Dan Martell - How To Pitch Your SaaS Startup To Investors

00:00:00.000 Yo, what's up, everybody?

00:00:01.560 Dan Martell here, serial entrepreneur, investor,

00:00:03.480 and creator of SaaS Academy, and in this video,

00:00:06.180 I'm going to teach you how to pitch investors.

00:00:09.500 Yes, this is a laptop.

00:00:11.140 It's not, I'm just going to throw this down for a second.

00:00:13.680 It's not that I just broke my laptop.

00:00:15.680 It's not about pushing your pitch on investors.

00:00:19.560 I'm going to teach you a wholly different framework

00:00:21.220 that's going to allow you to get investors to react positively,

00:00:24.000 to want to take the meeting, and very likely invest

00:00:27.300 in your company if you follow this structure.

00:00:29.160 And be sure to stay to the end where I share with you

00:00:31.420 an incredible training called the Fundraising Like a Pro

00:00:35.040 where I teach you the three phases of fundraising

00:00:37.260 to help you crush your next round of funding.

00:00:51.980 So I've been super lucky and blessed over the years

00:00:54.480 to have raised millions of dollars in venture capital

00:00:56.860 for my own companies as well as helped dozens of entrepreneurs

00:01:00.800 raise over $200 million in funding.

00:01:03.460 Now, that all being said, when I first got going,

00:01:07.340 I totally screwed everything up.

00:01:09.540 I still remember the first investor meeting ever.

00:01:12.200 I was sitting there in the back alley behind a coffee shop

00:01:15.240 in San Francisco.

00:01:16.380 I'm on, this is when the iPhone first launched.

00:01:19.280 We're on the blue, not even the Bluetooth headset,

00:01:21.880 the cabled headset, me and my co-founder, Ethan,

00:01:25.480 and we're talking to his investor, Matthew.

00:01:27.620 And he's asking about the product.

00:01:30.660 It was called Flowtown and where we were at.

00:01:32.880 And he's like, oh, wow, congrats on the traction

00:01:35.420 because at the point we just got ramen profitable,

00:01:37.900 about 20K a month in reoccurring revenue.

00:01:40.320 And then he goes about, he goes,

00:01:42.800 well, what kind of terms are you raising on?

00:01:44.500 And both of us, we had agreed we're gonna do seven on seven.

00:01:47.900 700,000 pre-money on seven million posts.

00:01:52.900 700K on 7 million pre and the reason why we said this is

00:01:58.480 because San Francisco was called the 7x7 city.

00:02:01.680 That's how little scientific market research we put into

00:02:06.680 deciding our valuation and also we heard that Mint.com did a

00:02:10.860 600K, 6 million pre fundraising so we were like,

00:02:14.180 we're better, we're robbing and profitable,

00:02:15.660 we're revenue generating, et cetera and Matthew just was like,

00:02:20.320 oh, how are other investors responding to that?

00:02:22.920 And we're like, oh, everybody's super supportive

00:02:25.260 and positive and dah, dah, dah, dah.

00:02:26.560 And he's like, well, congratulations,

00:02:28.500 but unfortunately, this may not work for me.

00:02:31.600 And we were like, oh, totally great, Matthew.

00:02:33.040 Really appreciate the time.

00:02:34.060 It was really great getting to know you, et cetera.

00:02:35.460 We hopped the phone, a little deflated,

00:02:37.840 and quickly went to our mentor.

00:02:40.380 So we were lucky to be friends with Nivy from AngelList.com.

00:02:44.780 Back in the day, it used to actually be an email list.

00:02:47.780 And he gave us some incredible advice on approaching

00:02:51.460 and pitching investors that I'm gonna share with you guys

00:02:53.960 today in this video.

00:02:55.720 So number one, get an intro.

00:02:58.220 No investors, write this down.

00:03:00.200 No investors want to meet you.

00:03:02.520 They want to be introduced to you.

00:03:04.300 If you are cold emailing my inbox, my DMs on Instagram,

00:03:08.800 they're full of entrepreneurs pitching me cold.

00:03:12.380 Hey Dan, we have this incredible opportunity for you

00:03:14.800 invest in our bleeding edge AI, blockchain technology startup

00:03:18.940 and we would love to give you the opportunity." 0.58

00:03:21.640 And it's like, come on, like that's just not how it's done.

00:03:24.940 To me, investing is very personal.

