Scott Kupor, the managing partner and CEO of famed venture capital firm, Andreessen Horowitz (a16z), is behind some of the biggest names in the startup world. The firm’s portfolio of investments includes multi-billion dollar ‘unicorns’ that have gone public or are expected to go public this year: Lyft, Slack, Pagerduty, Pinterest, and Airbnb among others.
Kupor was employee number one when Marc Andreessen and Ben Horowitz started the firm in 2009. As managing partner, Kupor has overseen the company’s growth from $300 million in assets to more than $7 billion in assets under management.
I sat down with Kupor in a rare interview to talk about his new book, Secrets of Sand Hill Road. Our conversation focused on the five essential pitch techniques that an entrepreneur should master before they sell their ideas to potential investors.
The Art of the Pitch in 5 Essential Steps
1. Market Size
It’s an entrepreneur’s job to be a “patient and inspiring teacher.” In other words, don’t assume that your audience—even one made of up VCs—understands your market or its potential size.
For example, when the co-founders of Lyft pitched the ride-hailing service at Andreessen Horowitz, the market size wasn’t obvious. Kupor explains that most people would have used the taxi industry as a proxy for the potential market, but Lyft’s entrepreneurs argued that the taxi comparison was too limited. Instead, “If you imagine a world where everyone is walking around with a fully networked supercomputer in their pockets with GPS tracking…then the market size for on-demand car sharing should be much larger.”
The pitch worked and a16z’s stake in Lyft was worth an estimated $1.2 billion when the company went public
2. Team
Step two is the most critical aspect of the pitch. It’s your job as an entrepreneur to answer the question, Why You? Why should an investor back you and your team instead of another entrepreneur who might have a similar idea?
In his book, Kupor writes, “Ideas are a dime a dozen; execution is what sets the winners apart from the pretenders…What makes you a natural-born leader, or a learned leader, that will cause people to quit their jobs and come work for you?” A great pitch will showcase an entrepreneur’s unique story, experience, skill, as well as the specialized knowledge of the team. According to Kupor, VCs want to know “What is the unique characteristic that makes this team—hands down—the best team to approach this idea?”
Secrets of Sand Hill Road
3. Product
Kupor says that investors love to learn. They’re fascinated by how something works. “We want to see the idea maze,” a startup term for explaining the potential twists and turns from an idea to a real market product. An entrepreneur must give her audience confidence that she understands the data well enough to adapt to changing market conditions.
Investors also want to know why your idea is ten times better (or cheaper, or faster) than the existing alternatives. They want to be walked through the process.
4. Go-to-Market
Simply put, VCs want to know that an entrepreneur has a plan to win customers—the lifeblood of a company. Kupor says this is often the most underdeveloped section of the pitch, especially for early-stage companies. Investors need to understand how an entrepreneur plans to acquire new customers and how the business model supports the acquisition of new customers profitably.
While it’s true that early-stage startups don’t always have robust, long-range financial models, investors need the assurance that an entrepreneur has thought it through.
5. Planning
One VC firm does not expect to be a startup’s sole capital provider. It’s one stop on the journey. What story is the entrepreneur going to tell the next investor? “For the final part of your pitch to VCs, you should clearly articulate the milestones you intend to accomplish with the money you are raising at this round,” writes Kupor.
These pitch essentials are valuable for startups raising VC money and also for entrepreneurs who may not be looking for investors, but must persuade customers, partners and employees, to back their ideas.
Above all, Kupor recommends that you never forget your audience. Venture capitalists want to look like a hero to their audience—the limited partners whose money they’re investing. Show a VC how your idea turns them into heroes and you’ll stand a much better chance of winning them over.
In the following video, Kupor and I discuss the art of pitching, storytelling and our mutual love of country music.