Every six months at Entrepreneur First, founders from our latest cohort deliver 3-minute pitches to a gathering of the world’s top seed investors. We’ve held over a dozen “Demo Days” to date, most recently for the EF9 and SG2 cohorts.
For the startups, Demo Day is the culmination of 6+ months of hard work: forming a team, developing an original idea, building a product, gaining initial customers, and getting ready for institutional investment.
One might think that the “easy part” is delivering a pithy, memorable, exciting 3-minute pitch. And yet this is often one of the most difficult tasks at EF.
By watching hundreds of founders as they craft their stories, we’ve learned quite a few lessons along the way. What we’ve learned is that founders with memorable Demo Day pitches tended to:
- Find a way to escape the “curse of knowledge” — that knowing so much about something makes it harder to explain it to others
- Inspire curiosity and FOMO in the investors — sought to generate questions not pre-empt them
- Follow a familiar format—but “with a twist”
- Rely on stories over facts
- Don’t merely describe the “rocket” they’re building — but the “moon” their rocket can reach
Many of these lessons are useful not only to founders at EF, but to anyone looking to fundraise or just talk about their company.
Escape the “Curse of Knowledge”
A founder’s deep understanding of your company and sector — how well they can navigate the “idea maze” — is a profoundly important asset in building a successful company.
But it’s also a huge liability for explaining the company to others:
Once we know something, we find it hard to imagine what it was like not to know it. Our knowledge has ‘cursed’ us. And it becomes difficult for us to share our knowledge with others, because we can’t readily re-create our listener’s state of mind.
In other words, a Curse of Knowledge results in messages that simultaneously underestimate and overestimate what the listener already knows and cares about. A Demo Day script cursed by knowledge is boring and complicated. What’s actually exciting about the company gets lost in extraneous detail.
The best way to escape the Curse of Knowledge is to borrow fresh eyes. The EF team, for example, has helped countless teams improve their scripts over the years. We’re able to do this not because we’re great writers, but simply because we don’t know a company as well as the founder does.
Luckily, the EF team doesn’t have a monopoly on ignorance. Pretty much any smart, candid person who knows little about a company will do. Lots of founders at EF:
- Practice their pitch with as many smart, brutally honest people as they can find. On the cohort, during Demo Day practice sessions, everyone writes down in real-time what lines they like, what they didn’t understand, and when their attention started waning. Founders took this feedback seriously; they fought the instinct to assume “real investors will get it.”
- Get someone else to write it! One “hack” we’ve seen teams do on the cohort ahead of Demo Day is to write each other’s scripts. This way, you can learn very quickly what about your company is most memorable (or misunderstood).
A founder shouldn’t be the only person in the room who loves a pitch, just because she’s the only one who understands it.
Know your audience: Investors are not customers
Customers care about what problems you can solve for them today. A customer pitch is usually logical, uncontroversial. It underpromises. It doesn’t threaten to destroy the customer’s industry. It focuses on what the customer needs today, not what your company will be in 10 years.
It is, of course, important to investors that a product resonates with customers. Customer traction is the evidence investors look for to believe that company is going somewhere.
But investors are not customers. Investors have a very different, well-defined job: they need to deploy capital only in teams that (1) have a real shot at (2) building a multi-billion dollar company that returns their entire fund.
Naturally, investors don’t want the pitch you use with customers.
Solving a problem today is not enough. A company must have the potential to be huge. Thus, unlike your customers, investors love companies that will threaten the existing order of the world. A customer wants to see something practical, safe. An investor wants to see something exciting, unusual, visionary and — in many cases — downright controversial.
The investor’s ultimate driving force is FOMO: “I’m dead if this company turn out to be huge and I didn’t even meet with them.” What might make them feel irresponsible for not meeting you?
Inspire questions, don’t answer them
No one will invest in you from a 3-minute pitch. But you don’t need them to. All you’re trying to do is to get a card, a first meeting. All you’re trying to do is fill the investors in the room with FOMO if they don’t at least talk with you.
At first, many founders try to anticipate and answer all the investor’s questions in their script. They try to pre-empt every possible source of skepticism: team, solution, defensibility, margins, go-to-market, traction, and so forth.
What we see is that investors only care about those things if the core idea is original and exciting. Put differently, no one cares about your margins if you aren’t doing something original and exciting. And if you are doing something exciting, investors will find the time to ask your more questions. It’s literally their job.