00:03:27.220 Most investors I know, they would prefer to be introduced to

00:03:30.820 you by somebody they know, like, and trust.

00:03:33.320 So here's the tip, is find other entrepreneurs they've

00:03:36.580 recently invested in, ideally like the last two deals

00:03:39.400 they've done, email those entrepreneurs for advice.

00:03:42.860 Go in for 15 minutes.

00:03:44.180 Hey, congrats on your last round.

00:03:45.860 Love to get seven minutes on a call

00:03:48.220 to talk about our startup.

00:03:49.620 Here's where we're at.

00:03:50.400 Here's what we're trying to do.

00:03:51.360 Just be honest.

00:03:52.100 Be like, revenue, these are our numbers.

00:03:53.580 This is our churn numbers.

00:03:54.480 Give them the real numbers.

00:03:56.380 Get on a call.

00:03:57.260 And if you do things right, at the end of the call,

00:03:59.220 the entrepreneur is going to say, hey, sounds really exciting.

00:04:02.100 Let me know if I can ever be helpful.

00:04:03.640 And that's when, if you're ready to raise,

00:04:06.040 you say to them, hey, well, I noticed

00:04:07.760 that you raised from this investor,

00:04:08.940 and I'd love an introduction.

00:04:10.740 And this is the pro tip.

00:04:11.860 Normally, I don't even share this.

00:04:13.220 This is the ninja tip.

00:04:14.500 You actually say, I'll send you the email template.

00:04:17.100 Feel free to edit or send your own email

00:04:19.660 just to help you out.

00:04:20.660 So I actually send the email I want for them

00:04:23.740 to use for the intro.

00:04:25.000 But number one, make sure you get an intro to investors.

00:04:27.480 They don't want to meet you.

00:04:28.940 They want to be introduced to you.

00:04:30.280 Number two, research the investors.

00:04:33.620 I can't tell you how often.

00:04:35.160 I've gotten on a call with somebody introduced me.

00:04:38.180 I took the meeting, and I get on a call.

00:04:40.480 And I can tell right from the beginning,

00:04:42.840 this entrepreneur has no clue about my previous investments,

00:04:46.220 even though everything I've ever done

00:04:47.820 is public on AngelList.

00:04:49.720 I'm very public about the investments I've made.

00:04:52.020 You can talk to the founders, you can go online.

00:04:54.200 I blog, I tweet, I share everything.

00:04:56.560 And these founders have no clue about any of the things

00:04:59.260 I've done prior, not even about my investments,

00:05:01.900 but my own companies that I've built and sold myself.

00:05:05.040 So that, to me, is a big no-no.

00:05:07.700 If you get a meeting with an investor,

00:05:09.780 Do yourself the courtesy of the other person

00:05:12.680 to do the research, understand who they are,

00:05:14.680 what they like to invest in, and use that

00:05:17.280 in your conversation and your questions to them.

00:05:19.660 Number three, present the problem.

00:05:22.100 I can't tell you how often I sit down

00:05:24.220 and I get a pitch, a demo of a product,

00:05:26.640 and they don't tell me the quick story

00:05:28.900 of the problem that they've had

00:05:30.240 and why they're solving this problem.

00:05:32.060 And if I don't understand the problem,

00:05:33.840 then you showing me your solution

00:05:35.500 doesn't really connect me with it,

00:05:37.700 especially if it's something that I've never had

00:05:39.900 or have experience in.

00:05:41.080 If you're doing some farm technology

00:05:43.240 and I don't understand that drought and irrigation

00:05:47.040 challenges is a real problem for a farmer,

00:05:50.420 then why would I be even interested in looking at your demo?

00:05:53.340 So make sure you start with the problem.

00:05:55.620 Number four, demo the solution.

00:05:58.060 The reason I say that is you want to actually show the product.

00:06:02.400 The worst thing you can do as a founder

00:06:04.620 is open up a pitch deck or just talk.

00:06:07.500 Talking is probably the worst.

00:06:08.600 Pitch deck and just narrating through screenshots

00:06:11.340 is even worse.

00:06:12.200 Because look, we've been doing this for a while.

00:06:14.220 Any investor that's looked at a ton of technology companies,

00:06:17.640 we want to see the product.

00:06:18.920 I don't want to see your refined, polished, pixel

00:06:21.120 perfect design mock-ups.

00:06:23.300 I want to see the product from a customer point of view.

