Episode 04 | Part One: The Pitch Master

Gregory Shepard, an entrepreneur who's built and sold 12 businesses, a recipient of 4 private equity awards, TEDx speaker, and Forbes author. This is The Boss Podcast with Gregory Shepard.

Welcome back to The Boss Podcast. The definition of negotiation is a discussion aimed at reaching an agreement. One of the keys to investing and starting up a company is negotiating. My guest today is here to help with just that. The guy is a baller. His name is Oren Klaff. He's the bestselling author of Pitch Anything and Flip the Script. Oren, you help companies raise money and you're pretty damn good at that. You've raised over $2 billion in investments for your companies. One of the reasons I started the show is to improve the entrepreneur failure rate. Why do you think entrepreneurs fail? Fail so often?

Oh man, come on! That's giving me a layup question. This question one, right? I thought you were gonna say, yeah, define supply side economics as they tie into the venture industry and private equity in a reverse outlook for the next five years. But why do entrepreneurs fail? Here's the reason: they don't speak the lingua franca of finance. They're entrepreneurs; they know products. They know marketing, they know sales, they have charisma and persuasion and energy. The one thing that they don't speak is the language of finance. And the one thing that these entrepreneurial companies need, from Tesla to Google to Yahoo on down, is capital. You cannot grow fast with some form of capital. Some companies grow fast Without taking outside capital, but they use the revenue they gen. It costs money to grow. By definition, the word entrepreneur is—I mean—it means something in Latin, right? But but ultimately, the definition is somebody who's growing a company, and if you're growing, you better move fast, right? That's the one way to get there. And if you're gonna move fast, you're gonna need money. And if you're gonna need money, the best way to get it is to be able to plug into investors, right? Or or generate really high margin. sales, as I know you did. But you have to be able to speak the language of money, and entrepreneurs are never taught that. It's not in any book. There's no deal-making book. And so that's the problem. How do you cover that gap, the language of money?

And so your specialty is doing just that. I just got to tell the listeners that I read Oren's first book, Pitch Anything, and I was like, holy shit, this thing is intense. And then I called Oren, and after a few times, I was able to actually get a day with him. And my sales team was there with us and our sales went up by 40% after we had that day with Oren. It was like night and day and it changed my life. So it's a real big honor to have you first of all because it was a— all those awards I won and all that stuff that happened was after you taught me how to pitch.

Yeah.

I mean, you're the god of pitching as far as I'm concerned. So when you look at entrepreneurs failing and you say, okay, well, they're failing because they're undercapitalized, right? Because they can't and they don't know how to get money and that's why they fail all the time because they can't get money and they're Therefore, they can't keep going.

Well, to be fair, every single deal I've ever come across or taken in or worked on has eventually raised money. The problem is maybe, maybe one or two that they really were just burning way too much money and it was unsustainable. But if it was a decent deal, they had customers, it was working, they needed capital, eventually they always get money. The issue is the amount of time and energy and what they give up for the money. So if you, if you're a good entrepreneur, You have a good deal, you've got a good product, and you've got customers. You're gonna raise money, right? What are you gonna give up? How long does it take you to raise the money? And how much do you raise are the variables. And if you can fix those things, you can have a great, great company. And if you can't, it's not that you can't have a great company, but somebody else is very likely who can do those things. Yeah, raise money faster at better terms is gonna have a better company because they can just move faster than you.

Right, just beat you.

Outspend you. Yeah, I mean At least in my mindset is, is throw money at problems, right? When you're, when you're trying to grow a company and the outcome is $20, $30, $40 million, right? And winning a market and really capturing— a problem comes up, throw money at it. The only time you can't do that is if you don't have the money to throw at it, right? And so, right, so guys who have money are gonna throw money at problems to make them go away and move on with building their business.

That's true, actually. You do find that you can fix problems with money. Like if you're an investor and you're in a deal and something happens If something happens that's off, you just raise capital and buy your way out of the problem sometimes. But if that capital is not available, you're done.

