Pitching preseed investors

What's up, everyone? This is Alex, the host of Founders Journal. As you may know, I built Morning Brew from my senior year of college until we sold the business in 2020. And now I'm building a variety of businesses in different spaces and different stages. I'm basically averaging 1 to 2 new businesses per year. And because of that, I have had the opportunity to test a ton of different products and services, ultimately landing on a core software stack that serves as my business operating system whenever I start a new company. I have my go-to banking service. I have my go-to formation service. I have my go-to domain hosting service. But probably the most important of them all is my HR service, Gusto. If you're a longtime Founders Journal listener, you know how much I think about people in the context of business. A business is nothing without its people, which means a platform that helps me manage and take care of my people is invaluable. And that means I've tried every HR platform under the sun, always with the same exact goals in mind. First, I want a product that's intuitive and delightful to use. As a non-HR person, I find the intricacies of payroll, benefits, taxes, compliance, and expenses to be painful. So I just want something that makes my life easier. Second, I want it to be affordable. I'm a bootstrapper at heart. I started Morning Brew with $0 and I started StoryArc with $0 as well, which means I don't have infinite dollars to drop on SaaS products. And third, I want a platform that acts as my one-stop shop for all things people. I want it to handle payroll, benefits, hiring, onboarding, and taxes, all while integrating with all of the other tools in my business stack, whether it be QuickBooks, Slack, or Google Workspace. Well, Gusto hit the trifecta, which is why I am a customer and use it for every single one of my businesses. Yes, this is a paid sponsorship by the amazing team at Gusto, but I would sing their praises even if I wasn't being paid to do so. So if you're looking for a platform that takes the pain out of payroll, benefits, and HR, I highly recommend you check out Gusto. And if you sign up at gusto.com/alex, you will get your first 3 months free. Now on to the episode.

What's up everyone? This is Alex Lieberman and this is Founders Journal. For those who are longtime Founders Journal listeners, welcome back. For those who are new to the show, here's the deal. Founders Journal is my audio diary made public for the world. My goal is to increase your odds of success as an entrepreneur by sharing the stories, lessons, and tactics that I experience as I build my businesses. You can expect the podcast Monday and Wednesday with episodes that are under 20 minutes in length. And if you want to get notified when a new episode comes out, make sure to subscribe wherever you listen. Today on the pod, I'm talking about how to deliver a great pre-seed pitch to investors. Before we hop in, I just wanted to make one quick ask of you. If you enjoy this episode, please consider sharing it on social, whether it's Twitter, LinkedIn, Instagram, whatever it may be. Word of mouth and organic shares of the podcast on social media are the number one way we grow. And also, if you end up posting on social and tagging me, then I will respond. And add some distribution to your post. It makes a world of difference, so please consider doing so if you enjoy the podcast and this episode. Now let's hop into it. So for some quick context, one of my businesses that I incubated is raising a bit of money. It's called Distro. Distro is the first AI content strategist. So Distro, the product today is basically an AI content interviewer where you can set up a studio session. You can tell Distro what you want to talk about, whether it's about your career journey, whether it's news in your industry, whether it's some challenge with building your business. It could be about anything. And then Distro is going to end up asking you really thoughtful questions as if you're talking to a world-class podcast host. And, you know, once Distro has done this interview with you, which can range from 5 minutes to 20 minutes, you will end up having this conversation that is turned into a transcript, a summary, key quotes, as well as posts that you can end up sharing on social or turning into a newsletter or any form of content. And, you know, the, the idea for Distro was ideation is oftentimes the highest friction stage of the content journey. So basically the way I see it is there are 5 steps in creating content. Ideation, creation, refinement, distribution, and insights. Lots of content software companies do a lot of work in kind of the creation, refinement, distribution, and insights part of the journey. Almost no one focuses on ideation. One of the reasons for that is technology wasn't good enough to help with ideation, where humans were always needed. And so Distro has become kind of your your Sherpa, your copilot for coming up with great ideas for what to create about online. So all this to say, you know, Distro came out about a month and a half ago. We're seeing a lot of really good signs on social and also momentum with the product. We've had 10,000 people come to the website, 2,000 signups, $660 in monthly recurring revenue. 