What’s The Best Way To Pitch A Startup With Two Strategies?

“I never invest in act two of a startup,” Gill’s partner Carl said to me. The meeting was going well. We had really signed our term sheet, so this was more of a get to know you meeting.

Then Carl continued talking, “I’m heartened that you have experience doing act one already. That makes me comfortable.”

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Carl was referring to the first part of our strategy which was second sourcing (producing replicas) of other companies best selling parts. Then once we pivot to our own proprietary products (act two).

The strategy was sound, but it was not popular with many of the investors we spoke to. After all, you’re supposed to innovate when you’re a startup, and producing second sources sure doesn’t sound like innovating.

So a lot of investors passed on us because they just didn’t get what we were doing. No matter how hard I tried to explain we were following the same tried and true path that the two most successful companies in our industry followed (Maxim and Linear Technology), investors continued saying no.

You have to stand for something. Not two things, but one thing.

NFL Hall of Fame football coaching and business expert John Madden has a saying, “When you have two quarterbacks, you have none.” It’s the same for business strategies. If you have two strategies, you don’t have a strategy.

You’re going to have just choose a single strategy just like we did. The question is which one should you choose.

You should choose the strategy that makes the most business sense, not the strategy you think will get you funded.

That sounds pretty controversial, doesn’t it? The goal is to get funded, but you will pay for it later if you mislead your potential investors.

So we stuck to our guns. During our first meeting with Gill, he smiled and said, “I was an investor in Maxim.” I smiled too because I knew right then he was a believer in our strategy.

Sure enough, Gill quickly gave us a term sheet. That’s why I’m not a believer in trying to morph your pitch and your plan to what you think investors want to hear.

You’re, by definition, out of alignment with your investors if you change your strategy in a way that suits your investors but doesn’t suit you. And being out of alignment with your investors can be a fatal mistake for your company.

I’m not saying you shouldn’t pay attention to useful feedback you get along the way. I am saying that you should go after the business that you believe will be successful first.

In other words, make act one of your business what you think makes sense. Then focus on act two.

For more, read: The Nine Facts Of Fundraising You Need To Know

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I work with startup CEOs to help them grow their businesses . I built several businesses from $0 to >$100M. Learn more at www.brettjfox.com

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