Very much so. And then, you know, operationally, you know, take it down to a more operational level, you know, if you can solve the problems that come up, you know, with money, then you're just gonna outpace and outmaneuver and outgrow the next guy. So that's, that's the gap that entrepreneurs need to know how to fill and why don't they have this, you know, this language of finance? Because it's the exact opposite of the world they live in. When you move from the entrepreneur world to the world of finance, it's— gravity is upside down. The things that you know work in your day-to-day business for recruiting, for selling, for handling customers, for marketing products, for putting up landing pages, create the opposite effect, almost a linear opposite effect. In the world of money, you've said neediness kills deals, right?

So, and I remember you telling me that you can't come across as you need them, but, you know, you said something that, that stuck with me forever, and that is what goes away from you, uh, you want to follow, and those things that are coming towards you, you want to walk away from.

That is the, the decoded language of finance, right? People want what they can't have.

So how do you go from— if you're needy, if you're an entrepreneur, right, and you're trying to raise capital and you're like, man, I need this money, how do you Get something you need without coming across as needy.

If you're an entrepreneur, run down to a tattoo parlor and get this, you know, tattooed on your arm somewhere that it's always visible. Neediness kills deals. Neediness kills deals. In almost all other parts of your life, transparency, honesty, reciprocation, emotional you know, awareness, all that stuff is valuable to relationships. When you're talking to investors, this is one of the biggest relationships you may have in your life.

Sure.

And you want to be transparent, right? And you want to say things like, we're at the point where we need this capital in order to do XYZ, in order to survive, in order to grow, in order to beat our competition. We need to meet these goals, right? No good deed goes unpunished in the capital markets. There's a very thin path that you have to walk. And anytime you show needing— because in reality, who wants to put money into a deal that has no other options, is maybe shrinking, and needs the capital in order to succeed? That is the exact opposite of what any investor wants to see. What do they want to see? Fast growth, high recurring revenue, growing MRR, growing ARR, growing faster than the peer set. And they want to put their money into high-quality problems, not low-quality problems.

Okay. Yeah, right.

So things that trigger neediness are that, you know, we need— and I see this 9 out of 10 times— we need to raise $1 million or $3 million to fill in the blank.

Yeah, right.

Yeah, that's what I see too. The train is leaving the station. I don't want my money to cause the train to leave the station. If that's the case, I want, as an investor, I want a lot more value for my money than you're giving me. So the pitch is, listen, we're gonna be at $8 million by the end of the year. We think we're gonna have, you know, a million, million and a half of recurring revenue. We feel like there's some opportunities to sign Microsoft, work with Oracle, increase our margin, and improve our customer service if we invest in those. Either way, we're going to be at $15 to $18 million a year to 2 years out, right? That pro forma is happening. Train is leaving the station.

Right.

We think if we strengthen the balance sheet, when we start to negotiate with Microsoft, we can strike a better deal.

Okay.

I think if we invest in customer service today, we get Oracle, and that's an $8 million revenue ticket. We think that if we put some AI and some bandwidth infrastructure together, that impacts the income statement here. As you can see, out in month 14, we really start to see some 80 to 90% margins on our core products by stabilizing our AI platform today. So those are things that I want my money to do, not to fix problems today, but to really position for advantage in the future.

Right.

You have to be able to, uh, not be needy. So, so the question is, what if you do need the money, right? As, as I think where you were heading, you know, step one is just never be needy. And to remember, people want what they can't have. They chase that which moves away from them, and they only value that which they pay for.

Okay. Those are some really wise words. I want to, I want to go backwards a little bit to go forward because I want to give you the opportunity to talk about framing. And frame selling and all of the stuff with the brain that, that you taught me. I think for people that are listening this, after he, he tells you about this, go out and buy the book because I mean, it's just awesome. I did the audiobook so I could listen to it and make notes. Maybe take a second and talk about that. And then I want to go into another subject so we can tie your first book and your second book together and how these things can weave into an entrepreneur and help them solve that problem that we just Sure.

