Last week, Bplans members had the opportunity to attend our free webinar, “14 Tips on How to Pitch and Get Funded.” Our featured speaker was Caroline Cummings, the VP of Business Development at Palo Alto Software.
As the former co-founder and CEO of two technology companies, Caroline has experienced both start-up failures and successes, and has raised close to $1 million in investment capital. She is regularly invited to participate as a judge for business plan competitions, as well as speak on topics including entrepreneurship, angel investing, social media, and authentic self promotion.
Needless to say, the webinar was absolutely packed with great tips on what it takes to pitch your business so that investors take notice. The full audio and slide deck are free to watch above, and the full transcript can be read below:
14 Tips on How to Pitch and Get Funded:
Caroline Cummings: I first want to talk a little bit about LivePlan. Not only because it’s a product that Bplans and Palo Alto software makes, but because before I joined the company, I used LivePlan to pitch and raise my investment capital. It was really great because when I got funded I was able to invite my investors in, I was able to invite my board members in to look at my business plan, to look at my pitch, to make comments on my financials, and because it’s in the cloud, you can track and plan your business from anywhere.
At the end of this webinar, for those who stay on we will be sending out an offer that you can get started using LivePlan and try it out for under $10. It’s normally $20 a month, so it’s a really affordable tool for you to do live business planning and tracking, and put a really compelling pitch together, and then invite investors in, or lenders in, or family members in, or mentors in to help you as you craft your pitch.
As we jump in here I want to first talk about the purpose of the pitch. In the purpose of the pitch, you really want your audience, whoever it might be that you’re pitching to, to look like this cute little frog. You want them peering out, you want their neck sticking out, you want their eyes bulging. You want them on the edge of their seat wanting to know more.
Most of the time you will get 10 minutes to pitch if you are going to speak to investors. You should also have a thirty second pitch ready and rehearsed, a two minute, a five minute, a 10 minute, and if you’re lucky enough a 20 minute, but know that the purpose is not to blah out your entire business plan. It’s to highlight some of the key parts of your opportunity and what makes it so amazing that whoever it is that you’re talking to, whether it’s a bank, or an investor, or a family member, or a potential business partner, that they are on the edge of their seat and they ask for your full plan, and they want to know more. That’s really the purpose of the pitch.
Then it’s also important to know that you’re delivering a performance need, and that means you need to have your pitch rehearsed. The worst thing I’ve ever done is gone over a pitch. Someone says give me ten minutes, and the ten minute mark is coming up and I know I still have two more minutes to go. That’s not good. It also shows and communicates to your audience that you’re not being respectful of their time.
You want to make sure you rehearse, and as I mentioned have it rehearsed in those different time frames. You never know when you’re going to get an opportunity to deliver your pitch. I’ve pitched in taxi cabs, I’ve pitched on street corners, in board rooms, on stage in front of 400 angel investors.
The opportunity when I got to pitch on stage in front of 400 angel investors was for the largest angel investor conference in the Pacific northwest called Angel Oregon, and we competed with 60 other companies. It got dwindled down to seven or eight companies who actually pitched and only three got funded and we were one of the three who got funded. It was because we were extremely rehearsed, we were very disciplined, and the rest of the tips that I’m going to share for you today are how I got the funding, and how we raised the funding.
There’s some key assumptions first before you actually get up and deliver your pitch. One is that you’ve written a business plan. Now I don’t mean the hundred page business plan that we used to write back in the day. I’m talking about a really compelling executive summary, and you can even do these in one page. I know that one of my colleagues on the line is going to post the link to a great article about how to write a good one-page business plan.
You should have a good solid executive summary, you should have full financials, and that means a projected balance sheet, P&L and cash flow. Now I’m actually judging business plan competitions for large universities, and even MBA students, and I can’t tell you how many times I look at really great ideas, and key parts of their business plan are missing. There’s the cash flow missing, so how can I really assess your business if you don’t have full financials?
