Last summer, the same question occupied my thoughts each morning as I drove to work: how were we going to raise a Series A for my startup Chatbooks? The automatic photo book company I had joined as CFO was starting to show the growth and economics to tell a solid Series A story. But the task of creating the perfect pitch -- a pitch ready for our target investors -- was unavoidably daunting. Nate Quigley, the founder and CEO, and I continually hypothesized what the Series A market needed to see, yet the full Chatbooks pitch remained undefined.
Then I started re-listening to The Lean Startup during my commute – a book focused on decreasing the development cycle of products by testing hypothesis, iterating based on feedback and validation. I realized the "lean" principles for product development could work just as well for our Series A efforts. Why spend a bunch of time building the proverbial “rocket ship” pitch, when I could take a lean approach and iteratively pivot the deck, slides and storyline based on actual investor feedback. We wouldn’t spend months tinkering on a “perfect” pitch, we’d start now.
Five months later we closed a $6 million Series A from our target investor, and we got there by employing lean principles.
Here’s how to build your own “Minimum Viable Pitch Deck” and put the lean fundraising approach into practice yourself:
Start fast, start dirty.
The same morning we decided to go Lean in our fundraising, I started calling every friendly investor I knew. And I kept calling until someone agreed to meet that same day. Not tomorrow, not next week, today. An old friend caved and agreed to meet, so Nate and I threw together five quick and dirty slides (read: MVP) and presented to investors. While it was obvious to everyone in the room the presentation was thrown together, the roughness brought out tough questions, puzzled looks and awkward pauses.
Surprisingly, the “work-in-progress” approach quickly lowered the venture investors’ defenses and they gave honest feedback without hesitation. We quickly picked-up on this dynamic and over the course of dozens of pitches we never let the deck become too clean. It instead retained that work-in-progress feel to keep the pitch relaxed and welcoming to honest feedback.
Pitch, revise, repeat.
Within 24 hours we went from zilch to the first feedback-driven revision of our pitch deck. The goal soon became to pitch a “friendly” at least twice a week. We’d observe their reactions and revise the pitch accordingly. Each cycle we learned how to better tell the Chatbooks story, what questions to preempt and what analysis to add to the appendix. We never used the same deck twice, and what we finally used to pitch our target investor was actually version no. 12! That meeting went precisely on-script and with almost no surprises; it was wonderful. Had I instead spent the previous few weeks building the rocket ship pitch without ever leaving the office -- and without getting a shred of real input -- this meeting would have been as painful as the very first.
Don’t serve all the answers up on a silver platter.
Our slides weren’t the only thing purposefully left raw and incomplete -- so was our analysis. This allowed the investor to do what they do best: unapologetically pick apart our business model, then help reconstruct it with the key questions on which the model depends. As one of our investment partners put it, “Institutional investors are smart, and they will follow the logic of the metrics you present. You shouldn’t even lay out all the math for them!” So we removed our “conclusion” metrics -- figures that let investors come to conclusions on things instead of spelling it out -- and instead talked through the final steps of the analysis together. This way, the group collectively arrived at the conclusion of infusing capital into the business.
Ask for money, and get advice. Ask for advice, get money twice.
There is an unanticipated bonus to the lean approach: the more we asked for advice, the more people wanted to give us money.
Nate would begin by stating, "We're not here to formally pitch you, we're just trying to figure out what all these metrics mean, and if you think we should raise money." This created an atmosphere of collaborative exploration with us and the investors. In addition, when you’re asking for advice, not having a perfect response to each probing question is acceptable. At the end of each session we would ask the investor for the same advice, “What do you think, should we raise money now or wait?” I soon realized that if the pitch was built right, the response was to raise now and to raise from them.
Optimize for relationships, not valuation.
By now you’re realizing that a lean approach to fundraising means being completely transparent with potential investors, which becomes critically important during the final stages of the deal. While pre-money valuation or liquidation preferences remain important levers in structuring a Series A, they are secondary to really knowing who you are “marrying”. The transparency of a lean fundraising approach lets the investor see the real you early on -- and letting them see the real you will do incalculable good for one of your most vital business relationships.
This approach can work for others, too but where you start depends on your stage. A company raising a Series A will have a pool of existing investors and a network of friendly investors who can provide helpful feedback, but may not have the right-fund fit for your industry or stage but a brand new founder who has never raised capital will need to start smaller. Start by pitching fellow entrepreneurs, business operators in your industry, or student-run university investment groups. While they may not be active investors, they'll provide valuable feedback to help out a scrappy entrepreneur. It matters much less where you start than the fact that you just start.