I work with startups every day. At times as, an advisor. At times a supplier. Often, I’m asked to invest or help raise money. As I review various pitch decks, I see the same theme over and over. Entrepreneurs, in love with their “baby,” focus too much on their product and how it’s going to “Uberfy” an industry. Unfortunately, they missed the key elements investors target (in order):
- They haven’t found product-market fit.
- They haven’t formed a team with proven success in that industry
- They don’t have a command of the competitive matrix or their intersection
- They don’t have command of their financials and more importantly, ratios.
Traction trumps team… Team trumps product. It a simple concept I’ve written about here.
One of the only television shows I watch is Billions, starring Damian Lewis as Bobby Axelrod, on Showtime. In one episode, Axe’s wife, trying to raise a round for her new venture, has negative experiences with potential investors. Axe adroitly explains why she’s not ready:
What is it you do that you’re the best in the world at? You offer a service you didn’t invent, a formula you didn’t invent, a delivery method you didn’t invent. Nothing about what you do is patentable or a unique user experience. You haven’t identified an isolated market segment, haven’t truly branded your concept. You need me to go on?
So why would an investment bank put serious money into it? I all but told you that ahead of time, but you wouldn’t listen. Now you’ve heard it, but it’s too late. You. Weren’t. Ready.
I may start playing this clip at the beginning of every consulting request.