When I say written a business plan, I mean a comprehensive executive summary with full financials and a quality pitch deck. One that you can deliver within ten minutes, and for those who are familiar Guy Kawasaki, he has this great ten, twenty, thirty PowerPoint rule really where you have ten slides, twenty minutes to deliver it in a thirty point font. You want to show compelling images and little bits of text, because you really want them to be like that frog I showed you earlier. They’re just so excited about the performance that you’re delivering.
Again, remember you’re the CEOs of your company. That’s who the investors want to hear from. They want to hear from you. Whether you like it or not, CEO is also synonymous with salesperson. When they fund you, they know that they have to believe that you can also go out and sell the product. If you can’t sell your pitch and sell your product, that’s going to be a little bit harder to raise money.
Another assumption is that you’ve actually conducted due diligence on your own business, and these are the areas of your team, financials, your competition, your IP, market trends, because the best pitches I’ve ever delivered were when investors were raising their hands and asking me questions about, “How is your IP protected?” Or, “How do you know that your growth is going to, in year three, going to spike up by 50%?” Make sure you’ve done the due diligence on all of these areas of your business. Pretend that you are the investor. What areas when you look under the hood to you are, “Hmm I’m not sure if I can back that up.” You better be able to back everything up.
Of course have mentors and advisors. This is my biggest thing really, is having solid mentors. It’s really my biggest passion other than entrepreneurship, is mentoring. I actually use LivePlan and I mentor entrepreneurs all over the world. I have some entrepreneurs who are in Gaza, who are in Cairo, who are in New Jersey, and I’m in Oregon. That’s the glory of using LivePlan being in the cloud, because they invite me into their business plan and their pitch, and I can review it for them, and I can post comments. They can then get their pitch and their plan ready to share. Make sure you have mentors and advisors. These are just basically all the assumptions before you even get up and deliver your pitch.
Now you want to hit the stage strong, and by stage it could be you’re delivering through Skype. You could be literally on a stage, you could be in a room with one person, you could be at a bank, you could be on stage, it doesn’t matter. You have to make sure that you hit the stage strong. You share that you’ve got rock star talents, whatever that might be, don’t be afraid to brag about yourself, don’t be afraid to talk about your team.
This is who they’re investing in, so I’ve had a lot of investors tell me, “Yeah, yeah, yeah, that’s great, your idea is awesome, but tell me about your team, because we invest in people first and ideas second.” You want to find ways to spark their interest, and then you want to address the problem. You basically have one minute to do this. You’ll see in the top right part of the screen, I’m giving you the amount of time that I used to use to break up the ten minutes to deliver this pitch. When you are addressing the problem in the market, you want to tell that in the format of a compelling story.
Don’t get up and say, “My product is the best, my cupcakes are awesome, my app is the coolest, my electric car is the most eco-friendly.” That might be true and hopefully that is true, but that’s not how you start your pitch. You start your pitch off by telling a story, and that’s really how you establish credibility as well. If you don’t have any existing customers yet talk about perspective customers.
Talk about how your product or service is solving a problem that they have, and tell it in a very compelling way. Are you saving them time? Are you saving lives? Are you saving them money? What is it that you’re doing, and make sure you have that part rehearsed really well, because at the end of the pitch, most people aren’t going to remember all the tech speak or the humbo jumbo, what they’re going to remember are the stories.
Now you can move into the solution. Now you actually have a minute and a half to talk about why is your product or your service so unique. Don’t geek out here, don’t talk about … I mean I’ve heard pitches from bio science, biotech companies, and I’ve even heard pitches from food companies, and they start telling me about all kinds of complicated ingredients, or they’re using acronyms, and the last thing you want to do is have your audience looking confused, and they’re not sure what it is that you’re talking about.
Make sure that before you actually go and pitch for funding, that you’ve done this and rehearsed this at least 40, 50 times, and you’ve delivered it to different people from different backgrounds, because you’re so close to it that you want to make sure that when you’re describing how awesome and unique your product is, that other people get it, and ask them to repeat it back to you.