20% of people are doing repeat sessions. And so it's going well. But we need to raise some money because my co-founder for Distro, he's still a full-time employee. He's been building Distro on nights and weekends. We want to hire an engineering org. We want to hire a product designer. We want to make a growth or marketing hire. We want a little bit of budget for marketing. And so we're working on raising a pre-seed round. And so as we were preparing for conversations with investors, you know, something that I was supporting my co-founder with was helping him understand what goes into a great pre-seed pitch, what characteristics do pre-seed investors look for, and how can he deliver a compelling pitch to investors. And so what I'm going to just take you through are kind of the 7 bullets that I shared with him on what makes for a great pre-seed pitch and what makes certain founders better at pitching than others. And I'll provide some context on how I think about each of these points. Again, this is focused on the pre-seed stage of raising money. But I would say a lot of these points relate to every part of raising money from investors. But even more than that, it relates to every part of just delivering a message in a compelling way that's persuasive to other people, whether it's to your team, whether it's to investors, whether it's to customers. So I think there's a lot of value here, even if you're not raising a pre-seed round. So let's go through them. First tip, how you deliver matters just as much as what you deliver. You know, I, I love over and over I see this quote by Maya Angelou and it applies to every facet of life. But I think it's especially true at this point. There's the quote where it goes, I've learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel. And, you know, this quote by Maya Angelou can be applied in different ways, in different contexts. But I think in the, in the context of investor pitching, is when an investor, a pre-seed investor leaves a conversation, I think more than, you know, what Distro is or what the mission is with the business, they're going to be left with a feeling about how they felt about Dev as well as how they felt about myself during that conversation. And so what I would say is, let's just say you spent 10 hours working on your pitch, working on the story you were going to tell about your startup. I think probably over half of that time, at least 5 hours, need to be focused on the way that you deliver the message. It has to be focused on what are you delivering upfront? What is your body language? Are you articulating things in a clear and cohesive way? Are you giving off a, a feeling of confidence? And so we'll get into more of these points. But just remember, How you deliver matters just as much as what you deliver. Number 2, uncomfortable conviction matched with deep thoughtfulness and self-awareness is highly attractive to investors. And so what I mean by this is, at the end of the day, when you are raising a pre-seed round, I'm going to say this over and over, but an investor is investing in you more than they are investing in a business. Because the odds that the business you are pitching right now at kind of the pre-seed stage will be the business that ultimately succeeds or fails is almost zero. You know, I even say this to any time I hire an early-stage employee in a startup. I say the odds that the business today is what the business will be 12 months from now is zero. And so when an investor is looking at a pre-seed company, I would argue that they're really just looking at 2 things. Are you in a good market? Because the odds are that you're going to stay in that market even if you pivot. And am I willing to bet on this founder every day of the week? And when they ask themselves, am I willing to bet on this founder every day of the week? I think there's this dichotomy that needs to exist. They need to see that you as a founder have incredible conviction in what you're building. Said differently, it should feel to them that success seems inevitable to you as a founder. And it's just a question of time, not if it will happen. But then the second part of this is I only think uncomfortable conviction is attractive to an investor if they also see deep thoughtfulness and self-awareness. And what I mean by that is the conviction you have in your idea or where the business is going. I think it's important for an investor to see, Basically, how strong of a foundation do your deep beliefs sit on? Like, have you spent 10 hours, 100 hours, 1,000 hours getting as close to the truth of your ideas as possible? If an investor was to ask you, why do you believe this 5 times, would they, by the 3rd question, hit kind of like the ceiling of how much you've thought about your conviction or your idea? Or would they get through all 5 questions and it feels like they could go even deeper? And so I would say uncomfortable conviction is only as attractive to an investor as it feels to the investor. Like you have spent so much time turning over every stone, thinking from every perspective about your idea, where any question they're going to ask you, it is not the first time that you've thought about that question. And then the other piece to this is self-awareness. I think lack of self-awareness is one of the most dangerous traits in founders, because when you don't have self-awareness, You have tons of blind spots and you don't know when to hire people or change course to uncover or fix those blind spots. And because at a pre-seed stage, like I said before, a founder is likely going to pivot at least once, if not more. If you as a founder don't have self-awareness, 2 things are going to happen. You're going to have a really tough time building a core team because you're not going to know what you need that you lack. And you're also not necessarily going to have the humility or the awareness of when to change course or pivot based on what your customers or the market is giving you. And so this is all to say that an investor wants to see deep conviction in an idea, but they want that to be matched by how much have you deeply thought about that idea and how aware are you of where there are holes in this idea or where there are deficiencies in you or your co-founder that will need to be uncovered or fixed by your team. The 3rd tip, lean into stories. Stories drive greater