18/01/2022, 18:00 How to Present to Investors

Want to start a startup? Get funded by Y Combinator.

August 2006, rev. April 2007, September 2010

In a few days it will be Demo Day, when the startups we funded

this summer present to investors. Y Combinator funds startups
twice a year, in January and June. Ten weeks later we invite all
the investors we know to hear them present what they've built so
far.

Ten weeks is not much time. The average startup probably

doesn't have much to show for itself after ten weeks. But the
average startup fails. When you look at the ones that went on to
do great things, you find a lot that began with someone pounding
out a prototype in a week or two of nonstop work. Startups are a
counterexample to the rule that haste makes waste.

(Too much money seems to be as bad for startups as too much

time, so we don't give them much money either.)

A week before Demo Day, we have a dress rehearsal called

Rehearsal Day. At other Y Combinator events we allow outside
guests, but not at Rehearsal Day. No one except the other
founders gets to see the rehearsals.

The presentations on Rehearsal Day are often pretty rough. But

this is to be expected. We try to pick founders who are good at
building things, not ones who are slick presenters. Some of the
founders are just out of college, or even still in it, and have never
spoken to a group of people they didn't already know.

So we concentrate on the basics. On Demo Day each startup will

only get ten minutes, so we encourage them to focus on just two
goals: (a) explain what you're doing, and (b) explain why users
will want it.

That might sound easy, but it's not when the speakers have no
experience presenting, and they're explaining technical matters to
an audience that's mostly non-technical.

This situation is constantly repeated when startups present to

investors: people who are bad at explaining, talking to people
who are bad at understanding. Practically every successful
startup, including stars like Google, presented at some point to
investors who didn't get it and turned them down. Was it because
the founders were bad at presenting, or because the investors
were obtuse? It's probably always some of both.

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At the most recent Rehearsal Day, we four Y Combinator partners
found ourselves saying a lot of the same things we said at the
last two. So at dinner afterward we collected all our tips about
presenting to investors. Most startups face similar challenges, so
we hope these will be useful to a wider audience.

1. Explain what you're doing.

Investors' main question when judging a very early startup is

whether you've made a compelling product. Before they can
judge whether you've built a good x, they have to understand
what kind of x you've built. They will get very frustrated if instead
of telling them what you do, you make them sit through some
kind of preamble.

Say what you're doing as soon as possible, preferably in the first

sentence. "We're Jeff and Bob and we've built an easy to use
web-based database. Now we'll show it to you and explain why
people need this."

If you're a great public speaker you may be able to violate this

rule. Last year one founder spent the whole first half of his talk
on a fascinating analysis of the limits of the conventional desktop
metaphor. He got away with it, but unless you're a captivating
speaker, which most hackers aren't, it's better to play it safe.

2. Get rapidly to demo.

This section is now obsolete for YC founders presenting at Demo

Day, because Demo Day presentations are now so short that they
rarely include much if any demo. They seem to work just as well
without, however, which makes me think I was wrong to
emphasize demos so much before.

A demo explains what you've made more effectively than any

verbal description. The only thing worth talking about first is the
problem you're trying to solve and why it's important. But don't
spend more than a tenth of your time on that. Then demo.

When you demo, don't run through a catalog of features. Instead

start with the problem you're solving, and then show how your
product solves it. Show features in an order driven by some kind
of purpose, rather than the order in which they happen to appear
on the screen.

If you're demoing something web-based, assume that the

network connection will mysteriously die 30 seconds into your
presentation, and come prepared with a copy of the server
software running on your laptop.

3. Better a narrow description than a vague one.

One reason founders resist describing their projects concisely is

that, at this early stage, there are all kinds of possibilities. The
most concise descriptions seem misleadingly narrow. So for
example a group that has built an easy web-based database
might resist calling their applicaton that, because it could be so
much more. In fact, it could be anything...

The problem is, as you approach (in the calculus sense) a

description of something that could be anything, the content of
your description approaches zero. If you describe your web-based
database as "a system to allow people to collaboratively leverage
the value of information," it will go in one investor ear and out
the other. They'll just discard that sentence as meaningless
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boilerplate, and hope, with increasing impatience, that in the next
sentence you'll actually explain what you've made.