I did this with my mom. I would tell her what I’m doing and ask her to repeat it back to me. I did this with investors who were venture capitalists who had funded companies in the hundreds of millions and asked them to repeat it back to me. It’s really interesting when you try that because sometimes you might be surprised on how you’re describing your product isn’t really how you intended.
Next is your successes, so a lot people struggle in this area, and as entrepreneurs we have lots of successes, even if it’s before you started your company. This is also called the traction slide. I’ve pitched to investors and they say, “Okay everything sounds good, but what’s your traction?” What they mean is what have you done so far? Have you gotten letters of intent signed? Have you gotten some interesting media? Is there a barrier that you’ve overcome? Are you applying for a patent?
This is where your mentors and advisors come in handy, because you may not know what you’ve done is a success, because it’s just part of your everyday business. Ask these people, in the three months or the three years, whatever it might be, or three days that I’ve started this company, what do you think is a key success point? Make sure you focus on that. Obviously you have thirty seconds; you can’t go through every one. Pinpoint a few that you think are really key.
In our first company we actually had a letter of intent signed by Toyota. We were going to have a Toyota hybrid ad, a Prius ad pop up. Now we were in basically beta mode, we were not launched live, we had a few hundred members who are helping us build the product, so it wasn’t like I was going to Toyota saying, “I have millions and millions of people,” and we weren’t going to charge them, but the fact that they were willing to sign a letter of intent, when I took that to investors that was huge credibility. Think about your successes.
Next are your target markets, so you want to highlight any key research that you’ve done. This is definitely a weak area of most pitches and business plans that I see. That’s because most people say, “Everybody in X or Y is my market.” It’s really hard for a company to say that. Even if it might be true, which is very rare, you want to make sure you break down your market, particularly when you’re doing a pitch. Who are the first ten (which maybe that’s your beta market)? Who are the first fifty or hundred? How are you going to get them?
It’s also known as TAM SAM SOM. I just said don’t talk acronyms when you’re delivering presentations, but in this case, there’s an article that’s been written and that link will also be sent out to you guys, on the importance of breaking down your total addressable market, your total available market, your segmented attainable market, and then your segmented obtainable market. It really just starts to break it down so if your total available market is a million, what is that beta market? Is it a hundred? Is it a thousand? Then how are you going to reach them, and how do you know that they’re your market? How you know is you have to go out and actually speak to people.
You have to go out and talk to people who might be interested in your product or your service. If you actually have a product to give away, you want to see if you can actually put it in their hands.
Next is an example. Let’s think about Facebook, most people know Facebook, and when Facebook first launched, these were the segments they hit. Initially they went for Harvard and Stanford. They went then for Ivy League, then colleges and universities, then they actually started stealing mind share away from Myspace. That’s when they started to pull away the 14-34 year olds from Myspace. Then there’s businesses. We actually advertise on Facebook, and it works really well.
They have a great platform called FBX, and we can do re-targeting on there, and it works really well. Now the fastest growing demographic on Facebook is actually women over the age of 55, which in the United States it’s a segment that actually controls a lot of the money and the spending in households. If you have a product where you’re trying to reach this demographic, you want to be on Facebook. The point of this slide is I want you to think about how you’re going to segment out your markets, and how you’re going to acquire those markets.
That moves into the customer acquisition strategy. This includes again another acronym I’m going to share, CAC, the cost to acquire a customer, the customer acquisition cost. It might be difficult for you to calculate this, but you can do research. You can find out how other similar companies and products or services are doing this. Sometimes you have to trust your gut.
As an entrepreneur I would say 50/50. You have 50% of what you do is your gut, and the other 50 is research, fact. You want to make sure that you understand, does it cost $10 to get a customer? If you’re a physical brick and mortar store, what does it cost to get someone in the door? Are you doing advertising? What does that look like? If you’re online, it’s a little bit easier to track that through pay per click campaigns and things like that, because there’s a lot of analytics behind that so that you can track what that costs.