00:06:26.320 So when I say demo the solution, it

00:06:27.780 means here's the problem we solve,

00:06:29.420 and then boom, here's how we solve it.

00:06:31.580 Show them the iPhone.

00:06:32.940 Open up your laptop.

00:06:34.040 Go to the website.

00:06:35.440 Show them the product so they get a sense

00:06:38.380 of how the customer experience would look as well.

00:06:40.780 Number five, market size.

00:06:43.340 If you're pitching to an investor

00:06:45.180 that's not familiar with the market,

00:06:47.420 you need to tell them how big it is.

00:06:48.920 I still remember I was looking at a deal called Foursome.

00:06:51.660 It was in the golf space.

00:06:53.100 And at first I was like, oh, this is interesting,

00:06:55.260 but I mean, how big could the golf space be?

00:06:58.860 I mean, I didn't play golf

00:06:59.960 and I honestly didn't know a whole lot about it.

00:07:02.140 And then they told me that it's a multi-billion dollar market

00:07:05.880 and they had an opportunity for capturing like 20% of the

00:07:09.580 specific kind of coaching, training and then wagers and

00:07:13.680 betting, all this stuff and I was just like, okay, whoa,

00:07:16.080 how big is this market?

00:07:17.920 If you don't explain to them the market size for your solution

00:07:21.460 then your product may be too small or not interesting enough,

00:07:24.720 especially for a professional investor,

00:07:26.760 sophisticated investor, they invest in tech.

00:07:29.000 You need to tell them about the market size.

00:07:30.500 So do the homework, get the research, and present it.

00:07:33.300 Number six, business model.

00:07:35.740 So one of the most important questions that an investor's

00:07:38.280 gonna ask you is, how are you gonna make money?

00:07:40.380 So you could wait till they ask it,

00:07:41.740 but I would just add it to the narrative,

00:07:43.440 add it to the conversation when you're showing the product.

00:07:45.980 You talk about the market size.

00:07:47.220 Then you say, the way we make money is bam.

00:07:49.920 If you've ever watched Shark Tank,

00:07:51.720 you've seen them ask this question.

00:07:53.320 It's like, hey man, I love your fluffy little gizmo

00:07:55.820 thingamajigger there, that's great,

00:07:57.260 but how do you make money?

00:07:58.460 Is it a licensing deal?

00:07:59.820 Is it direct to consumer?

00:08:01.260 Is it through a distributor, a partnership, et cetera?

00:08:05.500 The big question that investors are going to,

00:08:07.720 if they believe everything else you've said so far,

00:08:09.760 they need to understand the business model

00:08:11.340 is sound based on fundamentals, maybe some level of market

00:08:14.840 comparison so that it's like based on logic and not just

00:08:18.060 like pie in the sky like, we're going

00:08:19.820 to charge $1,500 for this thing, but nobody's ever

00:08:22.300 charged that before.

00:08:23.640 So understanding the business model,

00:08:25.880 explaining it clear, simple, don't, oh my gosh,

00:08:29.140 This just reminded me, don't add multiple levels

00:08:32.580 of revenue streams.

00:08:33.420 I've seen companies say, well, today we're gonna make money

00:08:36.380 this way and then in the future we're gonna add this

00:08:38.880 and this and this and this and then all of a sudden

00:08:40.780 it's this like dynamic star diagram of revenue streams

00:08:46.000 and proprietary licensing and data selling on the back end.

00:08:51.000 It just, you confuse the investor.

00:08:53.360 Just keep it simple, you charge X,

00:08:55.740 this is how big the market is,

00:08:56.900 This is the revenue opportunity for the business.

00:08:59.260 Number seven, proprietary tech.

00:09:01.780 Ideally, if you're building a software, a technology,

00:09:04.500 you have some level of proprietary unique technology.

00:09:08.780 Yes, I know most products today are web apps.

00:09:11.680 They're databases and the front ends and it's more workflow

00:09:14.880 and I get that but there should be some kind of unique hook.

00:09:18.960 You should have something in your product that stands out

00:09:23.500 and it's like, it could be an interaction design.

00:09:25.620 For example, Tinder, swipe left.

00:09:27.420 That was a unique proprietary interaction design that seemed

00:09:31.760 to have higher engagement, higher virality.

00:09:33.900 So if you can figure out what is it about your product

00:09:37.560 that's unique, that really stands out,

00:09:39.040 and kind of front load that and talk about it.

00:09:41.100 Number eight, open Q&A.