Your primary goal is not to describe everything your system might

one day become, but simply to convince investors you're worth
talking to further. So approach this like an algorithm that gets the
right answer by successive approximations. Begin with a
description that's gripping but perhaps overly narrow, then flesh it
out to the extent you can. It's the same principle as incremental
development: start with a simple prototype, then add features,
but at every point have working code. In this case, "working
code" means a working description in the investor's head.

4. Don't talk and drive.

Have one person talk while another uses the computer. If the
same person does both, they'll inevitably mumble downwards at
the computer screen instead of talking clearly at the audience.

As long as you're standing near the audience and looking at

them, politeness (and habit) compel them to pay attention to
you. Once you stop looking at them to fuss with something on
your computer, their minds drift off to the errands they have to
run later.

5. Don't talk about secondary matters at length.

If you only have a few minutes, spend them explaining what your
product does and why it's great. Second order issues like
competitors or resumes should be single slides you go through
quickly at the end. If you have impressive resumes, just flash
them on the screen for 15 seconds and say a few words. For
competitors, list the top 3 and explain in one sentence each what
they lack that you have. And put this kind of thing at the end,
after you've made it clear what you've built.

6. Don't get too deeply into business models.

It's good to talk about how you plan to make money, but mainly
because it shows you care about that and have thought about it.
Don't go into detail about your business model, because (a) that's
not what smart investors care about in a brief presentation, and
(b) any business model you have at this point is probably wrong
anyway.

Recently a VC who came to speak at Y Combinator talked about a

company he just invested in. He said their business model was
wrong and would probably change three times before they got it
right. The founders were experienced guys who'd done startups
before and who'd just succeeded in getting millions from one of
the top VC firms, and even their business model was crap. (And
yet he invested anyway, because he expected it to be crap at this
stage.)

If you're solving an important problem, you're going to sound a

lot smarter talking about that than the business model. The
business model is just a bunch of guesses, and guesses about
stuff that's probably not your area of expertise. So don't spend
your precious few minutes talking about crap when you could be
talking about solid, interesting things you know a lot about: the
problem you're solving and what you've built so far.

As well as being a bad use of time, if your business model seems

spectacularly wrong, that will push the stuff you want investors to
remember out of their heads. They'll just remember you as the
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company with the boneheaded plan for making money, rather
than the company that solved that important problem.

7. Talk slowly and clearly at the audience.

Everyone at Rehearsal Day could see the difference between the

people who'd been out in the world for a while and had presented
to groups, and those who hadn't.

You need to use a completely different voice and manner talking

to a roomful of people than you would in conversation. Everyday
life gives you no practice in this. If you can't already do it, the
best solution is to treat it as a consciously artificial trick, like
juggling.

However, that doesn't mean you should talk like some kind of
announcer. Audiences tune that out. What you need to do is talk
in this artificial way, and yet make it seem conversational.
(Writing is the same. Good writing is an elaborate effort to seem
spontaneous.)

If you want to write out your whole presentation beforehand and

memorize it, that's ok. That has worked for some groups in the
past. But make sure to write something that sounds like
spontaneous, informal speech, and deliver it that way too.

Err on the side of speaking slowly. At Rehearsal Day, one of the

founders mentioned a rule actors use: if you feel you're speaking
too slowly, you're speaking at about the right speed.

8. Have one person talk.

Startups often want to show that all the founders are equal
partners. This is a good instinct; investors dislike unbalanced
teams. But trying to show it by partitioning the presentation is
going too far. It's distracting. You can demonstrate your respect
for one another in more subtle ways. For example, when one of
the groups presented at Demo Day, the more extroverted of the
two founders did most of the talking, but he described his co-
founder as the best hacker he'd ever met, and you could tell he
meant it.

Pick the one or at most two best speakers, and have them do
most of the talking.

Exception: If one of the founders is an expert in some specific

technical field, it can be good for them to talk about that for a
minute or so. This kind of "expert witness" can add credibility,
even if the audience doesn't understand all the details. If Jobs
and Wozniak had 10 minutes to present the Apple II, it might be
a good plan to have Jobs speak for 9 minutes and have Woz
speak for a minute in the middle about some of the technical
feats he'd pulled off in the design. (Though of course if it were
actually those two, Jobs would speak for the entire 10 minutes.)

