“Hey, y’all wanna hear a joke?” one of my teammates in my lane asks during warm-up. If there was the equivalent of a class clown in the pool, that’d be him.
“Why not?” the rest of us answer, hoping to spice up the impending 2-hour practice.
“So, there’s this guy who’s about to ask this girl out to the school dance. But to do so, he’s gotta ask her out on Valentine’s Day. So the day before, he goes to buy a Valentine’s gram during lunch. Turns out – there’s a long, long line.”
Our coach blows the whistle, and we sprint off. When we touch again, he goes on, “And there’s a separate line to buy the roses. So, he heads over, and turns out – there’s a long, long line.”
Again, the whistle goes off, and upon return, “So, he finishes buying his gram and roses. On the fateful day, she gets it all and says yes. Super excited, the guy prepares for the school dance. First he goes to buy his tux. When he arrives at the tailor-“. He pauses, beckoning us to finish his sentence.
“There’s a long, long line,” we chime in. In the distance we hear, “Lane 1. Stop talking!” Whistle blows, and we go…
And return. “He gets his suit tailored. Now he goes to Office Depot to buy his cue cards and markers to ask her out. But when he gets to the cash register…”
“There’s a long, long line.” And a kickboard comes flying in and smacks two of us in the face. “Quiet!” a distant shout.
“Day of the ask, he assembles all his friends, lines them up for a dramatic prom ask. And what do you know?”
“There’s a long, long line.” Another one of us feels the sting of hard foam across our face.
“The girl says yes. And now, finally the day of the prom arrives, and he picks her up. Together, they take pictures with everyone else, in a-“
“Long, long line.”
“Then they all drive to the destination of prom. But turns out they’re not the first ones there. Ahead-“
“There’s a long, long line.” At this point we were too vested in the joke. Each of us with bruises across our face – just short of our coach dragging us out of the water to discipline us.
“So the boy and girl finally make it into the dance hall, and while they’re waiting for the dance floor to open up, the boy asks us the girl, ‘Can I get you something to drink?’ And she says, ‘Sure.’ So, he goes over to where the fruit punch is. And, turns out…”
“There’s a long, long-“
“Nope, there’s no punch line.”
The bigger picture
I hear so many founders tell me they’re pursuing this billion dollar market. Or even a trillion dollar one with a capital T. And how they plan to capture 10% of this huge market in 5 years. I mean, c’mon, how awesome would 10% of this billion dollar market sound for our returns?
For an investment of anywhere between $1 and $10 million, let’s say $1 million (’cause this is usually something people raising a pre-seed/seed say), 10% of $100B market is $10B. And for the ease of calculation, let’s say by the time the founders exit, we still have 10%, 10% of $10B is $1B. For only $1M invested, $1B is a 1000x return. Wowza!
The true let-down happens when they finally share what their solution is. And it turns out to only address a small fraction of their total addressable market (TAM). Here’s a hypothetical example. A team is tackling a TAM for events of $1.1 trillion (2018 number). They talk about how awesome a CAGR of over 10% is. And how virtual events are the new trend and might accelerate that number even more. I’m thinking, “Hell ya, this’ll be epic.”
Then their product – the punchline… an app that streamlines coffee service at events in 2020. While this may or may not be an exaggeration, many startups find their pitches in a similar format. On one end, as a founder, you want to tackle the biggest market you can – to attract investors hoping to make large returns. On the other end, you want to be realistic with your expectations, as well as your investors’. Often times, it’s a fine line. I get it, which is why I suggest approaching market-sizing from the angle of pragmatic optimism.
The GTM strategy
After you share such a lofty goal, the inevitable question comes along: “What is your go-to-market (GTM) strategy?” The usual answer is some permutation of the below:
- Google/Facebook/other ads,
- Get it on the App Store (and/or Play Store),
- (Pay for) SEO,
- Hire a C_O (fill in the blank)
- Hire a growth hacker,
- Or more engineers, or for that matter, anyone,
- We were hoping you (the investor) could help us with that, once you fund us. 🙁
But who are we kidding? No one. While none of the above answers are unilaterally incorrect, all the above show characteristics of someone who isn’t a hustler, who isn’t scrappy, and who probably isn’t one to scale a business. A pitch deck is designed to be short. I get it. There’s a lot you can’t fit on to it. But I’m not alone when I say this, we want to see the why and the how behind the what. A bit of Simon Sinek‘s two cents – start with why.
- Why are you hiring more people? To do what?
- Why did you choose Google over Facebook ads? Over Reddit, Instagram, Tiktok, you-name-it ads? Over traditional billboards?
- What is the end goal?
- What is the core metric you’re optimizing for? In the near term? In the long term? Before your next fundraise?
Just to be clear, just because a founder approaches market analysis from a top-down approach doesn’t instantly disqualify him/her. But it is a red flag. That’s why I’m a huge proponent of bottoms-up market-sizing.
Bottoms-up… and Cheers!
How many customers do you plan to have by the end of this year? By the end of next year? The year after?
How much do you plan to sell your product/service for? How will customer acquisition cost (CAC) get cheaper over the next few years? What will you need to do for CAC to get cheaper?
Eventually, you build out this road map of what the next few quarters and years will look like. You, effectively, plot out, here are the next few milestones we need to hit as a team. And those milestones are quantifiable and actionable – a clear sense of direction for your team and for your investors. Of course, as any road map goes, all subject to change depending on the situation.
In closing
Just like a great joke, you, the founder, need to be capable of delivering the punchline in your pitch deck. The build-up is the problem in the market and the world-class team you’ve assembled, as well as why it means so much to you. The punchline is the solution you’re building. Always, make sure your punchline delivers.
- It’s relevant to the rest of the (comedic) routine.
- When it hits , it’s at the minimum, satisfying, as a climax. At the maximum, like a world-class punch, it knocks the wind out of your audience.
In the words of Robert McKee, a Fullbright Scholar who’s coached over 60 Academy Award winners, 170 Emmy recipients, among numerous others,
“At story climax, you must deliver a scene beyond which the audience can imagine no other.”
Your punchline, your product, by the time you deliver your pitch’s climax, must deliver a utopia beyond which your investors can imagine no other.
Photo by Ben White on Unsplash
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