Know you have thirty seconds to talk about how you’re going to acquire your customers. You can’t just say, “My customers are X,” you also have to say, “It’s going to cost Y to acquire them,” so that in your financials you’re representing that.
Next you want to hop into your competition, and this is also a weak area that I see in pitches, is don’t ever say, “We have no competition.” Everybody has competition, doesn’t matter who you are. You may not have exact direct competition, but you have indirect. For example in our first company, there was no one else doing social shopping like we were doing for our market, but there was a social shopping site that was targeted for women who liked fashion. It was a very different audience.
We were talking about eco-friendly products, but these were women who liked to socially shop so we had, they were an indirect competitor, we had to figure out how are we going to take their time away from that website, and come over to our website? What percentage of them would be willing to come over? This is where you’re going to clearly communicate the value proposition, and here’s a fun way to do this. I use Craigslist as an example.
Craigslist has been around for a while, and the biggest competitor was the local newspaper when they first came out. If you wanted to advertise that you’re selling something, or you’re looking for a job, you want to put a job posting up there. What you want to do is get a whiteboard and across the top is you want to list out all the things that you do. Knowing that your competitors are going to do some of them, and that’s okay.
Then you want to list below yourself, in this case Craigslist, all of your competitors. This is just a simple example to show for the sake of how to do this competitive matrix. Then you’re going to start filling in checkboxes, or X’s, or something across the top row. You want to make sure that all of the items you list across the top, you can check off. If you can’t check one off then don’t put it on there. Then you want to start checking off what your local newspaper can do. In this case, the local newspaper just has the city local focus.
What’s great about this exercise is those items that are listed across the top now become your value proposition. They now become your talking points in what you will use in your marketing materials. This is a really fun exercise to do and it’s also a great document I would turn over to investors and say, “Look here, I’ve done due diligence on my competition, check this out,” and they come back and say, “Maybe you missed this one or that one,” which is okay, at least they know that you’re digging and you’re doing due diligence so they don’t have to do as much work.
Now you’re going to move into your revenue model. You have a minute to talk about how you’re going to make money, who it comes from, and then have you done some market validation? This is, are you a brick and mortar? Are you a B to B? What kind of company are you? Are there some questions? Peter, I wanted to pause for just a moment, and see if there’s anything you wanted to ask at this point or if you want to save them until the end. You’re muted.
We can save them until the end. Okay, so now your revenue model, so this is—
Peter Thorsson: Yeah we’ve got one good question for you.
Caroline Cummings: Okay great go for it, Peter.
Peter Thorsson: We’ve got a good question that might come up later in the presentation. I wanted to make sure we got it out there, the idea of how does one find a good co-founder? How do you know whether that business partner is good for this pitching process? Where do you look? Where do you search for a co-founder who might help you with this pitch and planning process?
Caroline Cummings: That’s a great question, and it’s really important to have a co-founder. There’s another presentation I deliver on the top ten reasons startups fail, and the number one reason startups fail is because of the wrong team, and in my first company, we were not necessarily the right team.
You want to make sure you find someone who has complimentary skill sets. It’s rare that investors will invest in a company that’s all engineers, or all creative. You want to find a good mix, so start there. Start by thinking about what, and again you can whiteboard this. List out what are all the skills that you have, and then list what are the missing skills that you need to run this company? You’re going to have to find some mentors to help you, because you might be so close to it that you’re not seeing it.
Then you can go and join networking groups, depending on what town or city, or country you live in. Now entrepreneurship is the sexiest word on the planet, so a lot of people have startup weekends. There’s a lot of chambers of commerce. There’s non-profit organizations, and incubators, and accelerators, of like-minded people, and startup weekends are now global, and that’s a great place because everybody that goes there is interested in starting a business, and there’s usually a great mix of talent. That’s where, those are a few places that you can get started so hopefully that helps. Great.
Moving into your financial projections. This is the part that people hate the most, unless you’re a finance geek. Most people do not like putting their financials together because they think, “Where do I pull these numbers from?” I have no idea how much money I’m going to make in the first year. I don’t know what it’s going to cost. This is where you have to do some research. You have to do some due diligence. Most importantly you have to include your key assumptions, and have some research to back it up. If you’re sure … Peter I think you need to mute yourself again.