One great technique is to tee up — and leave unanswered— an obvious question. At the recent EF9 Demo Day, Yu from ArrayStream explained how their technology could allow fund managers to unlock a “whole new world” of returns: “we introduce a new dimension of diversification… polymorphic diversification.” Cleverly, Yu never defined the term — leaving any interested investor yearning to find out what, exactly, “polymorphic diversification” means. Yu was able to get more interest from investors not by pre-empting questions, but by inviting them.
“To sell something surprising, make it familiar; to sell something familiar, make it surprising.”
— Raymond Loewe
From pop songs, to movies, to food, to documentaries, to magic shows, and to Demo Day pitches, any engaging piece of content is mostly unoriginal. Most movies follow a very familiar — even predictable — structure; we like flavors we’ve tasted before; we identify with problems we have experienced; we stick with products we use; we rely on analogies, categories, and stereotypes to help us understand something new. All good demo day Demo Day pitches mostly “feel” like a pitch they’ve seen before; they are grounded in familiar examples and analogies; they can be easily placed alongside “similar” pitches.
But we don’t enjoy things that are entirely unoriginal. To make us really pay attention, we need a twist, a surprise, a mystery. We need something that breaks the familiar path we thought we were on. A Justin Bieber song with a reggaeton beat. A magic act where an assistant enters a tomb on stage … and taps you on the shoulder in the back of the theater. A great steak with something amazing in the sauce. When something familiar surprises us — when it breaks the pattern we know — we remember it; we are curious about it; we want to know more.
Many great pitches start with a familiar base: for EF founders, this is usually the corpus of prior Demo Day videos. Like comedians, great presenters then decide where they will break the convention.
- Steve Jobs’ 2007 iPhone launch: “Today, we’re introducing three revolutionary products of this class. The first one is a widescreen iPod with touch controls. The second is a revolutionary mobile phone. And the third is a breakthrough Internet communications device. […] An iPod, a phone, and an Internet communicator. An iPod, a phone … are you getting it? …. These are not three separate devices, this is one device, and we are calling it iPhone.”
- Mimica (EF9): “Think of an ax. Think of a pulley. Think of a telephone or a laptop. Tools like these are the reason for the rise of civilization. And fundamental is that a human learns to use them. Human. Learns. Tool. But what if that could flip? … Our software does something sofware hasn’t done before. Instead of you learning it, it learns you.”
A good script is conventional enough that it feels familiar; yet unusual enough that it is memorably surprising.
Stories > Facts
Our brains are literally wired to process stories. Tell facts, share ideas, and only a small part of the brain is activated. But when you tell a story, something else happens. Every part of the brain that would be activated if we were in that scenario lights up. A story commands attention; it implants not only ideas but thoughts, emotions, and memories.
We can remember incredibly complicated stories after one listen. We seldom remember complicated facts. Really, it’s scary what a difference a good, simple story can make. I still remember Marco, the 3 year old English learner in Lingumi’s Demo Day Pitch:
Don’t describe a rocket; describe the moon
Most of the founders at EF have unique abilities that let them deliver technical breakthroughs. It’s no surprise they want to talk about the technology.
Unfortunately, with rare exception, investors don’t really care nearly as much about how the “sausage is made.” What really matters to them is that the sausage looks and tastes great, that people are clamouring for it, that no one else can make it — that soon the whole world will be eating those god damn sausages. That’s what they care about. Successful Demo Day pitches talk about the sausage.
One EF team member highlighted the difference in a much more poetic way:
It’s like you invented a rocket, and you explained it this way: ‘Like a plane, it flies through the air. But it goes much faster, and it doesn’t have wings.’ You’re missing the point! What’s special about a rocket? A rocket is special because it goes to the moon. Tell me about the moon.
Once you can say it 10 words, say it in 500
If one can’t describe your company in one, great sentence, then 100 more sentences won’t help. Conversely, with a great one-liner, the story seems to flow beautifully: every point seems to magically build on the last and support the core thesis.
My own writing process looks like this:
- I write the first thing that comes to mind, with little regard for length.
- I throw all that out, then summarize it in one sentence.
- Next, I outline the key supporting points.
- I turn the outline into prose.
Everyone’s own personal system may be different, but the point is the same: until a founder has nailed the one liner and key points, they tend to not have a a great script. (This is true of your investor decks as well.)
Want to pitch a great idea at Demo Day?
Demo Day is the culmination of 6 months of hard work by founders at EF — but they all joined as individuals, before they had an idea or co-founder.
At EF, the world’s most ambitious individuals come together at EF to form teams, develop ideas, and develop companies that solve globally important problems. If you’d like to begin your entrepreneurial journey at EF, apply at joinef.com.