resonance. So this was a piece of feedback that I gave to my co-founder after he delivered a mock pitch of Distro to me. And, you know, he had started the pitch basically by saying that, you know, the first big problem we are solving with Distro is to solve the blank page for creators. And the whole idea here was, When any person goes to create content on the internet, they step up to their computer and the highest friction point in the content journey is thinking about what do you actually want to create content about? And he shared all of these stats around like how painful the blank page is, how many people experience writer's block or blank page syndrome. And what I said to him is people are not going to remember these stats. People are going to remember any stories that show versus tell the painfulness of the blank page. And so I basically told him, like, we can tell the story of how we had the insight for Distro. And the insight for Distro was in the early days of my other business, StoryArb, when we were just doing executive social and helping founders or executives with their content on Twitter or LinkedIn. You know, I spoke to hundreds of founders and anytime I talked to them and asked them like, why are you not creating more content online? The number one thing they would say to me is they'd only have 20 minutes in their day to create content on social because they had all these other things going on with their business, they would step up to their computer and they would feel this deep discomfort of having no idea what to talk about. And so they would never create anything. And so the way we would solve that problem at StoryArc is we would have a content strategist who would interview that founder or executive for an hour, and they would just ask smart, deep questions that would pull out of the founder either things about their startup journey, challenges they're experiencing with their business, big lessons they've learned along the way, what's happening in their industry. But, you know, before AI or voice AI, human beings had to do this process of interviewing someone to pull ideas out of them. Now, with voice AI and AI agents, it actually can be done by software. Not to suggest that the role of the content strategist is obsolete. That is not the case at all. But a lot of people don't have a content strategist at their disposal to pull ideas out of them. And that is the story of how we came to this insight. And again, it's so much more powerful to paint a picture with stories than just to read off stats or share ideas. The 4th tip: great founders demonstrate confidence without arrogance. And so, you know, just to— this is similar to the point I shared about uncomfortable conviction matched with deep thoughtfulness and self-awareness. But there's this very thin line between confidence and arrogance. And the way that I think about arrogance is When someone is arrogant, they lack empathy for others. Arrogance to me is a close cousin of lack of self-confidence and insecurity. To me, people who are arrogant require external validation to remind them that they are good at something, whereas confidence to me is someone has an intrinsic self-belief in the things they are good at. And so, you know, the way that someone spots arrogance is how much is someone flexing their abilities or their accomplishments without purpose? Confidence to me is basically showing versus telling your aptitude in a given skill. I love confidence in founders. To me, arrogance leads to poor leadership, The inability to manage people or build connections with people well. And again, at its core, I think it signals insecurity. Tip number 5, proactively answer an investor's likely questions. To me, there is nothing more attractive to an investor than them coming to a pitch ready to ask you a bunch of questions, or if they've demoed your product, ready to share a lot of feedback. And you basically, through telling the story of your business, and where you're headed and where there's opportunity for improvement, sharing answers to the things that the investor was going to bring up. And the reason there's nothing more attractive than that is it, one, signals self-awareness, and two, it signals deep thoughtfulness. Like I would actually— going back to tip 2 about uncomfortable conviction matched with deep thoughtfulness and self-awareness, I actually think the number one way to demonstrate deep thoughtfulness and self-awareness is to basically proactively answer an investor's likely questions. And to me, the way that you do that is one, by just like spending a lot of time thinking about and wrestling with your business and what you're trying to build and where there are holes in your strategy. And the second is, is if you have a co-founder practicing mock pitching with your co-founder and creating a list of questions that if you were sitting in investors' shoes that you would ask. And so I did this with Dev is like when Dev and I were practicing his mock pitch, I'd written down a bunch of questions. So an example would be like, I'll just read off some of the questions I shared with him. How does a personal interviewer turn into a billion-dollar business? What's your plan to get users? If you run out of money 18 months from now, what happened? Are you planning on raising more rounds? What differentiates a software business today? Why do you think you'll be able to outcompete a business that has potentially raised tens of millions of dollars? Couldn't any one of these platforms like existing content software platforms launch a content interviewer tomorrow? Why aren't you worried about that? What's the big vision? Why is ideation the right wedge to get into the content software game? How exactly are you going to use the money? What's the number one priority in the business right now? And so if you