You want to explain those inflection points. I don’t know how many pitches and how many presentations I’ve seen where the financials look like a hockey stick, where it’s like it’s flat, flat, flat, and then it spikes up to like two million or two hundred million, and that might be true, and there are companies that grow that way, but you need to explain what is happening at that inflection point. Are you bringing on some investment capital? Are you landing a big sale? Are you doing an acquisition? Are you being joined together?
Those are some of the things that you want to make sure, and most importantly people think cash is king and you hear that all the time which is true, but really it’s assumptions are king. When you’re pitching, because you probably don’t have cash, it is all about the assumptions. What I mean, are your numbers behind your numbers?
If you say in year one I’m going to do one hundred thousand in sales or, a million in sales or whatever it might be. Why? Is it because you’re selling a certain number of products? Is it because there’s a certain number of people signing up on your website? Is it because you’re having a certain number of people walk into your store, and you’re assuming that out of every hundred people that come, three will buy?
Whatever that might be, that’s what important, is you have to figure out what are the numbers behind your numbers, so that when the due diligence is done, that you know that you can back up those numbers that you’re showing. Every model, it doesn’t matter what you are. Food, technology, bioscience, services, you need to know the metrics for your model. I’m going to share what the metrics are for a SAS business, which is software as a service, and that’s what we are here at LivePlan, so these are the things that we track on a daily basis.
Content marketing, and under content marketing we’re tracking uniques, time on site, bounce rates, open rates, click-through rates, conversion rates, these are the things that if we don’t know what these things are, we could end up in trouble. It’s how we put our financial projections together. The customer acquisition cost that I talked about. What is the lifetime value of a customer? We’re $20 a month. What is the lifetime value? How long are people staying? For your product how much money in the lifetime are you going to make out of that customer?
That’s going to help you put your financials together, and it’s also going to help because everybody loses customers, so in your model you have to be able to say what the retention rate is of that customer as well, and the churn rate. How many people are going to leave? Then referral rates and opt-out rates. This is what we track. These are the metrics for the SaaS model that we have.
Next is your team, and again you want to make sure that when you’re talking about your team, you’re not afraid to say and brag about what you’ve done. If you’ve raised money before, if you’ve won awards before, if you saved the company millions of dollars that you worked for. Know that, this goes back to the question earlier, what kind of co-founder? There’s really what kind of co-founder, and then where you find them, but where you find them can be a little bit harder, but know that every entrepreneur and every business owner rather fits in one of these areas.
You could be two or three of these, but I’ve never met someone who’s in all five of them. You’re either an “ideator,” an innovator, a starter, a grower or an “exiter.” I’m really the “ideator,” and the starter, and the grower. There’s a great fun story I like to tell about how I came up with these, and how a mentor of mine helped me come up with these. He’s a turnaround CEO, he also was an investor in my first company. After I sold my second company I went to him and I said, “Mike, let’s do a startup together,” and he laughed at me and he said, “Oh gosh I don’t have the stomach for startups,” he said, “I’m the ‘exiter,’ I’m the grower, so get your company to 3 million and I’ll help you take it to 30 million and 300 million.”
It was interesting to me, so we had this whole conversation about the type of people. He’s not the right person to start a company because he doesn’t have the stomach for it, that’s not where his skill set it. Even though I think he’d be good at it, it’s just not what he wants to do. Think about where you fall. Do you come up with all the ideas? Are you the person who actually is the innovator? You’re the engineer; you’re the person who creates the product or service. Are you the one who likes to start, or grow, or exit? Think about that. You will need all five of these in your business at some point.
Now your funding needs. I use this funny sort of homeless person holding a sign that says, “Brittany’s sister is having a baby, and I need $5 to buy her a nice gift,” and the reason that I like this is because when you talk about your funding needs, if you say I need half a million, or I need a hundred thousand, or whatever you need, ten thousand, ten million, you need to say: how much, what it’s for, and why? In this case we know that it’s because Brittany’s sister’s having a baby, and she needs $5 to buy a nice gift. Actually I might even ask more specifically, what is that nice gift?
