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STEPHEN PEARSE: How
many of you guys in here

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think you might want to one
day run your own company

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00:00:30,970 --> 00:00:35,230
or begin a startup?

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The vast majority of you.

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00:00:37,480 --> 00:00:38,630
Good.

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00:00:38,630 --> 00:00:42,500
Remember that, because at
the end of my presentation,

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I'm going to give you guys
an opportunity to begin

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that process.

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My name is Steve Pearse and
my background, let's see.

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00:00:54,540 --> 00:00:59,940
Former CEO, entrepreneur,
I am an angel investor.

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I work with venture capital
companies as a litmus test.

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If I like it, they
might like it too.

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00:01:06,820 --> 00:01:10,420
And I advise CEOs and startups.

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I live in Colorado, Florida,
I used to live here full-time,

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now I just come and visit.

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So my specialty and background,
primarily telecommunications,

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IT, and as of late, the last
10 years or so, health science.

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I've bought companies,
I have sold companies.

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I have raised over $250
million over six rounds,

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and my background is kind
of up through the ranks.

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AT&T, then I became
chief engineer at Sprint,

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00:01:44,890 --> 00:01:48,890
ran operations and started
Time Warner Telecom,

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I ran a wireless company, was an
executive vice president at Bay

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Networks, merged into
Nortel in a successful sale

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for $7 billion.

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And then I did my own
startup in Silicon Valley,

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and that was cool.

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00:02:04,440 --> 00:02:08,949
That, I came in when we
were valued at $18 million,

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and we sold for $2.7 billion
less than a year and a half-ish

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later.

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Those were the days.

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You might think
that was a bubble.

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Guess what?

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There's always a bubble.

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There's always a bubble.

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Look what's happening now with
Twitter and social networking.

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There's always a bubble.

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Your challenge is to find
how can I make my own bubble,

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00:02:33,960 --> 00:02:35,880
or where is the next
bubble going to be.

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Your challenge is to
be a hockey player

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and skate to where the
puck is going to be,

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not where it is now,
because you're too late.

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Where do you think that next
big event is going to happen?

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That's your challenge.

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The startup.

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And these statistics
are about right.

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Some might say
I'm over-generous,

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but out of every 10 startups,
maybe one will succeed.

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Kawasaki will say one out of 20.

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But one out of 10 will succeed.

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What's a success?

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Success is, if
you're an investor,

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you make at least 10x.

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The investor really
wants 100x, and they're

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going to gun for that,
but they'll take 10x.

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They want something that's
going to make-- it's called,

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hey this company, thanks,
Steve, you made the fund.

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What does that mean,
I made the fund?

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They've got a fund, they have
a lot of private investors

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give them their money,
they invest that money,

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and they want all that
money back, plus more

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to the investors.

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If you have a $100
million fund, you've

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got to give that $100 million
back or you're a failure.

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You really want to give $200
million back, $400 million

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back.

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You want to give
much, much, much more,

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and as a venture
capitalist, you get

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to pocket an even
bigger percentage

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than your limited partners
or investors will take.

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So they want a 10x company
that makes the fund.

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So 10 companies, they want one
to be a factor of 10 better.

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Three out of 10-ish might
yield a moderate return.

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What's a moderate return?

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Maybe 2 to 4x in
four to seven years.

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And you really want
to be shutting down

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the fund in about seven years.

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Sometimes it happens,
sometimes it doesn't.

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And then six are failures,
completely shut down.

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So that's the odds
you're facing here.

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You might think, oh
God, if I do this,

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chances are I'm not going to
be a success, a big success.

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That's fine, because
investors know these odds,

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00:04:57,020 --> 00:05:01,280
and if you come from a failure
or two, there's no problem.

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As long as you did
a good job, you

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learn from the
failures or mistake.

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00:05:06,650 --> 00:05:09,250
Maybe it was just the wrong
bid at the wrong time.

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But they're not afraid
of reinvesting in people

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who have done this a few times.

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And look at the Valley.

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You have people
skip companies right

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00:05:16,720 --> 00:05:17,960
and left all over the place.

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So long history of backgrounds.

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OK.

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Why do a startup?

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I mean, what's the game here?

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What are you trying to play?

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Well, if you do a startup, and
you get money from investors,

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you have to be able to exit.

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00:05:39,680 --> 00:05:40,690
And what is an exit?

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You have to either go
public or get sold.

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That's an exit.

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Why is going public an exit?

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00:05:47,020 --> 00:05:50,360
Because finally, I can
cash out the stocks

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that I bought from
you a long time ago.

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Your investors want
their money back.

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If you're interested in
running a mom and pop

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business with a cool
idea and cool technology,

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00:05:59,470 --> 00:06:02,940
no one's going to invest
in it except family.

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Why?

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Because they're never going
to get their money back.

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It's not a liquid asset.

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00:06:08,090 --> 00:06:14,220
So you have to plan on going
public or getting sold.

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If you're a technology company--
and by the way, officially,

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the answer is always
I'm going public.

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I'm not going to sell.

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Never going to sell.

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I'm going to run this thing
forever, hand it off to the--

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why do you have to say that?

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00:06:32,380 --> 00:06:37,120
Why do you have to say we're
not going to get acquired?

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00:06:37,120 --> 00:06:41,060
Because if you say I'm going to
get acquired, you're not in it.

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Your heart's not in it.

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00:06:42,510 --> 00:06:45,850
You're looking for a
trick, a magic pony,

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I want to sell this puppy,
I'm going to make a buck,

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and I don't want to-- I want
to sell it and make money

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and that's it.

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No, no, no, no, no.

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You can't say that.

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You say that and no one's
going to give you a penny.

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00:06:59,120 --> 00:07:02,010
So you're always going public.

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00:07:02,010 --> 00:07:04,000
But why would a company
ever want to buy you,

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00:07:04,000 --> 00:07:07,540
just in case they
wanted to buy you?

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Bay Networks.

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At one time, Bay Networks
was bigger than Cisco.

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Bay built routers.

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Internet IP routers.

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And I ran the internet and
telecom business group.

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And we built blades to replace
the old technology that

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was maybe 10 megabits a second.

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00:07:30,750 --> 00:07:34,980
We had to come out with 100
megabit a second, and then gig,

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and play that game.

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Different interfaces.

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And my team was a good team.

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We could build a blade
in about 18 months.

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That was pretty good.

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People working maybe
9:00-5:00, 9:00-6:00.

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Good engineers, teamwork,
meetings, stuff like that.

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A startup can do
that in nine months.

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And nine months' delta in
a new product introduction

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can spell the difference
between failure and success

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00:08:07,440 --> 00:08:08,170
in this business.

