How to Present to Investors

[How to Present to Investors]

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| Want to start a startup? Get funded by
Y Combinator. |

August 2006, rev. April 2007, September 2010

In a few days it will be Demo Day, when the startups we funded
this summer present to investors. Y Combinator funds startups twice
a year, in January and June. Ten weeks later we invite all the
investors we know to hear them present what they've built so far.

Ten weeks is not much time. The average startup probably doesn't
have much to show for itself after ten weeks. But the average
startup fails. When you look at the ones that went on to do great
things, you find a lot that began with someone pounding out a
prototype in a week or two of nonstop work. Startups are a
counterexample to the rule that haste makes waste.

(Too much money seems to be as bad for startups as too much time,
so we don't give them much money either.)

A week before Demo Day, we have a dress rehearsal called Rehearsal Day.
At other Y Combinator events we allow outside guests, but not at
Rehearsal Day. No one except the other founders gets to see the rehearsals.

The presentations on Rehearsal Day are often pretty rough. But this is
to be expected. We try to pick founders who are good at building
things, not ones who are slick presenters. Some of the founders
are just out of college, or even still in it, and have never spoken
to a group of people they didn't already know.

So we concentrate on the basics. On Demo Day each startup will
only get ten minutes, so we encourage them to focus on just two
goals: (a) explain what you're doing, and (b) explain why users
will want it.

That might sound easy, but it's not when the speakers have no
experience presenting, and they're explaining technical matters to
an audience that's mostly non-technical.

This situation is constantly repeated when startups present to
investors: people who are bad at explaining, talking to people who
are bad at understanding. Practically every successful startup,
including stars like Google, presented at some point to investors
who didn't get it and turned them down. Was it because the founders
were bad at presenting, or because the investors were obtuse? It's
probably always some of both.

At the most recent Rehearsal Day, we four Y Combinator partners found
ourselves saying a lot of the same things we said at the last two.
So at dinner afterward we collected all our tips about presenting
to investors. Most startups face similar challenges, so we hope
these will be useful to a wider audience.

1. Explain what you're doing.

Investors' main question when judging a very early startup is whether
you've made a compelling product. Before they can judge whether
you've built a good x, they have to understand what kind of x you've
built. They will get very frustrated if instead of telling them
what you do, you make them sit through some kind of preamble.

Say what you're doing as soon as possible, preferably in the first
sentence. "We're Jeff and Bob and we've built an easy to use web-based
database. Now we'll show it to you and explain why people need
this."

If you're a great public speaker you may be able to violate this
rule. Last year one founder spent the whole first half of his talk
on a fascinating analysis of the limits of the conventional desktop
metaphor. He got away with it, but unless you're a captivating
speaker, which most hackers aren't, it's better to play it safe.

2. Get rapidly to demo.

*This section is now obsolete for YC founders presenting
at Demo Day, because Demo Day presentations are now so short
that they rarely include much if any demo. They seem to work
just as well without, however, which makes me think I was
wrong to emphasize demos so much before.*

A demo explains what you've made more effectively than any verbal
description. The only thing worth talking about first is the problem
you're trying to solve and why it's important. But don't spend
more than a tenth of your time on that. Then demo.

When you demo, don't run through a catalog of features. Instead
start with the problem you're solving, and then show how your product
solves it. Show features in an order driven by some kind of purpose,
rather than the order in which they happen to appear on the screen.

If you're demoing something web-based, assume that the network
connection will mysteriously die 30 seconds into your presentation,
and come prepared with a copy of the server software running on
your laptop.

3. Better a narrow description than a vague one.

One reason founders resist describing their projects concisely is
that, at this early stage, there are all kinds of possibilities.
The most concise descriptions seem misleadingly narrow. So for
example a group that has built an easy web-based database might
resist calling their applicaton that, because it could be so much
more. In fact, it could be anything...

The problem is, as you approach (in the calculus sense) a description
of something that could be anything, the content of your description
approaches zero. If you describe your web-based database as "a
system to allow people to collaboratively leverage the value of
information," it will go in one investor ear and out the other.
They'll just discard that sentence as meaningless boilerplate, and
hope, with increasing impatience, that in the next sentence you'll
actually explain what you've made.

Your primary goal is not to describe everything your system might
one day become, but simply to convince investors you're worth talking
to further. So approach this like an algorithm that gets the right
answer by successive approximations. Begin with a description
that's gripping but perhaps overly narrow, then flesh it out to the
extent you can. It's the same principle as incremental development:
start with a simple prototype, then add features, but at every point
have working code. In this case, "working code" means a working
description in the investor's head.

4. Don't talk and drive.

Have one person talk while another uses the computer. If the same
person does both, they'll inevitably mumble downwards at the computer
screen instead of talking clearly at the audience.

As long as you're standing near the audience and looking at them,
politeness (and habit) compel them to pay attention to you. Once
you stop looking at them to fuss with something on your computer,
their minds drift off to the errands they have to run later.

5. Don't talk about secondary matters at length.

If you only have a few minutes, spend them explaining what your
product does and why it's great. Second order issues like competitors
or resumes should be single slides you go through quickly at the
end. If you have impressive resumes, just flash them on the screen
for 15 seconds and say a few words. For competitors, list the top
3 and explain in one sentence each what they lack
that you have. And put this kind of thing at the end, after you've
made it clear what you've built.

6. Don't get too deeply into business models.

It's good to talk about how you plan to make money, but mainly
because it shows you care about that and have thought about it.
Don't go into detail about your business model, because (a) that's
not what smart investors care about in a brief presentation, and
(b) any business model you have at this point is probably wrong
anyway.

Recently a VC who came to speak at Y Combinator talked about a
company he just invested in. He said their business model was wrong
and would probably change three times before they got it right.
The founders were experienced guys who'd done startups before and
who'd just succeeded in getting millions from one of the top VC
firms, and even their business model was crap. (And yet he invested
anyway, because he expected it to be crap at this stage.)

[...]

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