You want to get as specific as possible. How much of that money is going to marketing? How much is going to building your product or your service and R&D? How much is going to sales? Whatever that might look like, you need to be able to break down the funding needs and how you’re going to spend that. You have thirty seconds to do that. Just real quick there’s still someone who’s not muted on the line just so that folks know that.
Great okay, so now you’ve got your exit strategy. If you are raising investment capital from angels or venture capitalists, typically they only make money when you have a … There’s a liquidity in that, which means that you sell or you get acquired or something. That’s when they make their money, okay? Of course you could set up dividends and all that that kind of stuff as well so they make their money, but you want to know what is your exit strategy? Include some comparables and an estimated timeline to exit.
For example in our first company, what was interesting is the competitor that I mentioned earlier who was indirect competition, that CEO ended up becoming my mentor, and he got his company acquired by Hearst Media for $40 million when he had no revenue. He had two million people visiting his site, but no revenue, but yet he sold for $40 million. I was able to work with him, and he did some due diligence on my financials, because we had a similar business model, and I was able to show this is a comparable for our exit strategy.
It really built a lot of credibility for the investors, because they were able to even call the CEO and talk to him about how he got acquired. Again we had a great idea. Obviously Pinterest came later, but we made a series of mistakes that I was able to then take those learnings into the next company. You need to be able to talk about your exit strategy. Now if you’re a small business, and you don’t really ever want to go big or sell, you still need to have an exit strategy. It might be that you are handing it over to someone in your family or family succession, but you need to think about that.
End on a high note. When you’re ending your presentation this is where you want to remind them why you’re a rock star, why your company and why your team is where they want to put their money, because the last thing that an investor ever wants to feel is they’re missing out on an opportunity.
There were investors in my second company who felt like they missed out. They said no, they didn’t invest, and then here we sell, and they came back and they said, “Ah man, I wished we would have gotten in.” Come up with, just like when you hit the stage strong, you want to leave the stage strong. You want to reiterate maybe three points from your pitch that are those powerful things. Maybe there’s a traction item, a success you want to highlight.
Maybe you already put in some of your own money. They love that. In my first company my business partner and I had put in $100,000, $50,000 each. They love that. It’s called skin in the game. They want to know so maybe there’s another investor who’s ready in our second company, if one group put in a half a million, another group was going to come behind them and put in another half a million. Say, “We’ve already got this group ready to put funding in; all we need is another partner. You guys are great because you have X, Y, and Z.” You want to remind them and you want to show them that you can sell, because again this is where you’re selling.
As we’re coming to the end, I also put a lot of what I’m sharing into an eBook on how to pitch and get funded, that everybody’s going to get for free that we will send out to you at the end of this presentation. I’m also very available on Twitter and social media. My hashtag, my twitter account is @iamcarolina, and you can also use @Bplans if you have questions. I do monitor them very closely; we do have a team of people here who monitor them.
We want to hear from you if you have successes about your pitch, let us know. We don’t have a service yet where we will review your pitches for you. I’d love for us to have that service, and we’re working on moving in that direction at some point, but right now we don’t have that, so please don’t ask me to do that. I’ve had a lot of people send me their pitches and ask for my feedback on that. I would love to be able to do that, particularly when there’s a couple thousand people who have signed up, it makes it a little bit harder.
I will get back to everybody who tweets me, and so I really want to make sure that I’m available, and that if you have some fun things to share with me. Maybe you have a quick question about a pitch, you can surely shoot that over to me, and that’s what’s great about the internet today. It doesn’t matter where you’re located, you can have contact with me and with Bplans as well. I want to remind everybody, and then we’ll open it up for some questions here in a moment.