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I could not afford to
build a new blade that

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goes into my rack and
sell it to my customers,

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sometimes, if I can
only do it in 18 months.

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If I have another
company start advertising

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00:08:25,250 --> 00:08:27,440
and have a good marketing
person and they're

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telling the industry analysts
and all the industry rags,

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00:08:30,510 --> 00:08:31,940
hey we got this new widget.

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And it's got 100 megabits now.

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And we're selling and
customers love it.

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I have to do a make
or buy decision.

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I may interrupt my development.

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I may say, finance,
go strike a deal.

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Let's buy this company quickly.

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And Bay did that all the time.

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I bought a bunch of
startups, hot startups

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for internet dial-in modems.

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That was big time
back in the '90s.

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So you had a box that was 10
times smaller, faster, cheaper,

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00:09:03,620 --> 00:09:07,100
all that stuff, using
chips that just came off

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00:09:07,100 --> 00:09:09,829
the line from Intel
or TI or whatever,

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00:09:09,829 --> 00:09:11,620
and you can build
something in nine months,

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00:09:11,620 --> 00:09:13,710
I'd buy that company.

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00:09:13,710 --> 00:09:17,190
That's a great example
of how you can go out,

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00:09:17,190 --> 00:09:21,080
take the state-of-the-art
today, the latest chip sets,

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00:09:21,080 --> 00:09:25,050
build it smarter
smaller, faster,

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00:09:25,050 --> 00:09:28,030
all these nice characteristics,
and sell your company.

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00:09:28,030 --> 00:09:31,040
And you can do it over
and over and over again.

186
00:09:31,040 --> 00:09:33,160
Why can you do
that as a startup?

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00:09:33,160 --> 00:09:35,490
Why can't big companies do that?

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00:09:35,490 --> 00:09:39,870
Because you're
working for stock.

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00:09:39,870 --> 00:09:42,590
You're not working
for a promotion,

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00:09:42,590 --> 00:09:44,620
you're not working
for a lot of things

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00:09:44,620 --> 00:09:46,430
big companies' people work for.

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00:09:46,430 --> 00:09:48,280
A nice stable lifestyle.

193
00:09:48,280 --> 00:09:51,840
You're willing to work until
midnight and bring in pizza.

194
00:09:51,840 --> 00:09:57,130
The CEO, when I was a CEO, I'd
bring in Chinese just to entice

195
00:09:57,130 --> 00:10:00,670
people, please stay
longer and work harder.

196
00:10:00,670 --> 00:10:02,740
Because everybody's
working for the same thing.

197
00:10:02,740 --> 00:10:04,080
Everybody wants to get rich.

198
00:10:04,080 --> 00:10:06,590
Everybody wants stock.

199
00:10:06,590 --> 00:10:07,893
It's a great unifier.

200
00:10:11,340 --> 00:10:13,960
It is the enticement
that makes everybody

201
00:10:13,960 --> 00:10:16,360
think along the same way.

202
00:10:16,360 --> 00:10:19,850
When I was at AT&T,
everybody wanted

203
00:10:19,850 --> 00:10:24,080
to make you look bad so
they might step on you

204
00:10:24,080 --> 00:10:26,940
and get another
$5,000 raise, or maybe

205
00:10:26,940 --> 00:10:29,750
run the department
with five more people.

206
00:10:29,750 --> 00:10:31,880
That's big company mentality.

207
00:10:31,880 --> 00:10:34,620
Startups were such
a great cleanse

208
00:10:34,620 --> 00:10:37,070
when I left the big
corporate environment

209
00:10:37,070 --> 00:10:38,779
and went to the startup world.

210
00:10:38,779 --> 00:10:40,320
That's what we're
talking about here.

211
00:10:40,320 --> 00:10:42,824
That's the taste of what
could be your future.

212
00:10:47,440 --> 00:10:51,350
OK, getting money.

213
00:10:51,350 --> 00:10:53,310
Signal to noise.

214
00:10:53,310 --> 00:10:55,100
Signal to noise.

215
00:10:55,100 --> 00:10:58,400
Do you know how much noise
is out there that you're

216
00:10:58,400 --> 00:11:02,470
going to be fighting against,
if you want attention

217
00:11:02,470 --> 00:11:03,380
as a startup?

218
00:11:03,380 --> 00:11:07,310
If you want attention
from a VC or an angel,

219
00:11:07,310 --> 00:11:12,000
you're wading through a
tremendous amount of noise.

220
00:11:12,000 --> 00:11:16,456
Your signal has to
be muy powerful.

221
00:11:16,456 --> 00:11:17,830
And we're going
to talk about how

222
00:11:17,830 --> 00:11:20,190
to make your signal
very powerful,

223
00:11:20,190 --> 00:11:22,130
and punching through that noise.

224
00:11:22,130 --> 00:11:25,530
Because you've got to go out
and grab people by the neck,

225
00:11:25,530 --> 00:11:30,140
shake them, and make them
listen to your pitch.

226
00:11:30,140 --> 00:11:33,460
So, this is a terrible
elevator pitch,

227
00:11:33,460 --> 00:11:37,810
but it's the elements of what
you want to be looking for.

228
00:11:37,810 --> 00:11:39,220
I'm going to paraphrase.

229
00:11:39,220 --> 00:11:42,190
For this huge,
great target market

230
00:11:42,190 --> 00:11:46,060
who really hate the
stuff they're using now,

231
00:11:46,060 --> 00:11:51,620
our thermostat is a new
[? Heigelberg ?] category

232
00:11:51,620 --> 00:11:55,750
that provides all your solutions
you've been looking for.

233
00:11:55,750 --> 00:11:59,700
Unlike the bozos who
we're competing against,

234
00:11:59,700 --> 00:12:03,250
we have assembled
incredible, groundbreaking

235
00:12:03,250 --> 00:12:07,569
technology that is going
to be ready in six months.

236
00:12:07,569 --> 00:12:09,860
Essentially, that's kind of
what you want to be saying.

237
00:12:09,860 --> 00:12:12,110
You have to have all these
elements in your elevator

238
00:12:12,110 --> 00:12:13,980
pitch.

239
00:12:13,980 --> 00:12:18,130
And say it a lot better
than this format up here.

240
00:12:18,130 --> 00:12:20,120
That's what you need to do.

241
00:12:20,120 --> 00:12:22,950
I'd like you to start
thinking about filling

242
00:12:22,950 --> 00:12:26,040
in the blanks for
your ideas now.

