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Investors buy tomorrow, not today
The most common mistake founders make when pitching investors is presenting where the company is today, instead of where it will be in 10 years.
In the early days of building your company, every step forward is incredibly difficult. You push, grind and do whatever you can to make even the smallest amount of progress. Your first product, first customer, first user are all momentous achievements. You want to display them proudly and show them off to potential investors!
Unfortunately, no one cares.
Investors don’t invest in companies because of where they are right now, they invest because of where the company can be in 10 years.
It can be hard to shift gears from dealing with the daily grind to focusing on the far, far future. Some founders feel it’s even dishonest to talk about their companies being industry leaders when they have no customers yet. It is a very different skill to present the company as it could be in the far future, even if that future is extremely unlikely.
However, investors know your chance of success is low! You don’t need to explain what can go wrong to them, they know it all too well. You need to explain what can happen if things go right. What if your vision comes true? How far will your company get? The bigger the opportunity, regardless of the low probability, the better.
When you think about your company this way, it becomes clear that your progress so far isn’t an achievement (at least not yet). Your progress is validation that your long term potential is possible. It’s evidence that your vision is not entirely crazy and that there is a small chance you can eventually achieve it. That’s important, but not enough to convince an investor to invest.
Consider a few different ways to talk about your company:
The future is much more compelling! Far too many founders try to raise money using their sales pitch, which focuses on today, instead of pitching tomorrow. You need to build an entirely different pitch for investors that is your sales pitch from 10 years from now.
Again, it can be really hard to shift gears from dealing with the daily grind to thinking about the far future. This is where finding someone outside your company to review your pitch can help, since they will find it easier to separate the present from the future. It can even be a good idea to have a friend interview you about your company to create the first version of the pitch, since it means you don’t have to think as much about the framing.
You will know you’ve hit the right formula when investors stop asking questions about how big the business can become, and start to ask about how you get there.