I do want to remind everybody that we will send an email after this with links to some of the articles that I mentioned, to help you with writing a one-page business plan, and how to segment out your target market, the TAM, SAM and SOM. We’ll also send the link to these slides on our SlideShare account, and then give us about five to seven days to get the recording out, because we have to, we need to rasterize that and get that ready and posted for y’all, so that you can review the recording for those of you who want to just sort of go back and look at that. Now I’d like to open it up for some questions, so Peter or Jonathan, if there’s anything that you want me to address, now’s a good time.
Peter Thorsson: Sure, Caroline. We’ve got a few great questions here, I just wanted to kind of do them one by one. One question, we were talking about a ten minute pitch today, and someone was asking about other timeframes. How do you fit like a three, or five, or seven minute pitch? Do you try and use all the same material? Do you try and shorten it out? How would you address those other pitch timing formats?
Caroline Cummings: Yeah that’s also a really good question, because obviously you cannot go through all fourteen of these items in a thirty second pitch, or even in a two minute pitch. This is again where it’s important to have mentors. Deliver your ten minute pitch to them, and say, “If I only had thirty seconds or two minutes, what are the two or three points that were most compelling to you?”
Ask people, because they’ll tell you. They’ll say, “Oh wow, when you talked about having a letter of intent signed by Toyota, talk about that. When you talked about that you’ve already raised a half a million dollars in a prior company, talk about that. Or when you talked about that the patent is being filed,” whatever those items might be, or you got your first hundred customers, you got your first paying customer.
Whatever that might be, ask people around you, because again when you’re running a company, you’re never doing it alone, and you should never, never be an entrepreneur without mentors. I’ve had a lot of investors ask me, “Tell me who believes in you. Forget your product, forget your idea, forget your company, who believes in you?” It can’t be your mom or your dad, or your grandma; you have to find someone outside of your family who believes in you, because they may want to talk to them as well. They’ll also be able to help you figure out how to cut down your pitch. Those folks who are mentors and coaches.
Peter Thorsson: That’s great, Caroline, I hope that answers it, if not please feel free to ask other questions related to that in the sidebar or in the chat. One more question for you, we have a bunch of questions about the idea of validation. Market validation I think you mentioned a little bit in the TAM, SAM, SOM section, and Jonathan posted a link to that in the chat, but when it comes to markets, market sizes, or even financial projections, what kind of validations can these folks do, and what level of validation is reasonable for maybe a startup versus an up and running business?
Caroline Cummings: Good question, and it is one of the hardest areas, the market validation, and then the financial projections. Really those are the two toughest, and the most important. This is why we love the lean startup methodology. If folks don’t know what lean startup is you want to check out Eric Ries’ book, because he talks about customer validation, and also this is in the lean canvas model as well when it comes to shorter planning cycles. You want to go out and talk to people that you think would be interested in your product or service, or another good way is think about who your biggest competitors are, and find their customers, and go talk to them.
Now it’s hard to answer this question specifically because there’s so many different types of companies, maybe you’re a dentist starting a dental practice. Maybe you’re just two people doing an app, maybe you have a landscaping business. It’s so hard, depending on what market you’re in, but the most important thing is know you already have competitors, and they already have customers, so you want to find them, and you want to talk to them.
What we did in both of my companies, in my second company that was real estate so there were realtors, so that was easy. We could go and talk to realtors in person, we could talk to them online, find out where they hang out and maybe there’s some discussion groups and things. We would just ask them questions about the pain point that we thought we were solving in the marketplace.
Then you want to capture all that, and sometimes you can record interviews that you do. If you are a technology company, you can record some usability testing of a customer sitting actually using your product or using your website.
Capture that, so that’s part of your due diligence process when funders say, “Okay you’ve identified your beta market, we want to talk to a few of them. We want to find out what they think about what you’re doing, and the pain that you think going to help them solve,” so that’s some really good practical ways of working on that, because even in our first company we thought we had a market, but we didn’t, and we were able to then say, “You know what? We’re not going after that market. They don’t have enough money to be on our website. They’re interested, but they don’t have enough money,” so we couldn’t validate them as a market. It’s important to do that.
