Know Your Business

It helps to know how you create value for your customer

Summertime is perfect for catching up with people and one meeting here last summer really stands out. An engineer and an astrophysicist came to see me with a fire safety device. I like fire engines as much as the next guy, but fire safety tech is a narrow niche of geekery and it ain’t my bag. This product, however, turned out to be much more than a fire safety device and potentially worth a lot of money.

Define cool

I’m a big fan of this Copenhagen-based engineer/astrophysicist combo and I knew they desperately needed to review their value proposition. What it is, what it does, and what that means can be very different things for almost any product. Their fire safety device project took an interesting turn when they shared their conversations with property owners. It turned out the device would remove the need for a second or back staircase in the older apartment buildings common in middle of European cities.

Revenue is cool

Removing the need for a back staircase means that space can be added to the apartments or used to install elevators. More square meters and new amenities both mean more revenue for property owners, a lot more revenue. And property owners are excited about that. Add in that the device could also make it possible to create penthouse apartments in the current attic spaces and it sounds even better.

A new value proposition

By the time we finished our coffee, the two entrepreneurs had a new value proposition. They were no longer in the fire safety business, but were firmly in the “increasing revenue for property owners” business. Adding 2-6 square meters to each apartment – usually in either the kitchen or bathroom – quickly turns into a lot of money. Potentially adding penthouses to existing structures adds even more.

Follow the money

Investors get pitched a lot of ideas and investors aren’t always super imaginative. Helping investors make lots of money catches the imagination in ways that helping them with fire safety does not. I look forward to seeing where the new value proposition takes the engineer and the astrophysicist.

Finding Zlatan

Nordic founders can take underselling to unnecessary extremes

Our region spawns an outsized number of unicorns. What’s even more impressive is that we do it despite, to put it politely, a limited ability to pitch. There are a handful of natural showmen amongst us, but most Nordic founders have to work hard to learn to communicate effectively. When we do, we excel.

We don’t do “Show-and-Tell” at school

For many Nordic founders, pitching is our first taste of public speaking. Schools in the English-speaking world seem to start teaching presentation in kindergarten. Tiny tots bring favorite toys to present at “Show and Tell”. “This is my teddy bear. I like him very much. Etc.” This is unknown in the Nordics.

Nordic Founders can drive you nuts

We seldom brag, even when we have plenty about which to brag. Take the pair of game developers I met two years ago in Malmö. They planned to launch their game on Steam, the dominant platform for indy games. When I asked how they would stand out amongst the dozens of games launched every day on Steam, they were disconcertingly vague.

Who did you say they were?

Imagine my surprise when, moments after our meeting, I was told they had been on the team that built Mindcraft. And that one of them had 400,000+ followers on Twitter. “Hey, you! Come ‘ere!” I yelled, channeling my very un-Nordic inner New Yorker. I was polite, but made myself very clear.

More Zlatan, less…

I’m glad to report that they now introduce themselves as part of the original Mindcraft team. Their pitch has more Zlatan Ibrahimovic “how do you like me now?” swagger and less Swedish modesty. Saying that you built Mindcraft and now you have a new game is also relevant information your audience needs to know.

Sometimes it’s the setting

I met a raw bar startup at a pitch workshop I held in Malmö back when raw bars were strictly for vegans and crossfit enthusiasts. The half dozen other firms in the workshop were all early stage and many were pre-sales. My workshops are hands on, so they were all creating or rewriting their actual pitches. As we went along, the raw bar people struggled to explain their traction.

The challenge of consideration for others

The Nordics are famous for our consensus and it relies in great part on not making other people feel ill at ease. It took me most of the day to figure out that they didn’t want to make the other workshop participants feel bad. They had plenty of traction. They had sold hundreds of thousands of bars and just landed a contract with 7-Eleven. Today they’re huge.

Modesty can almost be dishonesty

You don’t want a Boy Scout trying to save your life, just because the trauma surgeon next to him is too modest to intervene. It may sound harsh, but pitching is serious business. Being modest or overly considerate can be very counterproductive.

Nordic founders can be modest to a fault. Our lack of public speaking experience can confuse or even misinform. Once Nordic founders understand how much pitching matters and we have the tools to learn how to do it well, we tend to do great things.

Misunderestimating Women Has a Price

A tale of opportunities missed – and what we did about it.

I prefer to work with people I like, and I really like the team behind Hooves (hoovesapp.com). There’s no guessing where Hooves will end up, but they work hard, have a great idea, and the last year has been a lot of fun. They also happen to be women, so last year I taught Hooves not to smile.