I think, you know, to bring somebody into the world of Frames, I mean, it's, you know, so we had a building, right? I have to have you down here, Greg, but we had a building right across the road. And it's interesting, you looked out of my office and you saw the ocean, right?

Yeah.

You walked across the hallway, you looked out the customer service office, and they got to see the freeway, right? So it's the same building, same office, same company, we work together, same customers, everything just depends which window You look out of, you get to see something totally different.

Okay.

So frames control the perspective of the investor and the buyer. Do they see the freeway or do they see the ocean? Another way to think about it, have you ever walked— obviously not today because there aren't any— but if you have walked into a busy restaurant, right, you're going to, uh, I think Il Fornio on North Beverly Drive in Beverly Hills, and lunch, big restaurant, super bustling, a couple hundred people in there, and you're meeting a few friends for a business meeting. You walk in and noise hits you and smells and waiters are going by and hundreds of people are talking and people are moving. It is an overwhelming amount. And your friends are sitting right there, 14 feet. We've all experienced it, 14 feet in front of you, right?

Yeah.

And they're waving at you, throwing paper at you, right? And you're looking around, right? And eventually your brain starts filtering out the noise and the movement and the smells and the mo— And eventually you find them. I mean, it could be your mom and you can't see her, right? Yeah, in that much noise, uh, it's very high signal, you know, noise to signal. Eventually folks, I'm like, hey, we've been waving at you for 3 minutes, you didn't see us? You know, we're right here.

Yeah, and then all you can hear is them, right?

And then all you can— so this is the same thing that investors experience. You know, they're coming into, to your world and there is just noise and information and signal and details and financial information and product and competition. It's a huge amount of noise. So unless you frame that into something that has meaning and narrative and plugs into the way they understand the world, it's too much noise and information to absorb. You have to frame your reality so it fits the perspective that somebody else has. Otherwise, you're letting them figure out your story from all the information you're feeding them.

Wow.

So you have to have frame control. Once you have frame control, then you can really start to have power over the social interaction. So if they have a power frame, right, where they're making you see them as powerful, the decision maker, we have the money, You don't. You send us the business plan, you send us the financial model, you send us the competition report, you send us all this stuff, right? And we have the power to decide if we give you the money or not, and you will wait for us, right? And yes, we said we were going to give you an answer on Wednesday, but we don't, you know, we haven't met yet. We'll let you know next week.

Yeah, yeah, that's very common.

Power frame. Yeah, power frame, right? And so most of us are trained to just fall into or become subsumed by their power frame. They're forcing that perspective that they're powerful and you're not. But when you understand frame control, you can just flip that around, right? And you say the way to change a power frame is to say, hey, listen, you know, this is the way I've done it many times. I look at your website, right? Right on the front page. Founders Fund, the founder-friendly site. We invest in early stage, we invest in entrepreneurs, we invest in the speed of startups, right?

Yeah.

Right now you're on a bicycle, okay? This is not the speed of startups. So as you know, a company like us is not going to spend 60, 90 days raising money, but working with you—

Yeah.

At this pace, it seems like 100 days Might be a good outcome, right? So I'm confused. Who are you? What are your values? You're not making sense to me. And you take away all their power by bringing their values into this.

You take the power too, right?

We take— when we have frame control, we now make them see themselves through the perspective of weak values, not as powerful, but of weak values. If you show a lens to someone, a frame that their values aren't in sync, especially in Silicon Valley, you know, Wall Street, aren't in sync with what they say about themselves or what they want people to believe, they lose all power and they will say, so sorry. And now you control the frame. So that's frame control 101.

So the reason why I brought that up too is because you preach about writing a great pitch deck. Which by the way, the one that you worked on with us was really amazing. We literally got 40% increase in revenue from that. You know, we spent a day with you, got 40% increase in revenue, and then later drove it to a $925 million exit. So it was pretty, pretty epic. But a while back, I heard that you closed a $3 million deal with a 3-page deck.

Yeah.

And so I want to know, I want to try to connect this not being needy and frame control thing to how you were able to How did you close that deal with a 3-page deck so that people can hear this?

