Start-up Pitch Competitions vs. Real Business Discussions


From the desk of Bob Bridge: 

I recently have attended two Demo Days, which were the final events of multi-week accelerator programs. The start-up teams were well prepared and polished as they gave highly motivational and somewhat theatrical three-minute Demo pitches. At one of the events, up-beat rock music blared as each successive speaker rushed onto stage with a huge smile and excitedly made eye contact with as many in the audience as possible. Their businesses all sounded so high-energy and wonderful!

One of the Demo-day events also allowed investors to have ten-minute, private one-on-one meetings with the companies prior to the demo-day pitches. At these meetings there were no theatrics, only open and frank discussions about the status of the business, their successes to date and the challenges they face. These meetings were substantial and helpful.

It was interesting to me that in many cases, for a given company, it felt like a different company had been in the one-on-one and in the demo pitches. The demo pitches glossed over the real-world challenges and risk factors. 

I have the same reaction to business plan competitions for university teams. Well-rehearsed theater, with only a partial connection with reality.

an Angel Network that is not just about investing!

The Southwest Angel Network seeks to make a return for investors while helping social-impact startups address significant societal problems.

But we are more than just about investing. We also look for opportunities to advance the social-good in our community.

Recently members of the angel network participated as mentors in a high-school entrepreneurship competition sponsored by the Greater Austin Hispanic Chamber of Commerce. The Chamber ran the program at five diverse Austin high-schools. Our angels mentored eight teams at Akins High School. The winning Akins team advanced to the city-wide competition.

All five finalist teams (shown below) did a great job.

First place was won by three sophomores from Reagan High.  They were amazing with their plan for a company that addresses unmet needs of the Austin’s Hispanic community. We have invited the Reagan team to repeat their pitch at the next evening pitch event of the Southwest Angel Network, alongside three social-impact start-ups.

It will be great evening for the angels, for the Reagan team and the Austin community.

Validating the Market for Your Start-up Company’s Product or Service

From the desk of Bob Bridge:  

Scaling a business is all about profitability. There can no profits without revenue. There can be no revenue without customers. There can be no customers if you don’t solve problems that customers care about.

A real-life example: a university team invented a new type of catheter that would dramatically reduce the rate of urinary infections in patients. Doctors loved the idea, as did the nurses, patients and patients’ families. These people all validated that the new catheter provided great value and benefit. But it turned out that these highly-knowledgeable people were not the customer. Somewhere in the process of doing market validation the team discovered that the actual customer, who actually made catheter purchase decisions, was most often a purchasing clerk who was told to keep the supply cabinet stocked and to stay within the Medicaid reimbursement schedule. The new technology was more expensive than Medicaid would reimburse. The price point caused the clerk a problem rather than solving a problem. The team recognized that their technology would never gain wide market acceptance, and so they team decided not to launch a company.

Said another way, one of the biggest slams investors can make against an early stage company is to say that the company has “created innovative technology or service that now in search of a market”.

A much more promising approach is to first become the world’s expert on a customer problem, and then apply technology to solve that problem.

How do you go about becoming a world’s expert on a customer problem? There is no magic here, just hard work. Simply, get in front of 50 to 100 potential customers and understand their problems. With that number of interviews, you should gain a nuanced understanding of the problem, and understand that problem better than anyone else.

Who is a customer?  Someone with both a big problem and a budget they have the authority to apply to solving the problem.

What is a big problem? A problem that keeps a person awake at night with worry, or a problem when solved will get the person promoted. If your company can uniquely address those kinds of pains or gains, the person should be willing to write you a check (again, if they have the authority to allocate funds).

Nice-to-have or incrementally-better rarely motivates a customer to make a commitment to you. Especially since changing vendors can be risky or a big hassle.

And the customer is an individual. Your customer is not a group, like an engineering department, or a company, or an agency. These types of entities don’t decide to spend money with you. An individual with a name and a desk and a picture of their family on their desk can decide to spend money with you. When you find enough of these individuals willing to write you a check, then you have validated the market need and size.

In complex B2B sales environments there may be a variety of people influencing the purchase decision. But ultimately one individual makes the final decision. You need to interview that person.

When you interview the person, it is not productive to start off by talking about your cool product or technology and then asking the customer if they think your baby is pretty or ugly. No one wants to tell you that your baby is ugly.

And don’t ask about their opinions. You don’t care about their opinion. Opinions don’t buy products or services. Solving pain sells products and services

And don’t talk about the features of your product or service. No one buys features. They pay when your offering beneficially takes away their pain.

The more productive way to approach the customers is to start off by mentioning the general problems area that you are interested in, and then get the interviewee to talk about the pains they have in that general area.

Spend 80% of your time listening and only 20% of the time talking.

At the end of the conversation, if you have successfully identified a pain that you can solve, you can summarize your product or service offering, and ask how much they are willing and able to pay for a solution.

Good hunting!

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