Ninety percent of mentoring women in startups is the same as mentoring men. The last ten percent is not. I don’t have to mentor men on how to deal with investors who don’t take them seriously because they’re men. I don’t have to mentor men on how to present their product or service to investors who don’t understand men.

Misunderestimation is a common mistake

Alina and Suvi, the two founders of Hooves, fit a lot of our stereotypes about horse people. Both are young, female, outgoing, and blonde. Danes would call them ‘hestepiger’ – or ‘horse girls’. A lot of investors they met dismissed them to talk instead to introverted young men with glasses or overconfident fast talking salesmen types.

We changed the pitch

Just before the summer, we changed two things in their pitch – their focus and their delivery. Many pitches spend either too long on the problem or focus too specifically on their initial solution. The first Hooves application matches people who own horses with people who want to ride horses. The big opportunity the company presents, however, is digitizing an industry more than three times bigger than golf. That’s what they pitch now.

They also changed how they pitch

The world expects women to smile, so Alina and Suvi stopped smiling. You don’t have to be Harvey Weinstein to be a jerk to women. Too many investors of both sexes we spoke with referred to Hooves as the “horse girls”. A wardrobe change to black helped, but I think the big shift came when they stopped smiling.

Now people listen

My data is limited, but an investor recently said that half way through his meeting with Hooves he started wondering what he had done wrong. “They’re so serious”, he told me. I let him in on the secret and he nodded. Hooves are getting more meetings and, as of this week, have raised half of their next round.

Investors have been throwing money at golf concepts, because they know it’s a rich sport and it’s one they play. Hooves isn’t about innovating part of a sport, it’s about making lots of money and that’s what they pitch. Plenty of people seem to be able to find the opportunity in imperfect pitches, so why couldn’t they see the play in Hooves?

Stand back, the ladies are coming through

At an investor event where the pitching companies got access to the stage an hour before, I watched them practice their pitch over and over while other presenters just wandered around. They knew exactly where the sightline was between offstage and on stage and when the audience would first see them. They work harder.

Life is short and we spend a lot of time at work. I prefer to work with people I like. These ladies are kicking it.

What Exactly Do You Do?

Too many people don’t explain their product or service when they pitch – and it makes them look bad.

I may not be on the Nobel Committee’s shortlist, but I hear a lot of pitches and I’m really good at deciphering what people are trying to say. Sometimes, however, a five or even ten-minute pitch leaves me confused – and often utterly ignorant.

This matters because it makes both you and your company look like you don’t know what you’re doing. Far too many people see pitching as an add-on or ancillary task. It is a core task. If you can’t explain what you do clearly so that even I can understand, you’re doing something wrong. The cause is usually structural and the following rules can help.

Statement

Describe what you do in seven words. For example, “our platform connects auto dealers with customers”. Do not use these words to explain how it works, what it’s like, or the benefits it provides. Do not confuse this with your tagline. Say what you do.

Use a use case

Explain how your product or service does what it does for a single user or customer. This is especially useful if you have many different types of users or customers. Pick one. Show me how your product works for that one user. No pitch can explain every facet of your product. It doesn’t have to. A pitch is there to ‘get the next meeting’, where you can go into detail.

Use personas

Let’s say you’re explaining AirBnB. “Jane lives in San Francisco. She travels a lot for work and wants to rent out her apartment while she is on the road.” “Tom and Sarah want an alternative to staying in a hotel.”

In a few short steps, walk us through the process of how it works, from Jane putting her apartment on the platform, to how Tom and Sarah find and rent it, to how Jane gets paid, and how the transaction ends.

Explain the value

Don’t make me guess the value you deliver. Tell me the insurance the platform provides makes Jane worry less about renting out her apartment. Tell me the guarantee of a place to stay makes Tom and Sarah more likely to rent through the platform.

Stick to your statement

Repeat your seven-word statement so I have a chance to remember it. Repetition is a powerful tool. Don’t be tempted to explain what you do in different ways. The more times you rephrase what you do, the more chances I have to misunderstand it.

Conclusion

Many pitches fail to explain the product or service. This failure can reflect catastrophically on you and your product. Explain what your product is. Then show me how it works with a use case. Finally, tell me why that matters. Fixing the rest of your pitch is just hard work and practice.

Show Them The Money

It pays to know more than one language: Speak numbers.

I hosted a case competition called the CBS Finance Competition a while back at Copenhagen Business School and it was an eye-opener. The case was the Danish manufacturer Danfoss and the focus was their acquisition of startups. Two things stuck out: it was a boys club and it was all about the numbers.

It’s a pickle party

Do not confuse the society we want with the society we have. All twelve of the participants in the competition were white men in dark suits. There were only two women in the first two rows of the auditorium. Both worked in HR. All of the men wore dark suits, except for the professor, who wore a blue blazer, and a member of the Danfoss merger team, whose suit was gray.

