The #1 mistake in early stage startup pitches

I’ve been spending a lot of time with startups recently and have found myself in similar conversations many times. Most early stage entrepreneurs are rightfully very focused on building product, and as a result, their pitches are nearly all focused on aspects of their product — how it works, why it’s better, and other important questions leading up to launch. And it means conversations with investors and mentors usually revolve around “what if you did it this way?” and “have you thought of this feature?” and “what about competitors who do it that way?”

But feature/functionality conversations at the early stage are normally not very useful for entrepreneurs, since products invariably change as they get in the hands of customers and real world feedback materializes. And they send the wrong signal to entrepreneurs that if you just build the perfect product, a successful company is bound to materialize. There’s not a big company today that got that way doing the same thing they started up doing, and it’s the teams that are smartest about adapting, pivoting, and executing which tend to build the most successful companies.

That’s why I like early stage pitches that have some concept of a company roadmap, not just a product roadmap. Just like the product roadmap describes where you’re going with the product, a company roadmap describes how you plan to turn the product into a business. It will almost always change, but it’s good to demonstrate early thought on this topic. How will you acquire initial customers? When is the right time to test monetization? What are the next one or two fundraising milestones you’d envision if things go as planned?

In practice, this allows you to put your fundraising in context, which is always useful for investors. Rather than say “we’re raising $1MM to extend our runway for a year,” or “we’re raising $500K to hire engineers,” you should put your capital requirements in the context of the milestone you aim to achieve with the money. Try “we’re raising $1MM to prove our user acquisition costs” or “we’re raising $500K to get to a minimum viable product launch.” Of course these things involve hiring engineers, spending money on marketing, etc. But you don’t need make those things the focus of your use of funds — it’s the outcomes which the funds are designed to achieve that matter.

That makes it very clear what the near term goals are, and gets everyone on the same page about when and why the next round may be required. Using a timeline, you can show the upcoming milestone you’re fundraising for (i.e. prove our user acquisition costs), followed by the next inflection point you’d anticipate raising money to pursue afterward if things go as planned, such as scaling sales and marketing.

This stuff doesn’t have to dominate an early stage pitch, just one or two slides is usually enough, but signals to investors you are the type of founder who can build a business and not just a great product, and gives helpful context around use of funds that can do wonders for clarity and aligning expectations.