Gary Jinks breaks down what investors actually evaluate in startup pitches: a real market opportunity, a team that's shipped products before, defensibility beyond patents, and a concrete exit strategy. Investors fund opportunities, not ideas. Vague promises about viral growth won't cut it.
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All right. Now we're going to go through some of the key walkaway points when you go and talk to investors. And some of these you'll know, but I'm going to put them in a little bit different perspective. For one, investors don't invest in products. Investors don't invest in teams. Investors invest in opportunities. They use your product, your team, and your plan to check, check, check and see if they want to invest in you to go capture that opportunity. And if those 3 things are missing, then you probably won't get funded. But they invest in opportunities. No investor wants to miss an opportunity. So kind of keep that in mind. Usually what happens is most people's— most entrepreneurs' focus is a tech focus. They're focused on their product, which is natural because that's your baby. Everybody loves their baby. It's always the best-looking baby in the room. You know, and there are some ugly babies out there, but we don't talk about those. You know, so we understand that you guys really love your product. But stay focused on the opportunity. What I want to know is how are you going to capture the opportunity? That's all I really care. If you convince me you can capture the opportunity, we're good. We're going to take off. Okay? So the first thing is that you— there is an opportunity and you have a solution. Rarely are you going to have the solution. There are probably a variety of ways to solve a variety of problems to capture that opportunity. You have a solution to a problem. What's really important for you is to pick the right problem that you're solving and show me that if I solve that problem— so let's talk about the opportunities. If you come up and tell me that this is the most amazing opportunity in the world and we're all going to make money and I'm going, wow, this is a great opportunity, I think we are, we're going to make a killing on this, my next question is going to be, if this is such a great opportunity, why isn't everybody doing it? Now that's the problem you're solving. Is why isn't— why is that going to happen? What are you doing that's going to allow you to capture that opportunity? So the other one— oh, there you go. You have an executable plan and the team to do it. So once you've convinced me there's an opportunity, I'm just going to check it off. They got a good plan. It looks solid. Looks like the team can do it. They've done it before. That's an important thing. Having done it before. If you've never done it, there's no guarantees you can do it the first time. So it's always nice to have some people on your team that have taken a product to market, because that's a question that we almost always ask. Has anybody on your team brought a product to market? Yes? Okay. That's better than not having them. The real question we will find out is how long are those advisors going to hang with you? Are they going to be advising you for a while? What happens a lot of times with advisors is they're good there for a year, 18 months, and then they move on to other things and now they're gone. And if that was the core guy or gal that was providing you all the skill sets and knowledge on how to do that, then it's a little different. So that's the difference between advisors and teams. Now that doesn't mean the guy on your team isn't going to leave tomorrow too. But psychologically, if they're on your team and you're getting money and you're paying them and everybody's happy, they'll, they'll probably stay. Where advisors sometimes go and come. Yeah. What's the difference between advisors and mentors? Board members is good, but the board member, you know, what's going to happen on the board members, once we fund you, we're going to come on your board and we'll provide some of that as well. So, you know, those are all degrees. On your team, working with you day to day with a commitment is, you know, and then from there you get advisors and board members because they kind of get a little further away from the core of the business, so to speak. But at the end of the day, when you're a startup, the hardest thing for most startups to do is build a team. So whatever you can do to convince me you have any kind of a team early on, you're probably going to try to pull it out of the, you know, out of the air and make it happen and put these people together. So, so it's just a degree of separation that comes in. But if you can do that, we'll, you'll have it. We'll talk a little bit about teams here in a few seconds. Okay, the next one. Oh, there we go. Back to the right team to execute. We went into that. You got to have that right team. And we'll talk about what that makes that up. Okay, another couple things that fall into this is you're defensible. Now, not everybody has IP. Sometimes you're just a first-to-market play, but you have to be defensible. And defensible can— most people, when they hear defensible, it says, oh, you've got IP. If somebody tries to do this, I can go sue them and yada yada yada. I'll tell you right now, most startups don't have enough money to sue anybody. If you get in a legal battle, whoever you're suing probably has more money than you, and they're probably going to kill you before you have a chance to get through the pipeline to get that done. But you're somehow defensible. So in first to market, how do you become defensible? By getting out there fast. So you need to understand how— what it'll take you to be out there fast and just stay ahead of the competition. But you need to be defensible in some manner. So always have an answer for how you're defensible. You know, that's usually barriers to entry and things like that if you're first to market or stuff like that. IP obviously is the classic if you're in a tech model. The other one is scalable. You have to be scalable. If you're knocking on doors, it's not going to happen. Value-added resellers or VARs or these kind of things where you can knock on one door and they've already got 200,000 customers in their database, and so by knocking on one door, you get 200,000 people. Scalable is critical because without being scalable, you can't meet one of the criteria of a startup model, which is explosive growth. So think about scalability and how that goes and be able to always show how you're scalable. And going viral isn't a scalable model. It's a nice buzzword and it sounded really good for a while. So understand scalable has to be demonstrated. Show me how you're going to be scalable. And if you say we're going to do a Facebook thing and go viral, doesn't hold much water. So make sure you understand how that's going to work. All right. Back to the barriers to entry. Understand, you know, what it takes for you to get in and what it takes for your competitors to Get in bed and do the same thing that you guys are doing. So, understand those 3 things on the outside. The last one is you have an investor exit plan. It's nice to— when we come in and talk to it and somebody says, hey, we have a plan. Here's how you're going to exit. We're looking at this, boom, boom, boom. We're looking at some terms in this. In the early stages for the angel round, a lot of what we hear is, hey, what's your investor exit plan? Oh, we're negotiable. We'll sit down. We'll talk. What do you think? But it's always nice to at least have a starting point, understand what that is. Oh, we're gonna do this, we're gonna do this, and here's what the plan is. 'Cause again, understanding the model, it's all about me. I wanna understand how I'm gonna get in, how I'm gonna make a lot of money, and how I'm gonna get out. And the more that you can answer those questions for me, then the more mature, the stronger you look in our eyes. I'm gonna go ahead and stop the recording.