243
00:12:26,040 --> 00:12:29,790
Whether or not it's a real
product or technology,

244
00:12:29,790 --> 00:12:31,320
or something you
think, hey, this

245
00:12:31,320 --> 00:12:33,760
would be cool if I
could ever do this.

246
00:12:33,760 --> 00:12:38,260
Think about how
you would say this.

247
00:12:38,260 --> 00:12:41,870
Because that's the elevator
pitch and will determine

248
00:12:41,870 --> 00:12:45,120
your readiness to do a startup.

249
00:12:45,120 --> 00:12:47,850
Your readiness to get money.

250
00:12:47,850 --> 00:12:51,760
You've got really one shot,
because once a venture

251
00:12:51,760 --> 00:12:55,320
capitalist has seen your face,
and you've said a few words,

252
00:12:55,320 --> 00:12:57,212
they're either
thinking right away,

253
00:12:57,212 --> 00:12:59,420
I'm going to go ahead and
listen to the rest of this,

254
00:12:59,420 --> 00:13:03,800
or you're having trouble
here, and then you're gone.

255
00:13:03,800 --> 00:13:04,810
Why?

256
00:13:04,810 --> 00:13:05,900
Too much noise.

257
00:13:05,900 --> 00:13:09,360
They see thousands of pitches
and thousands of people,

258
00:13:09,360 --> 00:13:13,250
and they have to quickly-- it's
almost neuronally implanted.

259
00:13:13,250 --> 00:13:17,610
They can very quickly determine
whether you're worth it or not.

260
00:13:17,610 --> 00:13:20,420
So that's why it's important
to rehearse this stuff

261
00:13:20,420 --> 00:13:21,501
and get it down right.

262
00:13:24,530 --> 00:13:26,302
Everybody's maybe heard this.

263
00:13:26,302 --> 00:13:28,260
I didn't have time to
write you a short letter,

264
00:13:28,260 --> 00:13:31,530
so I wrote you a long one.

265
00:13:31,530 --> 00:13:32,880
What does that mean?

266
00:13:32,880 --> 00:13:37,470
It means you've got to
be super, super crisp.

267
00:13:37,470 --> 00:13:39,340
You've got to be able
to say what you're

268
00:13:39,340 --> 00:13:41,900
going to say and enunciate it.

269
00:13:41,900 --> 00:13:45,900
Grab them-- you have to hit
him over the head with a hammer

270
00:13:45,900 --> 00:13:46,950
with what you're saying.

271
00:13:46,950 --> 00:13:50,470
It's got to be so compelling.

272
00:13:50,470 --> 00:13:53,210
We'll talk more about
that, but you really

273
00:13:53,210 --> 00:13:56,240
got to capture their attention.

274
00:13:56,240 --> 00:13:59,020
And then Jeffrey Moore.

275
00:14:03,280 --> 00:14:05,360
What do you mean, you
have to induce greed?

276
00:14:05,360 --> 00:14:07,190
Greed doesn't sound good.

277
00:14:07,190 --> 00:14:12,690
Well, when you go to the store
and you see something on sale,

278
00:14:12,690 --> 00:14:14,190
what are you thinking?

279
00:14:14,190 --> 00:14:16,710
You're thinking that's on sale.

280
00:14:16,710 --> 00:14:17,510
Do I need it?

281
00:14:17,510 --> 00:14:18,490
I don't know.

282
00:14:18,490 --> 00:14:22,280
Maybe I should buy it
now while it's on sale.

283
00:14:22,280 --> 00:14:25,760
You're inducing
spontaneous greed

284
00:14:25,760 --> 00:14:30,490
when you buy something for
sale, because it's a good deal.

285
00:14:30,490 --> 00:14:32,290
Might not be there later.

286
00:14:32,290 --> 00:14:35,740
You have to induce greed on the
part of your investors venture

287
00:14:35,740 --> 00:14:40,020
catalysts or angel
investors, even family.

288
00:14:40,020 --> 00:14:43,100
You have to say I'm on
to something really big.

289
00:14:43,100 --> 00:14:44,050
Really, really big.

290
00:14:44,050 --> 00:14:46,780
This is going to be
huge, and you need

291
00:14:46,780 --> 00:14:49,720
to think about investing now.

292
00:14:49,720 --> 00:14:51,740
You have to get
that greed going,

293
00:14:51,740 --> 00:14:54,950
and that greed has to be started
from the very first elevator

294
00:14:54,950 --> 00:14:55,730
pitch.

295
00:14:55,730 --> 00:14:57,170
And really, a good
elevator pitch

296
00:14:57,170 --> 00:14:58,760
isn't what I just said up here.

297
00:14:58,760 --> 00:15:00,820
A good elevator pitch
starts with a hook.

298
00:15:00,820 --> 00:15:05,510
And we're going to talk about
that hook a little bit later.

299
00:15:05,510 --> 00:15:07,250
The pitch.

300
00:15:07,250 --> 00:15:08,430
Keep it simple.

301
00:15:08,430 --> 00:15:10,510
Keep it simple and stupid.

302
00:15:10,510 --> 00:15:12,450
Keep it really, really simple.

303
00:15:12,450 --> 00:15:14,800
No matter how simple
you think your pitch is,

304
00:15:14,800 --> 00:15:20,445
no matter how easy and clear
you think you are, you're not.

305
00:15:20,445 --> 00:15:22,800
You're not being clear enough.

306
00:15:22,800 --> 00:15:25,250
You need to really dumb it down.

307
00:15:25,250 --> 00:15:26,360
Like third grade.

308
00:15:26,360 --> 00:15:28,784
You need to be able to
explain it to a third grader.

309
00:15:28,784 --> 00:15:30,450
If you can explain
it to a third grader,

310
00:15:30,450 --> 00:15:32,190
you're doing a good job.

311
00:15:32,190 --> 00:15:35,820
Don't worry about coming
across as too simplistic.

312
00:15:35,820 --> 00:15:38,970
They'll pull you up
to a different level

313
00:15:38,970 --> 00:15:42,327
if they need to, like, let's
talk more about the technology,

314
00:15:42,327 --> 00:15:43,910
let's get into the
weeds a little bit.

315
00:15:43,910 --> 00:15:47,210
But if you lose them early on
by being too technical or too

316
00:15:47,210 --> 00:15:49,230
complex, you're gone.

317
00:15:49,230 --> 00:15:52,130
They won't give you the chance
of explaining yourself later,

318
00:15:52,130 --> 00:15:54,540
because you weren't able
to communicate effectively

319
00:15:54,540 --> 00:15:57,330
up front.

320
00:15:57,330 --> 00:16:05,980
This hook is kind of like a pain
point, or a statement of greed.

