Analyzing pitches to find what gets VCs interested in a meeting • Hacker News Board

Re: Analyzing pitches to find what gets VCs interested in a meeting

#21

Post by wpietri » Mon, May 04, 2020, 3:27 PM UTC

onion2k wrote: post #13

mgamache wrote: post #5

I am not sure what value this post is besides a sales pitch for the poster. Don't mean to be overly critical, but really the number one factor is always customers. Do you have any? Also, How do you get more (cost of acquiring customers)? Market size? I suppose that's in the "underlying economics" section, but that's such a common question it should be addressed. VCs are looking for 100x return. Can you meet in person…

Don't mean to be overly critical, but really the number one factor is always customers. Do you have any? This is 100% true and 10,000% annoying. Effectively it blocks anyone who has an idea for an idea for a business that needs seed capital from competing unless they're already wealthy (directly or able to raise funds from within their own network of friends and family). 15 years ago seed capital was exactly that - m…

I don't disagree, but 15 years ago it was much more expensive to do a startup. This was before AWS and Rails was just getting started, so just getting something up and visible was a major technological effort. Now I can spend a day writing some Terraform code and have an infinitely scalable, load-balanced cluster up and running. A day later and I can have a decent-looking basic CRUD app on the cluster.

Then I can spin a lot of the other work off to pay-as-you-go SaaS tools. Payments, sales support, CRM, support, marketing, analytics, feature flags, landing pages, A/B testing: all of these are things I don't have to build any more. And now thanks to the rise of things like Slack, Zoom, and Trello, remote and/or part-time work is much more tenable, meaning we don't need an office and full-time commitment to get going.

So yes, VCs are going to take minimum risk for maximum return. But they always have. What's different now is that you don't need to convince some rando that you need $250k in seed money just to find out if your idea might work. If it does, you'll at least be in a better negotiating position. And maybe you won't need to seek investment at all.

Re: Analyzing pitches to find what gets VCs interested in a meeting

#22

Post by derefr » Mon, May 04, 2020, 3:30 PM UTC

pge wrote: post #12

I wouldn’t trust these data, not because there is anything wrong with the analysis but because the inputs are inaccurate. What VCs say was the reason they were interested is not necessarily what made them interested. It may be what they tell themselves or tell you, but I think the decision criteria are rarely that objective or explicit. Decisions are made, then back justified with a plausible explanation.

Sure, but at the same time, the relationship between founders and VCs isn't actually adversarial. VCs want founders to know how to pitch them. VCs are not “anti-inductive”† — they’re not shifting their requirements to become stranger and more complex every time they’re understood. Their needs are fairly stable. The main reason that most pitches don’t succeed, is that most founders are first-time founders, and therefore don’t have experience at pitching, and therefore make newbie mistakes.

† https://www.lesswrong.com/posts/h24JGbmweNpWZfBkM/markets-ar...

If you’ve ever heard publishers talk about the https://en.wikipedia.org/wiki/Slush_pile submissions they receive, it’s much the same: they have clear and stable and “knowable” expectations, but authors break them, because most authors are new authors submitting their very first manuscript, having never gone through this process before, never received feedback before, and so never had any data with which to polish their approach before.

(The other main reason that VCs and publishers both receive so many pitches they don’t feel fit them, is that the markets they operate in are heavily slanted in their favour, and so they don’t put much work into making their requirements known. They often don’t put their expectations on their websites or anything. This can be circumvented on the supply-side, though, by just asking around to find out from other submitters what a given buyer is looking for. Some enterprising souls have even done the “lazy” supply-side’s work for it, and compiled indices of the requirements for the buyers in the market.)

Re: Analyzing pitches to find what gets VCs interested in a meeting

#23

Post by [deleted] » Mon, May 04, 2020, 3:35 PM UTC

onion2k wrote: post #13

mgamache wrote: post #5

I am not sure what value this post is besides a sales pitch for the poster. Don't mean to be overly critical, but really the number one factor is always customers. Do you have any? Also, How do you get more (cost of acquiring customers)? Market size? I suppose that's in the "underlying economics" section, but that's such a common question it should be addressed. VCs are looking for 100x return. Can you meet in person…

Don't mean to be overly critical, but really the number one factor is always customers. Do you have any? This is 100% true and 10,000% annoying. Effectively it blocks anyone who has an idea for an idea for a business that needs seed capital from competing unless they're already wealthy (directly or able to raise funds from within their own network of friends and family). 15 years ago seed capital was exactly that - m…

[deleted]

Re: Analyzing pitches to find what gets VCs interested in a meeting

#24

Post by mgamache » Mon, May 04, 2020, 3:40 PM UTC

wpietri wrote: post #21

onion2k wrote: post #13

Earlier quoted context omitted.