Plan for today. Change tomorrow.

By all means be depressed by the current gender-gap and work to change it, but plan based on fact, not aspiration. Danfoss is an impressive company and they’re socially engaged, but facts are facts. If you’re looking for a corporate acquirer, know that the odds are overwhelming that you’ll be talking to a white man who studied finance. The ratio will change in the future, but plan for the ratio that exists now.

Your focus isn’t their focus – and this makes sense

Startups often focus on team and product. Most corporate investors focus on the numbers. They are buying for very specific reasons and usually have very specific KPIs. They may be how many customers you have or the size of the markets to which your product will give them access.

Like the jury in the competition, you’ll most likely be talking to finance people. Their degrees, surprise, surprise, are usually in finance. The exceptions work in an environment dominated by finance. To them, your product is not something that does A for B, but something that can generate X revenue over Y time. Know how to talk their language.

It’s all about the Benjamins

I ran into an old friend shortly afterwards who used to run an accelerator. After a year off spent working for a corporate, he had spent a couple of months helping a handful of his companies raise money. It had gone well. Why? He’d spent a year working on the other side of the table from the startups.

“You can talk about team and product,” he said, “but it’s all about the money.”

 

“They Didn’t Do As I Said!”

Action shot of me facilitating an investor panel and explaining what not to do.

A pitch doesn’t have to be perfect to work

Startup mentors spend a lot of time giving pitch advice. The advice given spans everything from format and content to delivery and even personal wardrobe choices. Some of the advice is good and a lot of it is not, but in defense of the well-meaning mentor, it is worth noting that the target – the right message delivered the right way to the right audience – can be hard to hit.

“Thank you for a really good pitch…”

Take for example, a pitch I heard recently while running an investor panel in Gothenburg, Sweden. The pitch was awful, and yet it really caught the panel’s attention. The pitch was vague. It was long on the problem and short on the value created, but Swedes are unfailingly polite. Each investor started their feedback by saying ‘thank you for a really good pitch’, before asking some rather revealing questions.

The first investor said he didn’t understand the product. The second investor agreed with the first and said that she didn’t understand the business model. The third agreed with her predecessors and said that she didn’t understand how the product was sold. The pitch looked like a disaster.

Sometimes ugly works

The fourth agreed with all of his colleagues, but then said that he wanted to meet with the company after the session. Why, you ask? Because they had 10,000 B2B customers, that’s why. He said he wanted to know what the customers understood that the company had been unable to explain to the investors. The other three investors all agreed.

Traction is king.

“Your Value Proposition is Unclear”

0iijeltgvzm-marc-guellerinThere are many ways to be a mentor, but basics are easy. Try to help and don’t be a jerk.

It’s almost Christmas as I write this. A few miles north of where I sit, my namesake is checking his list to see whether each and every one of us has been naughty or nice. Most of us could do with some help on the nice side, so if you’re a mentor, remember the first rule of mentoring: Don’t be a jerk.

We like being right
I meet loads of people who call themselves experts. A surprising number of them are actually quite knowledgeable. Quite a few of these even manage to translate this knowledge into something that provides value to others. Many, however, don’t help at all.

Translating knowledge into words that can be communicated, understood, and applied is hard. The temptation to play the know-it-all is overpowering to some. Far too many of us can’t help ourselves. We feel the need to prove we’re right. Our quick tongues can’t resist the urge to put down or ridicule. Our desire to help loses to a need to be recognized as clever.

Any fool can point out the problems
Too many mentors think our role is to point out all the problems. Entrepreneurs know startups are hard. If they don’t, time will teach them soon enough. They may have missed some nuances or completely missed something vital, but when they come to us, almost all of them come for help.

They’re looking for answers
They need help getting stuff done. They need solutions. There’s nothing wrong with helping them identify the problems, if that’s the phase they’re in – or if they’ve missed something big. Usually startups have a specific pain. It may be assistance in pinpointing where exactly they need help, but then they need the answer – or our advice on where to find it.

Answers that help, delivered so they can be used
Too many of us spend more time tearing down than building up. The American practice of sandwiching bad news in between good may seem superficial, but it can make advice easier to absorb and accept. Entrepreneurs are touchy about their startups.

Sometimes it’s not all about you
Half an hour of being told you’re an idiot makes people defensive and unreceptive to new ideas. Who knew? Sometimes dialing back the criticism makes it easier for us to make our point and provide help that makes a difference. No matter what your approach, follow the first rule of mentoring. Remember that we’re here to help. Don’t be a jerk.