321
00:16:05,980 --> 00:16:09,870
You have to say something
that is so exciting, they're

322
00:16:09,870 --> 00:16:12,520
going to stop what they're doing
and continue to listen to you,

323
00:16:12,520 --> 00:16:13,894
because I've never
heard of that.

324
00:16:13,894 --> 00:16:16,020
How is that possible?

325
00:16:16,020 --> 00:16:17,480
Think about your
target audience.

326
00:16:17,480 --> 00:16:19,260
Is your target
audience technical?

327
00:16:19,260 --> 00:16:21,894
Is your target audience
a lay consumer?

328
00:16:21,894 --> 00:16:24,060
Is it the financial analysts
who don't know anything

329
00:16:24,060 --> 00:16:27,340
about technology, they want to
hear about money and numbers.

330
00:16:27,340 --> 00:16:30,220
You need to really understand
who your target audience is.

331
00:16:30,220 --> 00:16:32,350
If the eyes start to
glaze over, you failed.

332
00:16:32,350 --> 00:16:33,780
You didn't do your homework.

333
00:16:33,780 --> 00:16:35,810
You didn't understand
who your audience was.

334
00:16:35,810 --> 00:16:37,290
Talk to them on their level.

335
00:16:37,290 --> 00:16:38,770
That makes them excited.

336
00:16:38,770 --> 00:16:42,500
Everybody's listening to
you, greedy for something.

337
00:16:42,500 --> 00:16:45,320
Give them what they want.

338
00:16:45,320 --> 00:16:49,300
And if you're in a room
of different people,

339
00:16:49,300 --> 00:16:53,900
change your pitch to the
lowest common denominator

340
00:16:53,900 --> 00:16:57,620
You might have a room full of
VCs and a couple of junior VCs.

341
00:16:57,620 --> 00:17:01,340
If one of the
partners in the room

342
00:17:01,340 --> 00:17:04,220
is not from this
industry at all,

343
00:17:04,220 --> 00:17:07,960
you need to lower it down
to that person's level,

344
00:17:07,960 --> 00:17:09,859
because if you lose
that person, they're

345
00:17:09,859 --> 00:17:11,150
going to blackball you later.

346
00:17:11,150 --> 00:17:14,042
They're going to
say, they lost me.

347
00:17:14,042 --> 00:17:15,750
They weren't able to
communicate with me.

348
00:17:15,750 --> 00:17:17,099
I don't like them.

349
00:17:17,099 --> 00:17:20,940
So be sure, when you're
scanning the room,

350
00:17:20,940 --> 00:17:23,390
or before you even
walk into the room,

351
00:17:23,390 --> 00:17:27,609
get a list of who
the VCs may attend,

352
00:17:27,609 --> 00:17:31,790
what their backgrounds are,
what companies they work for.

353
00:17:31,790 --> 00:17:34,220
If you can connect
with any of them

354
00:17:34,220 --> 00:17:36,950
by their past history
with a person or a company

355
00:17:36,950 --> 00:17:39,680
that you're familiar
with, bring it in.

356
00:17:39,680 --> 00:17:42,730
Say, by the way, I happen to
know you were from Nortel.

357
00:17:42,730 --> 00:17:44,550
Did you know so and so?

358
00:17:44,550 --> 00:17:47,150
Try to engage that person.

359
00:17:47,150 --> 00:17:50,910
But bring it down to the
lowest common denominator.

360
00:17:50,910 --> 00:17:54,730
The whizzes in the room will
try to bring you back up,

361
00:17:54,730 --> 00:17:56,314
but always try to
remember there's

362
00:17:56,314 --> 00:17:57,980
one or two people who
may not understand

363
00:17:57,980 --> 00:18:00,880
what you're talking about.

364
00:18:00,880 --> 00:18:04,060
Joe's already
covered 10, 20, 30.

365
00:18:04,060 --> 00:18:06,520
But really, 20 minutes.

366
00:18:06,520 --> 00:18:07,080
20 minutes?

367
00:18:07,080 --> 00:18:09,290
They gave me an hour.

368
00:18:09,290 --> 00:18:12,000
Why do I need to make
this a 20-minute pitch?

369
00:18:12,000 --> 00:18:14,530
Well, for two reasons.

370
00:18:14,530 --> 00:18:16,040
One, they're going
to have trouble--

371
00:18:16,040 --> 00:18:18,330
you're going to have trouble
getting your presentation

372
00:18:18,330 --> 00:18:20,580
to work with the AV equipment.

373
00:18:20,580 --> 00:18:22,450
That's going to
eat up some time.

374
00:18:22,450 --> 00:18:25,010
But realistically, you're
going to be interrupted

375
00:18:25,010 --> 00:18:26,860
over and over and over again.

376
00:18:26,860 --> 00:18:30,420
People will drag you
into minutia and detail.

377
00:18:30,420 --> 00:18:32,840
You need to fight
that and resist that,

378
00:18:32,840 --> 00:18:34,530
but you'll be stopped.

379
00:18:34,530 --> 00:18:38,700
And you'll never get through
your 20-minute pitch.

380
00:18:38,700 --> 00:18:40,420
That hour will go
just like that.

381
00:18:40,420 --> 00:18:43,820
So you really have to make it,
if you're pitching it alone

382
00:18:43,820 --> 00:18:46,320
in a room, no more
than 20 minutes.

383
00:18:46,320 --> 00:18:50,000
It will expand to the full hour.

384
00:18:50,000 --> 00:18:52,720
Use pictures.

385
00:18:52,720 --> 00:18:54,300
Seriously, use pictures.

386
00:18:54,300 --> 00:18:56,400
There's nothing more boring
than this right here.

387
00:19:01,160 --> 00:19:03,620
There's always
somebody in the room,

388
00:19:03,620 --> 00:19:07,790
whether it's angels or a
venture capital partnership,

389
00:19:07,790 --> 00:19:11,460
someone in the room who
wants to show off they

390
00:19:11,460 --> 00:19:13,220
know more than you do.

391
00:19:13,220 --> 00:19:14,640
That's not going to work.

392
00:19:14,640 --> 00:19:16,150
We did that three years ago.

393
00:19:16,150 --> 00:19:18,050
It was a failure.

394
00:19:18,050 --> 00:19:21,990
Or, wait a minute.

395
00:19:21,990 --> 00:19:23,890
The neural resistance,
I thought was

396
00:19:23,890 --> 00:19:25,150
going to be higher than that.

397
00:19:25,150 --> 00:19:26,970
You need to defend that.

