It was a perfect sunny day and my spirits were high. My co-founder and I had a meeting lined up at one of Silicon Valley’s most prestigious investment firms, which had funded such startups as Snapchat, Dropbox and Airbnb. Our thought: We’re next.
We began the meeting with the firm’s general partner by whipping out our standard presentation deck. It provided a strong product overview and proof of early traction. However, this is when things started to go sour. The general partner started fidgeting, working the phone as thugh he had an impending Tinder date and distractedly gazing out the window as if to ask, “I wonder what ski conditions are like in Tahoe right now?”
Hitting a point of exasperation, he finally interrupted. “Honestly, I am sure your product is great,” he said. “But, I don’t care about the product as much as you might think. Stop going on and on. I get it. What I care about is what you are building for me. The revenue. The opportunity for return. That’s different than what you are building for your customers.”
That was the moment that we got it. Well, I got it.
Like every other entrepreneur, we entered the meeting eager to go over what we’d built and what we thought added the most value: our product. Also, being nervous during the presentation, we tended to focus on what we know best, which was (again) our product.
However, that approach ignored a critical point. Entrepreneurs are actually building two products: one for customers and one for investors. While the product you’re constructing for customers is the one you are passionate about, the product you are developing for investors is just as important. That’s because it’s focused on revenue, team makeup and other intangible dynamics.
Both “products” are crucial for success. Here’s how you can master storytelling for these two critical audiences.
The product you’re building for your customers
Geoffrey Moore’s book Crossing the Chasm outlines some key concepts on how to focus on the product you’re building for customers. The first concept he details is an entrepreneur’s need to create a unified approach for the marketing effort companywide.
To maximize resources and ensure strategic alignment, the entire management team needs to participate in the product development process. The task can’t be left solely to the marketing gurus in your company. Full participation ensures that the story stays consistent from the first draft to the final unveiling.
His second piece of advice is to pay attention to the technology-adoption life cycle. In building a product for customers, you’ll need to know when they’ll be willing to accept new products, especially if your product involves some type of disruptive technology. That requires research to discover customers’ comfort level for changing something they’ve been used to doing a certain way.
Some customers will eagerly embrace a continuous innovation cycle for products, such as an upgraded version of their smartphones. Other products — for example, an electric vehicle — may take much longer to gain acceptance. Knowing customer interest, behavior and adoption rate is integral to building the right product at the right time.
Finally, Moore’s third concept has to do with maintaining momentum. No matter what the product may be, customers over time experience a continuous technological progression that affects their expectations and addresses their needs slightly differently. If you don’t address or incorporate ongoing emerging technology, your competition will steal your customers.
The product you’re building for investors
By way of contrast, investors tend to care about a different type of product. They want the intangible story “behind the company.” This usually includes four topics:
To tie it all together for investors effectively, you’ll need a solid storytelling ability. According to Nathaniel Krasnoff, the principal at Wildcat Venture Partners, “The vast majority of the time, when you pitch, you’ll only get a 30-minute opportunity. It’s your one shot to get your foot in the door.
“With funds looking at anywhere between 1,000 to 5,000 companies per year, you need to be able to sell your company clearly and concisely, with a great story,” Krasnoff told me.
Storytelling, then, goes beyond a good pitch. “Storytelling is a foundational skill because if you can’t sell us, then you probably can’t sell your customers, and you will also probably have difficulty selling potential recruits,” Krasnoff said.
The product fallacy
Product is probably the least important of the four topics I mentioned earlier. It matters primarily in the earliest stages, as you are driving toward a minimum viable product (MVP). Yet, at a certain point, if you haven’t figured out your product, you won’t be able to raise funding anyway.
If an investor believes that what you’re building is legitimate and viable, he or she will do due diligence to learn more. The primary reason startups fail is that founders aren’t thoughtful about their MVP. They ultimately raise money for a sales team that is selling the wrong product.
Revenue and systems efficiency
When you’re thoughtful about what you’re building, the answer to, “Will this product make my users heroes at their organizations?” will be a resounding yes. From there, you will need to quantify what that means, in order to determine your pricing model and the systems you need to build. Next, you’ll follow up with a demonstrable and solid understanding of how you acquire customers and the costs.
Then you can go out and raise capital to add fuel to the fire.
Team above all
Building a company is the hardest thing you will ever do. That’s why no one wants to do it alone. The team you form will determine your success at every critical stage. This factor often becomes the difference between winning and losing.
If you surround yourself with the best people, then the journey becomes smoother. In interviewing many successful founders, I’ve discovered that they often had one key hire who altered the culture or built the right systems to change the company’s direction.
For customers and for investors
It’s helpful to measure your success along a chronology developed by Wildcat Venture Partners called the Traction Gap. As you move along the Traction Gap, the focal point of these four topics changes, while the key inflection point remains the same — the importance of building a product that customers will willingly buy.
Simultaneously, you must develop systems that reduce the friction involved in acquiring those customers. This helps raise the capital to scale those systems accordingly. And that in turn helps you create a product that matters to investors and customers alike.
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