Peter Thorsson: That’s awesome, Caroline, thanks so much. We talked a little about the idea of finding business partners, people to work with. We’ve still got a few questions just about the idea you mentioned of finding mentors, and what types of mentors you might want to find. I wonder if you have any input, not just in the US, but also maybe in some other countries. Not sure if that’s too deep a question there, but maybe just a general talk about finding that right mentor or mentors for a business. That’d be great.
Caroline Cummings: Absolutely. First I want to say there’s a difference between a mentor and a coach. Coaches typically want to be paid. Mentors should never get paid, because if you’re paying a mentor, that’s now basically your professional coach that you have, or a professional mentor, and I know there are professional mentors out there, that’s not something that I have seen work really well. The best thing to do is, I went out and I found people who were successful, not necessarily even in the area that I was successful in, which that helps too, but just people who were CEOs of companies, and they have been here, done that. I would just take them out for coffee for 15, 20 minutes, and ask them questions.
Now how do you find them? Again, it depends on what your product is, what your service area is, and all the areas I mentioned before, the startup weekends are always taught by, they bring mentors in. I know because we here, our executive team and even Peter who is on our team, he goes, he’s a mentor. Go to places that already gather mentors. These accelerator programs, these incubator programs, universities, colleges. Don’t be afraid to make an ask.
The worst thing someone can say is no. When I was at a pharmaceutical company before I became an entrepreneur, when I first got hired, I thought, okay I was in the IT department. I want to find the woman in the highest rank in this company, and I’m going to contact her and ask her to be my mentor. You guys, there’s still some unmuting going on there.
What I did was I found out that the chief information officer was a woman in the company, and I called her assistant and I said I’d like to take her out for coffee and just pick her brain about how she got to where she was. I’m still connected to this woman, and she’s now the CTO of Disney, and so if you don’t make the ask, you’re never going to know. Just because you ask someone and they say yes, if it doesn’t work out, then that’s okay. You want to make sure that you’re respectful of their time, and you want to be specific about the ask that you want from them. Hopefully that helps. Peter, any other questions?
Peter Thorsson: I think we’ve got a bunch of specific ones that I think we want to follow up on maybe after the webinar. Little bit here, lots of ones that really deal with specifics of industry, and specifics of dollar amounts, so I don’t think we want to dive too deep into that kind of advice today. I think lots of great smaller questions, maybe if we have one more. Yeah, no, I think you’ve kind of covered a lot of these, so let’s … Maybe that’s good on the questions.
Caroline Cummings: Okay. Great, I just want to remind everybody to tweet us @iamcarolina, or at @Bplans, and we will get back to you. Just know that what you’re doing for the entrepreneurs who are already pitching, or thinking about pitching, and maybe you haven’t left your day job yet. Maybe you’re just wondering how am I going to get money? Whether it’s $10,000 or $10 million?
I want to let you know that it is a scary thing, and that’s the good news. If you’re not afraid, something’s wrong. I was interviewed before and asked, “What is the definition of an entrepreneur?” I really think it’s two things. One is making something out of nothing. Two is being comfortable being uncomfortable most of the time. That’s really where you get to see what you’re made of, when you push yourself out of your comfort zone.
Most people hate getting up and talking in front of people, they hate doing presentations, and I hated it in the beginning as well, and there are Toastmasters groups all over the world. There’s chapters of Toastmasters groups where you get to practice doing talks in front of people, and they critique you, and it’s uncomfortable, but it’s so valuable. It really builds your character, and it helps you feel comfortable and confident. People are looking at you so you need to rehearse and present, as I said, that you’re delivering a performance.
I just want to give everybody the kudos for taking the leap and doing it, and raising money. There is a lot of funding out there. There’s grant funding. There’s a lot of angel groups and venture groups all over the world who have funding. They’re just looking for the right team with the right idea, and solving the right pain in the marketplace. I want to wish you all the best of luck. I look forward to hearing from you over the years through our Twitter account, and I just wanted to say thank you all again.