398
00:19:26,970 --> 00:19:31,440
You're always going to be
teased into a rat hole.

399
00:19:31,440 --> 00:19:32,992
Here, follow me
into this rat hole,

400
00:19:32,992 --> 00:19:34,700
let's run around,
waste everybody's time,

401
00:19:34,700 --> 00:19:37,150
and then you're going
to be asked to leave.

402
00:19:37,150 --> 00:19:39,140
Don't fall for that.

403
00:19:39,140 --> 00:19:41,410
You have two options.

404
00:19:41,410 --> 00:19:51,240
You either firmly and with a
nice, reasonable answer, say,

405
00:19:51,240 --> 00:19:55,320
nope that's not the
case, and this is why,

406
00:19:55,320 --> 00:19:57,760
but I'll get back to that
later if you want to.

407
00:19:57,760 --> 00:20:05,000
Or you say, good point, I'm
not familiar with that point

408
00:20:05,000 --> 00:20:06,210
you just made.

409
00:20:06,210 --> 00:20:07,680
I'll get back to you later.

410
00:20:07,680 --> 00:20:10,190
Don't let them continue
that conversation.

411
00:20:10,190 --> 00:20:13,240
You've got to know how to
shut off the questions,

412
00:20:13,240 --> 00:20:14,900
shut off the
spigot, and move on,

413
00:20:14,900 --> 00:20:19,000
because you have an
agenda to get to asking

414
00:20:19,000 --> 00:20:20,630
for money at the very end.

415
00:20:20,630 --> 00:20:23,030
If you don't get to
that, then it was a nice,

416
00:20:23,030 --> 00:20:25,270
thank you for the
information, there's the door.

417
00:20:25,270 --> 00:20:27,410
You have to be able
to get to that.

418
00:20:27,410 --> 00:20:36,210
So as important as
anything I've talked about

419
00:20:36,210 --> 00:20:42,880
is the need for you to
be a competent presenter.

420
00:20:42,880 --> 00:20:47,340
You need to show passion,
you have to show confidence,

421
00:20:47,340 --> 00:20:50,990
and you have to
engage the audience.

422
00:20:50,990 --> 00:20:56,650
Not easy to do, and it takes,
sometimes, years and years

423
00:20:56,650 --> 00:20:58,830
to learn how to do that.

424
00:20:58,830 --> 00:21:01,570
It's very difficult. If I
were to grab any one of you

425
00:21:01,570 --> 00:21:04,040
down here and say, please give
a presentation on whatever

426
00:21:04,040 --> 00:21:06,065
your most passionate
thing is, you're

427
00:21:06,065 --> 00:21:07,440
going to be kind
of hard-pressed,

428
00:21:07,440 --> 00:21:10,900
you're going to want to kind
of recite things from memory,

429
00:21:10,900 --> 00:21:12,980
and forget about the engagement.

430
00:21:12,980 --> 00:21:15,680
You're going to speak too fast.

431
00:21:15,680 --> 00:21:18,100
It's almost impossible
to speak too slowly,

432
00:21:18,100 --> 00:21:21,290
especially if you're from
a technical background.

433
00:21:21,290 --> 00:21:23,630
Slow the pace down.

434
00:21:23,630 --> 00:21:26,760
Make sure everybody's
keeping up with you.

435
00:21:26,760 --> 00:21:29,700
See if you've lost eye contact.

436
00:21:29,700 --> 00:21:33,010
If you have, focus on the person
who you lost eye contact with

437
00:21:33,010 --> 00:21:36,970
and say, I must
be confusing you.

438
00:21:36,970 --> 00:21:39,070
Can I answer any
question you've got?

439
00:21:39,070 --> 00:21:41,050
You've got to pull people out.

440
00:21:41,050 --> 00:21:44,740
You've got to get everybody
in the room along with you

441
00:21:44,740 --> 00:21:47,944
nodding their heads, because
the more they nod their head

442
00:21:47,944 --> 00:21:50,360
and agreeing with you, the
more likely at the end, and all

443
00:21:50,360 --> 00:21:53,770
I want is $25
million, and I'm going

444
00:21:53,770 --> 00:21:56,410
to give you 10% of my company.

445
00:21:56,410 --> 00:21:57,770
It's a great deal.

446
00:21:57,770 --> 00:22:00,770
So seriously, that's
like sales 101.

447
00:22:00,770 --> 00:22:02,760
Get them nodding their heads.

448
00:22:02,760 --> 00:22:04,860
Look at everybody in the eye.

449
00:22:04,860 --> 00:22:09,330
Be bold, be confident, use
passion, change your pitch

450
00:22:09,330 --> 00:22:13,180
and elevation, do whatever
you have to do-- histrionics,

451
00:22:13,180 --> 00:22:14,190
get their attention.

452
00:22:14,190 --> 00:22:15,730
Focus them on what
you're saying.

453
00:22:21,300 --> 00:22:25,080
So Joe has basically
covered the elements.

454
00:22:25,080 --> 00:22:26,540
And this isn't the right order.

455
00:22:26,540 --> 00:22:30,690
This isn't maybe Joe's order
fir a business plan or even

456
00:22:30,690 --> 00:22:33,400
a pitch, but basically, you
want to have these things.

457
00:22:33,400 --> 00:22:36,550
You want to have the hook.

458
00:22:36,550 --> 00:22:40,050
The hook as to be an
exciting statement.

459
00:22:40,050 --> 00:22:42,670
You know, hey, I
think we did fusion.

460
00:22:42,670 --> 00:22:43,860
It's in my basement.

461
00:22:43,860 --> 00:22:44,770
What?

462
00:22:44,770 --> 00:22:47,030
Then talk about it.

463
00:22:47,030 --> 00:22:49,480
Then you need to
have your solution.

464
00:22:49,480 --> 00:22:51,950
Your solution is, we
have a great product.

465
00:22:51,950 --> 00:22:54,807
It's using this technology,
using all these things

466
00:22:54,807 --> 00:22:55,723
in the elevator pitch.

467
00:22:58,870 --> 00:23:00,680
Not everybody will
agree with my order,

468
00:23:00,680 --> 00:23:03,150
but this is the order I like.

469
00:23:03,150 --> 00:23:04,360
What's your magic?

470
00:23:04,360 --> 00:23:08,850
Don't wait to talk about the
technology at the very end,

471
00:23:08,850 --> 00:23:10,450
and don't do it right up front.

472
00:23:10,450 --> 00:23:14,420
Hey, we solved
this implant issue.

