If you haven’t read any previous posts in this series consider starting here at the start. It is sequential. If you want to go to the post immediately prior to this one it is here.
So now you’ve told me who you are and why it is relevant to what you
do. You’ve given me the 60 second version of what you do in a single
slide. Now it is time for the “problem definition.” I often think
this is a good time for a 1 minute diversion of how you got the idea
in the first place (if it wasn’t covered in your bio). I think that
the “how we got started” adds a nice human touch to the pitch. As the
VC we’re wondering anyways. It’s the most obvious thing in our minds,
“how did you decide to do THIS?” Just avoid creating a fake story that
this was your life’s passion if it wasn’t. It will come across as
insincere. If it’s a boring story, just lay the truth on us and move
on quickly.
The problem definition (Slide 2) -
In order for an investor to get excited about your idea he or she
needs to know that there is a big problem that somebody can’t solve
today with the existing solutions on the market. This is something
many young or inexperienced entrepreneurs not only miss when pitching
their company but more importantly miss when thinking about why they
created the business in the first place. I can’t tell you how many
times I’ve sat in a conference hearing a new company pitch and they
talk about product, product, product. I call this, “inside out” in
that you’re thinking about what you’re company is doing rather than the
“outside in”, what the market is doing and how your company will help
it.
People or companies don’t buy new products when they don’t have a
problem (real or perceived). In fact, people won’t even invest their
scarce time using your free product unless it solves a problem they
have. So let’s say, for example, that you’re creating a website for
people to sell their used car directly to other consumers (rather than
selling it to a dealer as a trade-in). Your slide might have a
graphical depiction of the typical flow of goods and information from
consumers as they try to sell their cars to other consumers or to car
dealers. You might have bullet points with data (or bonus points if
you have it memorized and say it verbally): [data below fictitious, for
example only]
- 87% of consumers don’t trust autos that they buy from other consumers
- 65% of all cars are sold from consumer-to-dealer or from dealer-to-consumer
- 80% of consumers that sell to dealers get on average 15% below the
true value of the car; and 92% of consumers that buy from dealers pay
more than they would if they bought from consumers - Used auto sales represents a $275billion / year annual market size
- The number one barrier to consumer-to-consumer car sales is a lack of trust
We solve this problem. OK! Now I’m awake. It’s a big market and
that market has a problem. You’ve used data so I can understand the
size and scope of the problem. Now how on Earth do you solve this
problem when nobody else has?