Don't mean to be overly critical, but really the number one factor is always customers. Do you have any? This is 100% true and 10,000% annoying. Effectively it blocks anyone who has an idea for an idea for a business that needs seed capital from competing unless they're already wealthy (directly or able to raise funds from within their own network of friends and family). 15 years ago seed capital was exactly that - m…

I don't disagree, but 15 years ago it was much more expensive to do a startup. This was before AWS and Rails was just getting started, so just getting something up and visible was a major technological effort. Now I can spend a day writing some Terraform code and have an infinitely scalable, load-balanced cluster up and running. A day later and I can have a decent-looking basic CRUD app on the cluster. Then I can spi…

Sure executing some ideas are cheaper and infrastructure can be purchased cheaply. But this covers a subset of all startups. For example: Let's say you wanted to do a med-tech startup. You'll have to work for at least two years without pay to get a non-medical device product launched.

Re: Analyzing pitches to find what gets VCs interested in a meeting

#25

Post by wpietri » Mon, May 04, 2020, 3:49 PM UTC

mgamache wrote: post #24

wpietri wrote: post #21

Earlier quoted context omitted.

I don't disagree, but 15 years ago it was much more expensive to do a startup. This was before AWS and Rails was just getting started, so just getting something up and visible was a major technological effort. Now I can spend a day writing some Terraform code and have an infinitely scalable, load-balanced cluster up and running. A day later and I can have a decent-looking basic CRUD app on the cluster. Then I can spi…

Sure executing some ideas are cheaper and infrastructure can be purchased cheaply. But this covers a subset of all startups. For example: Let's say you wanted to do a med-tech startup. You'll have to work for at least two years without pay to get a non-medical device product launched.

Undoubtedly. And I'd bet that in those areas you can still find seed money before you get customers. My point wasn't, "All startups are easy now!"

It was that investors aren't going to pay for anything they don't have to. If there's a sufficient stream of web/mobile based startups coming to them who already have some proof, they're going to be much less likely to fund people who don't have that proof yet.

Re: Analyzing pitches to find what gets VCs interested in a meeting

#26

Post by est31 » Mon, May 04, 2020, 3:52 PM UTC

wpietri wrote: post #21

onion2k wrote: post #13

Earlier quoted context omitted.

Don't mean to be overly critical, but really the number one factor is always customers. Do you have any? This is 100% true and 10,000% annoying. Effectively it blocks anyone who has an idea for an idea for a business that needs seed capital from competing unless they're already wealthy (directly or able to raise funds from within their own network of friends and family). 15 years ago seed capital was exactly that - m…

I don't disagree, but 15 years ago it was much more expensive to do a startup. This was before AWS and Rails was just getting started, so just getting something up and visible was a major technological effort. Now I can spend a day writing some Terraform code and have an infinitely scalable, load-balanced cluster up and running. A day later and I can have a decent-looking basic CRUD app on the cluster. Then I can spi…

> This was before AWS and Rails was just getting started, so just getting something up and visible was a major technological effort.

Before rails there was LAMP. That's what Facebook used. Java servlets existed as well. And rented clouds existed before AWS as well. Despite the hype for them on pages like this, neither AWS nor Rails were really big disrupting inventions. The market for both existed before them, and will exist after they've fallen out of favour.

Where innovation happened is in the scaling domain. Terraform, kubernetes, etc, as well as in the SaaS tools you mentioned. But most of those things aren't needed for earliest stage startups. You don't need to be super scalable from day one. You can just run everything from one very powerful box for a while.

Of course this all depends on what your application is. If your product is a cloud based tool to post process movies, it will be a different setting from a CRUD app to plan events.

Re: Analyzing pitches to find what gets VCs interested in a meeting

#27

Post by onion2k » Mon, May 04, 2020, 3:54 PM UTC

wpietri wrote: post #21

onion2k wrote: post #13

Earlier quoted context omitted.