473
00:23:14,420 --> 00:23:16,331
Talk about why it's
exciting, what's

474
00:23:16,331 --> 00:23:18,330
the market, what problem
are you going to solve,

475
00:23:18,330 --> 00:23:20,540
and we did it with
this unbelievably

476
00:23:20,540 --> 00:23:24,200
great new technology,
fresh out of the labs.

477
00:23:24,200 --> 00:23:25,480
Or wherever it came from.

478
00:23:25,480 --> 00:23:28,420
Or a new chip or whatever it is.

479
00:23:28,420 --> 00:23:30,134
Talk about the magic
and technology,

480
00:23:30,134 --> 00:23:32,550
so the technologists can get
excited and go, yes, what are

481
00:23:32,550 --> 00:23:35,390
you going to do with it now?

482
00:23:35,390 --> 00:23:38,220
Then go into the
business model, and then

483
00:23:38,220 --> 00:23:41,550
more detail, the
marketing and sales issue.

484
00:23:41,550 --> 00:23:43,570
You really have to
have a credible way

485
00:23:43,570 --> 00:23:45,070
to sell what you've got.

486
00:23:45,070 --> 00:23:49,910
You've got to have a credible
way to channel it or retail it

487
00:23:49,910 --> 00:23:52,030
into the customer's hands.

488
00:23:52,030 --> 00:23:54,260
How are you going to
be successful at that?

489
00:23:54,260 --> 00:23:56,880
There's a lot of great
products that need

490
00:23:56,880 --> 00:23:58,830
to be sold through Home Depot.

491
00:23:58,830 --> 00:24:03,700
And Home Depot has thousands
of these ideas coming in,

492
00:24:03,700 --> 00:24:06,777
and then they, one by one,
nope, no time for you, go away.

493
00:24:06,777 --> 00:24:08,610
Nope, no, and then what
are you going to do,

494
00:24:08,610 --> 00:24:10,890
with all of your channel
strategies closed off?

495
00:24:10,890 --> 00:24:13,120
Have a credible
solution for that.

496
00:24:13,120 --> 00:24:14,870
Talk about the competition.

497
00:24:14,870 --> 00:24:19,980
If it's a new product,
never been sold before,

498
00:24:19,980 --> 00:24:21,990
well, that could
be nice, but you've

499
00:24:21,990 --> 00:24:25,520
got to spend a huge
amount of money and time

500
00:24:25,520 --> 00:24:28,925
and your personal capital
creating a new niche,

501
00:24:28,925 --> 00:24:31,050
or a new market for this.

502
00:24:31,050 --> 00:24:32,540
You don't know how hard that is.

503
00:24:32,540 --> 00:24:33,748
It's going to be really hard.

504
00:24:33,748 --> 00:24:35,590
If nobody's buying
this sort of thing now,

505
00:24:35,590 --> 00:24:38,340
you have to-- look
at Dean Kamen.

506
00:24:38,340 --> 00:24:39,750
The Segway.

507
00:24:39,750 --> 00:24:41,450
Remember everybody
got all excited?

508
00:24:41,450 --> 00:24:44,520
I mean, my home in Boulder,
we had activists saying,

509
00:24:44,520 --> 00:24:48,110
we don't want Segways
riding down my sidewalk.

510
00:24:48,110 --> 00:24:50,550
And they had protests.

511
00:24:50,550 --> 00:24:52,620
Dean didn't realize
how hard it was

512
00:24:52,620 --> 00:24:57,240
to create a whole new market
where the whole country stops

513
00:24:57,240 --> 00:24:58,680
driving and uses Segways.

514
00:24:58,680 --> 00:25:00,210
It didn't work at all that way.

515
00:25:00,210 --> 00:25:05,310
He was trying to create a whole
new approach towards travel.

516
00:25:05,310 --> 00:25:08,700
Very difficult. If it's a
substitution, then who are we

517
00:25:08,700 --> 00:25:10,787
substituting against
and why are you better?

518
00:25:10,787 --> 00:25:13,120
Because we're 10 times cheaper,
faster, better, smaller.

519
00:25:13,120 --> 00:25:16,100
All those sorts of things.

520
00:25:16,100 --> 00:25:21,210
And I have management
here, not at the top.

521
00:25:21,210 --> 00:25:22,700
Why?

522
00:25:22,700 --> 00:25:27,140
Because I don't care who
you are unless I really

523
00:25:27,140 --> 00:25:30,080
am excited about
your ideas, and then

524
00:25:30,080 --> 00:25:32,020
I want to know who you are.

525
00:25:32,020 --> 00:25:33,550
Where'd you were
to come from, how

526
00:25:33,550 --> 00:25:36,960
do I know you've got to take
my money and spend it wisely?

527
00:25:36,960 --> 00:25:39,270
Have you done this before?

528
00:25:39,270 --> 00:25:41,250
Then give me all
your credentials,

529
00:25:41,250 --> 00:25:45,250
but not until I'm
greedy, because I

530
00:25:45,250 --> 00:25:49,360
want some of your stock,
please, and now, who are you

531
00:25:49,360 --> 00:25:51,900
and what's your team?

532
00:25:51,900 --> 00:25:53,600
| at that point it's credible.

533
00:25:53,600 --> 00:25:55,840
If you hit them too soon
with here I am an all

534
00:25:55,840 --> 00:25:59,840
that, without knowing whether
they're excited or greedy yet,

535
00:25:59,840 --> 00:26:01,570
they're going to
not listen to it.

536
00:26:01,570 --> 00:26:05,130
I won't listen to it
I'm going to skip it.

537
00:26:05,130 --> 00:26:08,090
Then go over your financials.

538
00:26:08,090 --> 00:26:10,950
What are you going to do
with the money that you get?

539
00:26:10,950 --> 00:26:12,240
How are you going to spend it?

540
00:26:12,240 --> 00:26:15,680
Is it a credible timeline you
have for spending that money,

541
00:26:15,680 --> 00:26:18,840
or are you going to
run out of money?

542
00:26:18,840 --> 00:26:20,340
Which is a problem,
because then you

543
00:26:20,340 --> 00:26:22,860
have to stop what you're doing
and go raise money sooner,

544
00:26:22,860 --> 00:26:26,380
than later, and
stop the company.

545
00:26:26,380 --> 00:26:28,244
Then go over your status
and your timeline.

546
00:26:28,244 --> 00:26:29,410
Have you built anything yet?

547
00:26:29,410 --> 00:26:30,360
Do you have any prototypes?

548
00:26:30,360 --> 00:26:31,600
When are you going
to have it done?

549
00:26:31,600 --> 00:26:33,475
How do you know you're
going to have it done?

550
00:26:33,475 --> 00:26:35,530
Is it a credible timeline?