do enough of these mock pitches with your co-founder or the mentor or even, you know, a partner, You're just going to keep uncovering these questions that you'd be thinking about as an investor. And if you go through enough rounds of this, odds are that you will have thought of 95% of the questions that an investor would likely ask you. Tip number 6, appeal to heart and head. Head, does the founder check all the boxes for a pre-seed founder? Heart, do I as an investor feel that I would bet on this person no matter what they build? And so I think the, you know, the head part of the equation for the investor is basically, do I believe that this founder is the right person to build the business that they're talking about? Do I feel deep alignment with the insight that they have around what the problem is, why it's a big problem, and why their solution is novel and isn't being done yet? And do I believe in the market that they're trying to build in? Like, to me, those are the checkboxes. That an investor is, is going through as they kind of make a decision with their head. The heart side of this goes back to why, like, delivery of the pitch is so important and like the vibe that you give out as you tell the story is so important is it goes back to the Maya Angelou quote, which is, you know, as an investor at the end of this presentation, do I just have this deep guttural feeling that no matter what this person builds, so irrespective of market, irrespective of company, I just have this feeling that no matter what this person works on, they are going to have the self-awareness, the drive, and the resourcefulness to build something successful that is appealing to an investor's heart. And just to give a quick example that, you know, one of my buddies, Arman, I wrote a check into— I think it was the first check into his business. And I remember leaving that call and saying to my wife, this guy could start 7 businesses over the course of his career, and I would write a check into every one of those 7 businesses because I feel this deep feeling that he's going to succeed at some point. I don't know what he's going to succeed with, but I want to have a lottery ticket in his possible successes every time there's an opportunity to do so. And this leads to the 7th and final tip, which is focus on the team and the why are you the right founders investor question first. Going back to this, this is a pre-seed specific thing, but the odds that the business changes is almost 100%. The odds that there are going to be pivots is almost 100%, which means for a pre-seed investor, they are really just trying to answer the question of, am I willing to bet on these people? And there's kind of 2 questions. Am I willing to bet on these people with this idea? And am I willing to bet on these people with a different idea? So with this idea, I think the question becomes, with the idea that these founders are talking about, are they uniquely qualified to be the best people to execute on this idea? So the example with Distro is like, you know, Dev has been building in GenAI for the last 10 years. You know, he's been leading GenAI product at a $2 billion company for the last number of years. Before that, he was working on Copilot at Microsoft, building AI tooling before ChatGPT ever existed. Before that, he was building an AI business, right? So for our whole thesis, which is we want to build the end-to-end operating system for internet creators globally, and ideation is our wedge into that. But we want this whole business to sit on a foundation of AI and truly be an AI-native content platform. Dev is, technically speaking, like the perfect person to build this business. And then for me, you know, I have a built-in distribution, which distribution has never been more important in software. I've built in media and content over the last 10 years. So, you know, I have a deep sense of what is needed by content creators and where the content world is going. Like, I am perfectly qualified to be a part of this business. So I think the answer is sharing kind of my background and Dev's background upfront is so important to answer that question of why are you the right founders for this business? Now, what I think we should also be doing throughout the pitch is answering for investors the why are you the right founders for any business that you build? And that I think really comes down to kind of like what are the core traits you look for in any successful founder? And from my perspective, that comes to are they going to be obsessive? Are they going to work relentlessly? Are they incredibly fearful of losing investors' money? Are they self-aware? And are they deeply thoughtful? And when they make bets, it comes from a place of deep education and thought. And so I think you basically focus on the team upfront to answer the why are you right for this business? And then the rest of the presentation should answer for an investor, why are you right for any business? And I should write a check in you no matter what you are pitching to me. And so those are the 7 tips that I shared with Dev as we prepped to pitch a bunch of pre-seed investors. We're going to be learning several more things over the journey of raising money for this business. So feel free to reach out. If you have any questions about just raising money from investors or just storytelling as a founder in general, shoot me an email to alex@storyarb.com. And as I mentioned at the top, if you like this podcast or you like this episode specifically, please share it on Twitter, LinkedIn, any social platforms you're on. Tag me. I'll make sure to engage with it. But it is the number one way that we can grow this show and make it as helpful as possible for entrepreneurs around the world. As always, thank you so much for listening, and I'll catch you next episode.