Don't mean to be overly critical, but really the number one factor is always customers. Do you have any? This is 100% true and 10,000% annoying. Effectively it blocks anyone who has an idea for an idea for a business that needs seed capital from competing unless they're already wealthy (directly or able to raise funds from within their own network of friends and family). 15 years ago seed capital was exactly that - m…

I don't disagree, but 15 years ago it was much more expensive to do a startup. This was before AWS and Rails was just getting started, so just getting something up and visible was a major technological effort. Now I can spend a day writing some Terraform code and have an infinitely scalable, load-balanced cluster up and running. A day later and I can have a decent-looking basic CRUD app on the cluster. Then I can spi…

The problem is that if your idea isn't a CRUD app then finding funding to pay for the expenses is effectively impossible outside of raising from friends and family. VC funds (and especially public money that VCs control) should be invested in genuine innovation, not yet-another-Uber-for-meal-kits.

Re: Analyzing pitches to find what gets VCs interested in a meeting

#28

Post by wpietri » Mon, May 04, 2020, 4:05 PM UTC

est31 wrote: post #26

wpietri wrote: post #21

Earlier quoted context omitted.

I don't disagree, but 15 years ago it was much more expensive to do a startup. This was before AWS and Rails was just getting started, so just getting something up and visible was a major technological effort. Now I can spend a day writing some Terraform code and have an infinitely scalable, load-balanced cluster up and running. A day later and I can have a decent-looking basic CRUD app on the cluster. Then I can spi…

> This was before AWS and Rails was just getting started, so just getting something up and visible was a major technological effort. Before rails there was LAMP. That's what Facebook used. Java servlets existed as well. And rented clouds existed before AWS as well. Despite the hype for them on pages like this, neither AWS nor Rails were really big disrupting inventions. The market for both existed before them, and wi…

In some sense, nothing has been really disruptive since the web browser. But that doesn't matter because what I'm talking about is reduced cost, reduced accidental complexity, reduced systemic latency.

Having lived through it, it's just loads easier to get something up and going these days. I ended up back in some Java code again recently, and servlets are a) a pain, and b) a general-purpose abstraction. They're adequate for a lot of things, but not particularly great at anything. Whereas these days people have had 15 years to come up with special-purpose code to accelerate all sorts of common activities. My point wasn't that AWS and Rails were the only good things that happened in 15 years. It's that those, which now seem old and boring, were near beginning of a whole wave of innovation aimed at making it easy to have a consumer-grade user experience up and running.

Re: Analyzing pitches to find what gets VCs interested in a meeting

#29

Post by wpietri » Mon, May 04, 2020, 4:11 PM UTC

onion2k wrote: post #27

wpietri wrote: post #21

Earlier quoted context omitted.

I don't disagree, but 15 years ago it was much more expensive to do a startup. This was before AWS and Rails was just getting started, so just getting something up and visible was a major technological effort. Now I can spend a day writing some Terraform code and have an infinitely scalable, load-balanced cluster up and running. A day later and I can have a decent-looking basic CRUD app on the cluster. Then I can spi…

The problem is that if your idea isn't a CRUD app then finding funding to pay for the expenses is effectively impossible outside of raising from friends and family. VC funds (and especially public money that VCs control) should be invested in genuine innovation, not yet-another-Uber-for-meal-kits.

I agree that would be nice if it were true. But that's manifestly not the business VCs are in. Their behavior is a pretty predictable outcome of our society's current ideology around capital.

That could change, of course. The pandemic is making it clear how threadbare that ideology is, so perhaps we'll return to valuing things beyond a high rate of shareholder return.

Re: Analyzing pitches to find what gets VCs interested in a meeting

#30

Post by Zenst » Mon, May 04, 2020, 4:12 PM UTC

pge wrote: post #12

I wouldn’t trust these data, not because there is anything wrong with the analysis but because the inputs are inaccurate. What VCs say was the reason they were interested is not necessarily what made them interested. It may be what they tell themselves or tell you, but I think the decision criteria are rarely that objective or explicit. Decisions are made, then back justified with a plausible explanation.

The fact they attended the meeting already shows they are interested. What maintained that interest to the end is as you say a many forked answer and what they tell you and what they are actually thinking will be different.

They may have your company in mind to work with another company they know/own down the line, or the other way around and with that, see which one works well and breakup the other. That they won't outline at the start and yet would be a reason of interest in buying.