened from 1999 to 2000. Then I watched it happen again in 2008 both as an investor as well as an operator. When I see technology that infatuates me at its most nascent stages, I still go back to the very fundamentals. Blockchain itself stepped away from the technology. Not only is it a new technology that enables both incredible things to happen across lots of different aspects of life, but if you’re going to sell through and around anyone, the regulated industries or to larger enterprises, it’s a completely different way for them to do business. When I’m looking at those teams that are getting into it, I keep going back to those fundamentals. Is this the team that has what it takes to change the way an entire industry operates?
If you think about the biggest enterprise sales that are out there, like when Oracle went after their competitors, when IBM tried to sell this, large enterprise sales are incredibly hard to do. That’s just when you’re changing and swapping out technologies. These companies and these product pioneers and their CTOs and the CIOs, they’re all doing business the same, just with different technologies and supposedly technology is supposed to get some lift efficiency. With blockchain technologies, you’re going to change the entire way they do things. You’re going to take out an entire floor of securities traders and replacing them with smart contracts. You better be the best salesperson, the storyteller in the world to get them to do that. Don’t give me like this bullshit of, “We’ll do a pilot. I’ve got a pilot with everybody and they all paid me fourteen cents for a pilot but I’m in everyone’s innovation lab.”
When are you going to see production? Are they even talking to the people that can put you in a production? My point is the people that are going to the blockchain, that we’re going to bet on, are the ones that understand their industry that they’re going into and have that ability to tell the story that can change the way the whole industry works. Those people are few and far in between. The men and women that are doing that, they’re going to be the next Steve Jobs, the next Bezos, the next Elon Musk, the next Eric Lefkofsky, the next Brad Keywell. They’re going to be those special entrepreneurs that can do the unthinkable. It’s just not going to be like, “I wrote a white paper and here’s my use case. Here are all my coins. I’m going to keep 20% for myself and I’m going to sell the rest out.”
[bctt tweet=”Sometimes, an unfair competitive advantage can be a traction that the competitors don’t have.” username=”John_Livesay”]
To me, that’s not going to do it. That’s not how I’m going to invest. I’m going to invest in the people and the companies. Yes, there could be some tokens but at the end of the day, it’s going to be the people and their businesses that I’m going to invest in. There are some interesting enablers going on out there for companies trying to do better trading of tokens and those types of new technologies. The true ones, they want to change how eCommerce works or change how consumer product goods or assets are tracked or securities are traded or insurance is put together. Those are the ones I’m looking for. What’s the next Coinbase going to be at the enterprise level? Coinbase has announced where they’re going with those types of things. It’s going to be those people like Fred Ehrsam that they knew that industry. That guy knew more about money transferring than anybody out there when talking to him. I was already in a financial services business with bankers and treasury offices that had been doing it for four decades. Fred knew it better than they did. It was awesome and so it was great.
Pitch Secrets: You had to be scrappy and not be spoon-fed to get to where you are.
The real takeaway I think is some people are really good at understanding their industry but they’re bad storytellers or vice versa. They might be a great storyteller but they don’t really have a competitive advantage and they don’t really have the expertise to make you feel like they could execute it. When you meet those teams, that’s why most deals are only funded 1%, you hear 2,500 pitches and fund 25. It’s because of that rare combination. It’s almost like a casting agent looking for the next big movie star. It’s like they’ve got to have that it factor, which is great storytelling and expertise combined. A lot of people who are technology-oriented are not really great storytellers. When you get those skills in one person, it is like this incredible hybrid that comes to life.
That’s a great point and that’s spot on. There are also teams that they know it like, “I’m the product person and this is my BD salesperson and we come together. I know the technology. She knows how to sell and build a team. Together, we’re an awesome combination.”
Which goes to the point of complementary skill sets, not the same skill set. It’s a big takeaway. Any last thoughts on recommendations for someone who is looking for Seed or Series A round in addition to all the great things you’ve said? Any last thoughts about being really be prepared for the Q&A in addition to the pitch or anything like that?
Just do your homework. To me, that speaks volume. If you’re talking to a Seed and Series A person, do they write Seed and Series A checks and what’s their definition of Seed and Series A? Is it the same as yours? Start at the most fundamental level. Are you talking to the right type of investor? Then from there, do they do the investments and the types of sectors or the sector of the industry that you’re in? Can you have the conversation with them? Look at the investments they’ve done. The reality is most investors are going to take pitches that come to them through warm introductions. Very rarely do you come in cold. Every now and then, some people do or even the ones that come through like a friend saying, “Will you please take this pitch?” “Fine. I’m happy to.”
[bctt tweet=”We know where these companies are going to go; but at the end of the day, you don’t know how the market’s going to react.” username=”John_Livesay”]
I do like to help people and talk with them and help even if I’m not going to invest. Those have been some of my best relationships. It’s like, “Do you understand what I’ve invested in? Please don’t come with the pitch on how you’re going to try to take out a company I’m on the board of that I lead umpteen millions of dollars in investments in.” Know that you shouldn’t be pitching me if that’s the story. Do your homework on the investor. Know what they invest in. Know how they invest. Know what their style is and know what their track record is so you can understand if you should be in front of them in the first place.
Since you brought it up, I’m sure that everyone is going, “Don’t let him go without answering this one question.” What do you define Seed Round from and where do you think Series A starts because it’s all blurred these days? Is Seed Round $1 million and under for you? What are your parameters?
At the Seed, I’m going to invest anywhere from $500,000 to $1.5 million and to me Seed Rounds are priced anywhere from a $4 million to maybe an $8 million to $10 million. If it’s going up near $8 million, that’s going to be a special type that has some unbelievable traction. It’s just that they took a while to take some outside capital. We still consider A as a traditional A. It’s $5 million to $12 million raise on an evaluation that somewhere around there, they’re going to give up 20% to 30% of the company.
Pitch Secrets: A lot of people who are technology-oriented are not really good storytellers. So when we get those skills in one person, it is like this incredible hybrid that comes to life.
We’re not the type of firm that’s going to take part in a $40 million Series A investment. It’s just doesn’t make sense. We’re fortunate enough that Lightbank is a top performing venture capital firm, one of the top twelve results. When you measure us against our top decile, it’s because we stayed disciplined in the evaluation and we stayed disciplined in our approach. At the Seed stage, I just want to see people that have done the work and have a model that makes sense. It’s mostly hypothetical and notional at that point because you’re maybe not a marketer who just got the supplications. Show me that you’ve done the work, that you’ve got a reasonable financing plan, a reasonable strategic go-to market, how are you going to get the product market fit, and then how you’re going to get to scale from there. We’re looking for a founder-product fit and then just try to get the product-market fit and then it’s scaling out from there.
Thanks so much for sharing your story, your insights, and most importantly the kinds of people that you’re looking for. Now, we have a roadmap. For our audience, it’s much better prepared on how to tell a story, have your competitive advantage and really know who you’re talking to and do your homework. Thanks again, Vic.
It’s my pleasure.
Links Mentioned:
Wanna Host Your Own Podcast?
Click here to see how my friends at Brandcasting You can help
Get your FREE copy of John’s latest eBook Getting To Yes now!
John Livesay, The Pitch Whisperer
Share The Show
Did you enjoy the show? I’d love it if you subscribed today and left us a 5-star review!
-
- Click this link
- Click on the ‘Subscribe’ button below the artwork
- Go to the ‘Ratings and Reviews’ section
- Click on ‘Write a Review’