00:09:43.200 So this is where my pitch structure,

00:09:45.500 if I was on a stage and I was doing a formal pitch,

00:09:47.640 would have a whole bunch of other stuff.

00:09:49.140 But at the end of the day, if you're sitting down

00:09:50.820 and you're just having a one-on-one conversation

00:09:52.320 with an investor and you talk about the problem

00:09:56.700 that you solve, you demo the solution,

00:09:58.560 you talk about the market size and the business model,

00:10:00.460 how you're gonna make money, what's unique

00:10:02.320 and what tech proprietary stuff you've got in your business,

00:10:05.760 then it's really just a conversation

00:10:07.360 and this is where you need to be prepared.

00:10:10.240 So what I always say is have reference slides

00:10:12.300 if you want to, if you wanna open up your laptop

00:10:14.600 and show other slides but they might ask

00:10:16.440 about your architecture, they might ask

00:10:17.840 about the competitive market, they might ask

00:10:20.220 about the distribution opportunities.

00:10:24.260 They might ask you to see your business model canvas.

00:10:26.320 I don't know but to me it's just open the Q&A

00:10:29.400 because if an investor starts asking you questions,

00:10:32.640 they start getting more inquisitive about your business,

00:10:35.360 I'll tell you, the probability of them going to invest

00:10:38.380 in your company goes up.

00:10:40.100 So you wanna create a scenario where you give them enough

00:10:43.180 to get them excited but then it starts the conversation,

00:10:45.920 it starts the flow, it starts the questions

00:10:48.520 and it's an open Q&A that you are 100% prepped for.

00:10:52.700 You have your slides, you have your answers, your team,

00:10:55.660 you and your co-founder, holy moly.

00:10:57.600 One time I had two co-founders disagreeing with themselves

00:11:01.140 in a pitch, do not do that.

00:11:03.000 So make sure the open Q&A happens,

00:11:05.100 but that everybody's on the same page

00:11:06.840 and that will get the investor feeling comfortable.

00:11:09.300 The first pitch is a first meeting.

00:11:10.880 It is not by any means where you're gonna close

00:11:13.220 a round of funding, you build that relationship.

00:11:15.540 Quick 30 minutes, here's what we're doing.

00:11:17.580 All this happens in 30 minutes.

00:11:19.080 You bounce, you follow up, you have a secondary meeting,

00:11:21.520 maybe a third to bring things to wrap and then you add them to

00:11:24.620 the composition of the round.

00:11:26.760 So that's what I got, so quick review.

00:11:29.400 Number one, get an intro to the investor.

00:11:32.300 Number two, research them before the meeting.

00:11:34.200 Number three, present the problem you're solving.

00:11:37.100 Number four, demo your solution.

00:11:39.840 Don't show slides, just show the product.

00:11:42.440 Number five, market size, how big is it?

00:11:45.040 Number six, the business model, a.k.a.

00:11:47.980 how you gonna make money.

00:11:49.680 Number seven, proprietary tech, what makes you unique.

00:11:53.220 And number eight, open up the Q&A to have a conversation.

00:11:57.280 So if you do those things, you will absolutely slam

00:12:00.560 your next investor meeting.

00:12:02.200 And as I mentioned at the beginning of this video,

00:12:03.660 I wanna share an incredible training called

00:12:05.460 the Fundraising Like a Pro.

00:12:07.660 You can click the link below to get access to that in it.

00:12:10.640 I break down everything I've learned

00:12:12.240 about raising capital for myself.

00:12:14.040 the structure, the spreadsheet, the way I get introductions

00:12:17.540 to investors, the meeting format, how I close.

00:12:21.120 There's the third phase which is all about closing the round,

00:12:24.080 also known as hashtag money in the bank.

00:12:26.960 That's all available for you in that training.

00:12:29.260 Just click the link below, you can get access to there.

00:12:31.520 If you like this video, be sure to smash that like button,

00:12:34.600 subscribe to my channel and if there's anybody else

00:12:36.760 you think this video could serve that you care about,

00:12:38.800 feel free to share it with them directly.

00:12:40.560 As per usual, I wanna challenge you to live a bigger life

00:12:43.440 and a bigger business and I'll see you next Monday.

00:12:45.480 If you walk on water and then walk on Shark Tank,

00:12:48.720 they'll be like, hey, I like this guy.

Dan Martell - March 18, 2019

How To Pitch Your SaaS Startup To Investors

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