551
00:26:35,530 --> 00:26:39,480
What people have you lined
up to build this thing?

552
00:26:39,480 --> 00:26:40,990
Status and timeline.

553
00:26:40,990 --> 00:26:46,310
And then don't forget-- a
lot of people forget this,

554
00:26:46,310 --> 00:26:50,000
at the very end, the offer.

555
00:26:50,000 --> 00:26:51,810
You have to make the offer.

556
00:26:51,810 --> 00:26:53,770
What is that offer?

557
00:26:53,770 --> 00:26:56,847
And for all this cool
stuff, and the $100 million

558
00:26:56,847 --> 00:26:58,680
we're going to make
over the next five years

559
00:26:58,680 --> 00:27:00,800
with this product,
I'm going to give you

560
00:27:00,800 --> 00:27:03,320
10% of my company
for $25 million.

561
00:27:03,320 --> 00:27:08,240
And we're looking at
closing in the next 60 days,

562
00:27:08,240 --> 00:27:12,390
and oh, by the way, we're
talking to four other venture

563
00:27:12,390 --> 00:27:15,956
capitalists and three of
them are quite interested.

564
00:27:15,956 --> 00:27:17,080
Love to hear back from you.

565
00:27:17,080 --> 00:27:21,780
Make the request, which is the
offer of your stock for money.

566
00:27:25,920 --> 00:27:27,740
A little bit about the hook.

567
00:27:27,740 --> 00:27:31,150
When you very first
meet somebody,

568
00:27:31,150 --> 00:27:35,770
you've got about seven
seconds to engage,

569
00:27:35,770 --> 00:27:38,170
to make them excited about
hearing the rest of what

570
00:27:38,170 --> 00:27:39,410
you have to say.

571
00:27:39,410 --> 00:27:45,910
So that hook could be
whatever the cool part

572
00:27:45,910 --> 00:27:49,360
of your technology or
product is going to be.

573
00:27:49,360 --> 00:27:52,540
The hook could be-- imagine
a safe rubber coding

574
00:27:52,540 --> 00:27:54,482
that conducts electricity.

575
00:27:54,482 --> 00:27:56,690
Wait a minute, why would I
need-- well, before I say,

576
00:27:56,690 --> 00:27:59,190
but how do you--
OK, keep talking.

577
00:27:59,190 --> 00:28:00,360
So that's a hook.

578
00:28:00,360 --> 00:28:03,340
An example of a hook.

579
00:28:03,340 --> 00:28:04,640
Have you ever felt threatened?

580
00:28:04,640 --> 00:28:07,620
Wow, what kind of a question--
yes, of course I have.

581
00:28:07,620 --> 00:28:09,350
Are you threatening me?

582
00:28:09,350 --> 00:28:10,778
No, we have a solution for you.

583
00:28:15,010 --> 00:28:18,990
Our box is 10 times smaller,
faster, cheaper, better

584
00:28:18,990 --> 00:28:21,570
than this.

585
00:28:21,570 --> 00:28:23,900
Oh, cool, the next
generation of that.

586
00:28:23,900 --> 00:28:27,900
People will want that.

587
00:28:27,900 --> 00:28:31,370
Anyway, that's kind of a hook.

588
00:28:31,370 --> 00:28:33,750
So think about
what is your hook?

589
00:28:33,750 --> 00:28:37,940
What is your bold
statement that's

590
00:28:37,940 --> 00:28:41,590
going to wake me up and stop
what I'm doing and listening

591
00:28:41,590 --> 00:28:46,930
to you, whether it's an elevator
or the beginning of a pitch.

592
00:28:46,930 --> 00:28:53,270
So no geek speak.

593
00:28:53,270 --> 00:28:55,567
No geek speak.

594
00:28:55,567 --> 00:28:56,400
What does that mean?

595
00:29:00,450 --> 00:29:02,190
I've had lots and
lots of pitches,

596
00:29:02,190 --> 00:29:05,900
and they start off
with technical jargon.

597
00:29:05,900 --> 00:29:07,290
And that's the
wrong thing to do,

598
00:29:07,290 --> 00:29:11,200
because then my job is
now, pull out of you,

599
00:29:11,200 --> 00:29:13,960
why am I greedy about that?

600
00:29:13,960 --> 00:29:17,330
You need to explain it simply.

601
00:29:17,330 --> 00:29:18,520
This is a real example.

602
00:29:18,520 --> 00:29:20,480
"Our technology is the first
integrated automatic book

603
00:29:20,480 --> 00:29:22,520
scanner that will scan and
digitize bound documents

604
00:29:22,520 --> 00:29:24,603
at a speed of 1,200 pages
per minute at a fraction

605
00:29:24,603 --> 00:29:26,025
of the cost of
existing solutions,

606
00:29:26,025 --> 00:29:28,400
based on destructive digital
imaging technology initially

607
00:29:28,400 --> 00:29:31,160
developed at Bell Labs"-- Bell
Labs isn't around anymore--

608
00:29:31,160 --> 00:29:34,050
"and protected by 12 patents."

609
00:29:34,050 --> 00:29:39,470
That's the wrong way to start a
pitch about what you're doing.

610
00:29:39,470 --> 00:29:43,720
A better approach is, we enable
massive knowledge sharing.

611
00:29:43,720 --> 00:29:47,400
We're going to digitize
all the physical libraries

612
00:29:47,400 --> 00:29:50,770
at an incredibly low cost,
and there's people lined up

613
00:29:50,770 --> 00:29:53,430
who want this technology.

614
00:29:53,430 --> 00:29:57,660
So that's what I
mean by geek speak.

615
00:29:57,660 --> 00:29:58,620
Focus of the pitch.

616
00:30:01,570 --> 00:30:06,660
So again, it's really tempting
to talk about the technology

617
00:30:06,660 --> 00:30:11,690
improvements, or
the technology that

618
00:30:11,690 --> 00:30:16,000
is going into your product,
and how exciting it is,

619
00:30:16,000 --> 00:30:18,880
but you've got to convert that
into something that customers

620
00:30:18,880 --> 00:30:20,220
really will care about.

621
00:30:20,220 --> 00:30:22,500
So talk about the
customer benefits, not

622
00:30:22,500 --> 00:30:24,200
the tech benefits.

623
00:30:24,200 --> 00:30:27,090
The tech benefits-- if you
talk about the tech benefits,

624
00:30:27,090 --> 00:30:28,090
it's a so what?

625
00:30:28,090 --> 00:30:31,060
Why do I care about this
next generation of thing

626
00:30:31,060 --> 00:30:32,950
that you're building
or producing?