9. Seem confident.

Between the brief time available and their lack of technical

background, many in the audience will have a hard time
evaluating what you're doing. Probably the single biggest piece of
evidence, initially, will be your own confidence in it. You have to
show you're impressed with what you've made.

And I mean show, not tell. Never say "we're passionate" or "our
product is great." People just ignore that—or worse, write you off
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as bullshitters. Such messages must be implicit.

What you must not do is seem nervous and apologetic. If you've

truly made something good, you're doing investors a favor by
telling them about it. If you don't genuinely believe that, perhaps
you ought to change what your company is doing. If you don't
believe your startup has such promise that you'd be doing them a
favor by letting them invest, why are you investing your time in
it?

10. Don't try to seem more than you are.

Don't worry if your company is just a few months old and doesn't
have an office yet, or your founders are technical people with no
business experience. Google was like that once, and they turned
out ok. Smart investors can see past such superficial flaws.
They're not looking for finished, smooth presentations. They're
looking for raw talent. All you need to convince them of is that
you're smart and that you're onto something good. If you try too
hard to conceal your rawness—by trying to seem corporate, or
pretending to know about stuff you don't—you may just conceal
your talent.

You can afford to be candid about what you haven't figured out
yet. Don't go out of your way to bring it up (e.g. by having a slide
about what might go wrong), but don't try to pretend either that
you're further along than you are. If you're a hacker and you're
presenting to experienced investors, they're probably better at
detecting bullshit than you are at producing it.

11. Don't put too many words on slides.

When there are a lot of words on a slide, people just skip reading
it. So look at your slides and ask of each word "could I cross this
out?" This includes gratuitous clip art. Try to get your slides under
20 words if you can.

Don't read your slides. They should be something in the

background as you face the audience and talk to them, not
something you face and read to an audience sitting behind you.

Cluttered sites don't do well in demos, especially when they're

projected onto a screen. At the very least, crank up the font size
big enough to make all the text legible. But cluttered sites are
bad anyway, so perhaps you should use this opportunity to make
your design simpler.

12. Specific numbers are good.

If you have any kind of data, however preliminary, tell the

audience. Numbers stick in people's heads. If you can claim that
the median visitor generates 12 page views, that's great.

But don't give them more than four or five numbers, and only
give them numbers specific to you. You don't need to tell them
the size of the market you're in. Who cares, really, if it's 500
million or 5 billion a year? Talking about that is like an actor at
the beginning of his career telling his parents how much Tom
Hanks makes. Yeah, sure, but first you have to become Tom
Hanks. The important part is not whether he makes ten million a
year or a hundred, but how you get there.

13. Tell stories about users.

The biggest fear of investors looking at early stage startups is

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that you've built something based on your own a priori theories of
what the world needs, but that no one will actually want. So it's
good if you can talk about problems specific users have and how
you solve them.

Greg Mcadoo said one thing Sequoia looks for is the "proxy for
demand." What are people doing now, using inadequate tools,
that shows they need what you're making?

Another sign of user need is when people pay a lot for something.
It's easy to convince investors there will be demand for a cheaper
alternative to something popular, if you preserve the qualities that
made it popular.

The best stories about user needs are about your own. A
remarkable number of famous startups grew out of some need
the founders had: Apple, Microsoft, Yahoo, Google. Experienced
investors know that, so stories of this type will get their attention.
The next best thing is to talk about the needs of people you know
personally, like your friends or siblings.

14. Make a soundbite stick in their heads.

Professional investors hear a lot of pitches. After a while they all

blur together. The first cut is simply to be one of those they
remember. And the way to ensure that is to create a descriptive
phrase about yourself that sticks in their heads.

In Hollywood, these phrases seem to be of the form "x meets y."

In the startup world, they're usually "the x of y" or "the x y."
Viaweb's was "the Microsoft Word of ecommerce."

Find one and launch it clearly (but apparently casually) in your

talk, preferably near the beginning.

It's a good exercise for you, too, to sit down and try to figure out
how to describe your startup in one compelling phrase. If you
can't, your plans may not be sufficiently focused.

How to Fund a Startup Hackers' Guide to Investors

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Image: Casey Muller: Trevor Blackwell at Rehearsal Day, summer 2006

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