Yeah. So let me put some context. You go to pitch a private equity group, and I know not everybody listening deals with private equity, but this— you go to meet a private equity group and you've met with them, right? Bunch of young, handsome, well, beautiful, well-dressed in a beautiful office overlooking a freeway or a river, a lake. Cocky. Cocky. You're sitting there, got these beautiful Moleskine notebooks. You know, yeah, vinyl cover and the fountain pen, and you're sitting there pitching and they're looking at you just staring, right? Nothing to say. Listen, are they even paying attention? Then you say something and they scramble, they open the Moleskine, they write down something, they close the Moleskine book, put the pen back down, and start listening again, right?

Yeah.

This goes on for an hour and they do this 7 times. So for 7 times, for 15 seconds, they're paying attention to you. Why? Because you're saying the things that matter. Because they've learned over time, if they fish that information out of you, it's just a huge pain. You want to tell your story, you want to tell how great the product is, and you want to give the demo, and you want to say how great customer service is, and your co-founder, and your technology, and, you know, the awards you've won. If they just strip mine the meeting for the information they need to make a decision, you leave there complaining, ah, those guys are assholes. Right? They've learned over time, let you sit there for an hour, tell your story, but they only need 6, 7 pieces of information, right?

Okay.

And we all know what those are, right? So what's changing today? Why does that matter? What are the stakes? What problems is this causing? Do you solve— how do you solve this problem that's being caused? And is this hard? Is this a hard problem to solve or can anybody do it?

Yeah.

Right? What's the return, the ROI, or the, the, you know, what are the, what are the buyers or the users get as value?

Right.

How do you charge? What are the assumptions that make up the model? Who's gonna do the work when it gets hard? Not who's gonna do the work easy, make a website, spend money, hire a bunch of people, you know, create logos. Not who's gonna do that.

Who's gonna do the heavy thinking.

Who's gonna do the heavy lifting when it gets hard.

Yeah.

When the, when the, when the, when your hockey stick goes hockey stick, who's going to be there that looks like they're credible?

Right.

And what's your ask? That's it, right? Those are the pieces of information they want. So I boil down a 3-page deck just to cover those, right? The big idea, what's changing today, what and, and why it's hard to solve that problem, slide 1, right? What we do, how it works, and the value Slide two. Okay. The assumptions we're making about how we're going to become a five million dollar project in eighteen months. Yeah. Because the assumptions, because because making a pro forma or an income statement is baby math. Like my six-year-old can do that. Yeah.

I never even look at those things.

What are the assumptions? They don't need. They don't even need to see your pro forma, right? Because a pro forma is just your assumptions dropped into a template spreadsheet.

Right. So you have to see what the leading indicators of the pro forma was, right?

Right.

Okay. All right.

And then I don't even have a slide on team. I say, you know, this is who the team— that's it.

Yeah.

I think if you read my new book, Flip the Script, yeah, right, whatever the tactics are, I think you want somebody to get this sense at some point that it's their idea to work with you.

Yeah.

Not that you're asking them to invest. They say, how do we invest in you? How do we work together? How do we—

And that takes control of their frame, right?

And that, that is the ultimate in frame control. When somebody goes— and that is how all my deals close right now, right? People go, when can we get started?

Yeah.

We don't say, so what do you think? Is this something you'd be interested in? Right? Do you have any questions? Would you like to see the demo again? Um, when, when do we set our next meeting? Right? We say, so that's what we have. You can see we're super busy.

So this is really perfect because you were taught— because one of the questions I had is explain the technique of sales inception. Yeah. All right. And that's the perfect time to hit pause. Coming up in part 2 of my chat with Oren Klaff, the bestselling author of Pitch Anything and Flip the Script, I'll break down sales inception with Oren.

Plus, he'll give us a masterclass in Put these 2 words on the first page: everything's changed.

Thanks for checking out the BOSS Podcast with Gregory Shepard. Get more on Greg's Business Operating Support System, BOSS, at GregoryShepard.com. This has been a production of Forbes Books Radio.