627
00:30:32,950 --> 00:30:35,580
It has to have benefits
for the customer.

628
00:30:35,580 --> 00:30:38,220
If it's telecom improved
network utilization,

629
00:30:38,220 --> 00:30:40,010
this is scalable and adaptable.

630
00:30:40,010 --> 00:30:42,790
It integrates well,
seamless integration.

631
00:30:42,790 --> 00:30:47,230
The figures of merit that
a buyer are interested in,

632
00:30:47,230 --> 00:30:49,660
not just the fact that this
is a cool next generation

633
00:30:49,660 --> 00:30:51,807
technology.

634
00:30:51,807 --> 00:30:54,140
And then you've got to talk
about the business benefits.

635
00:30:54,140 --> 00:30:59,290
And the business benefit--
every business has pain,

636
00:30:59,290 --> 00:31:02,160
and you have to find
what the pain point is.

637
00:31:02,160 --> 00:31:05,070
You're in pain.

638
00:31:05,070 --> 00:31:07,000
I can heal your pain.

639
00:31:07,000 --> 00:31:11,010
I have something that's going
to make things better for you.

640
00:31:11,010 --> 00:31:14,020
And it usually has to
boil down to a dollar.

641
00:31:14,020 --> 00:31:20,670
You have pain that's costing you
$700,000 a year in something,

642
00:31:20,670 --> 00:31:24,260
and my product, my
device, my process,

643
00:31:24,260 --> 00:31:27,660
whatever you're selling
can cut that in half,

644
00:31:27,660 --> 00:31:29,260
and I can prove it to you.

645
00:31:29,260 --> 00:31:31,320
So that's a pain point.

646
00:31:31,320 --> 00:31:34,210
Increase revenues
or decrease costs.

647
00:31:34,210 --> 00:31:38,710
Everything's got to
boil down to a dollar.

648
00:31:38,710 --> 00:31:39,240
A dollar.

649
00:31:39,240 --> 00:31:43,480
Your technology
is not important.

650
00:31:43,480 --> 00:31:47,820
It's what that can do for a
business or a customer that

651
00:31:47,820 --> 00:31:52,240
can reduce their pain, and
that's usually evidenced

652
00:31:52,240 --> 00:31:54,770
by costing them money.

653
00:31:54,770 --> 00:31:58,160
And you're either going to make
them money or save them money.

654
00:32:03,030 --> 00:32:05,810
Style.

655
00:32:05,810 --> 00:32:08,540
If you're making a
pitch, either you've

656
00:32:08,540 --> 00:32:10,470
got to be the best
presenter of your team,

657
00:32:10,470 --> 00:32:12,280
or find the best
presenter of your team

658
00:32:12,280 --> 00:32:13,860
and let that person do it.

659
00:32:13,860 --> 00:32:18,770
It's best if the founder
or the CEO does it.

660
00:32:18,770 --> 00:32:22,490
I haven't seen a
whole lot of companies

661
00:32:22,490 --> 00:32:25,570
that aren't led by the founder
or the CEO making the pitch.

662
00:32:25,570 --> 00:32:30,030
So between the two of you,
unless you're the same person,

663
00:32:30,030 --> 00:32:31,500
get good at making the pitch.

664
00:32:31,500 --> 00:32:32,425
Be the best presenter.

665
00:32:35,860 --> 00:32:37,930
If you're not the
egghead, have the egghead

666
00:32:37,930 --> 00:32:42,640
in the room on a
really short leash.

667
00:32:42,640 --> 00:32:45,280
Because they're going to
get into the rat holes.

668
00:32:45,280 --> 00:32:46,950
They love rat holes.

669
00:32:46,950 --> 00:32:48,020
I love a rat hole.

670
00:32:48,020 --> 00:32:50,700
I have to sometimes wake up and
go, stop talking about that.

671
00:32:50,700 --> 00:32:54,100
You're excited about
it, nobody else is.

672
00:32:54,100 --> 00:32:58,170
But be prepared to ask the
one-off technical question.

673
00:32:58,170 --> 00:33:02,390
Exactly what frequency
will that resonate?

674
00:33:02,390 --> 00:33:04,136
Tell them.

675
00:33:04,136 --> 00:33:07,300
[LAUGHTER]

676
00:33:07,300 --> 00:33:08,660
I said this earlier.

677
00:33:08,660 --> 00:33:13,240
Give firm answers, even if
you don't have the answer.

678
00:33:13,240 --> 00:33:16,600
Don't sound hesitant, like,
oh we hadn't thought of that.

679
00:33:20,160 --> 00:33:21,860
Crushing defeat.

680
00:33:21,860 --> 00:33:25,030
If you don't have an answer,
say, let me get back to you.

681
00:33:25,030 --> 00:33:26,690
I'll get back to
you in 24 hours.

682
00:33:26,690 --> 00:33:29,060
I think I know the answer.

683
00:33:29,060 --> 00:33:33,020
Or the answer is, yes of course,
we've always been that way

684
00:33:33,020 --> 00:33:36,710
and we always will, or
no, that's not a problem,

685
00:33:36,710 --> 00:33:37,660
and here is why.

686
00:33:37,660 --> 00:33:40,630
Be firm in your
answer, smile, I mean,

687
00:33:40,630 --> 00:33:46,296
don't get angry, smile, and
say yes or no, but be firm.

688
00:33:46,296 --> 00:33:49,070
Have the presence
to be confident,

689
00:33:49,070 --> 00:33:51,734
because you're asking
for their money,

690
00:33:51,734 --> 00:33:53,150
and they want to
give it to people

691
00:33:53,150 --> 00:33:57,340
who are firm and confident
and all those nice things.

692
00:33:57,340 --> 00:34:00,190
I talked about looking
at everybody in the room.

693
00:34:00,190 --> 00:34:01,366
Try to grab their eyeballs.

694
00:34:04,830 --> 00:34:06,930
Practice that.

695
00:34:06,930 --> 00:34:08,780
By the way, if you've
never given a speech

696
00:34:08,780 --> 00:34:11,840
in front of a large
audience, the best confidence

697
00:34:11,840 --> 00:34:15,960
builder before you start the
speech is, look at everybody

698
00:34:15,960 --> 00:34:20,699
in the room beforehand, at the
bottom or wherever you are,

699
00:34:20,699 --> 00:34:22,949
look at everybody in
the room, and pretend

700
00:34:22,949 --> 00:34:25,510
like they're an old buddy.

701
00:34:25,510 --> 00:34:27,110
They're an old friend.

702
00:34:27,110 --> 00:34:31,230
And you won't any trouble
with confidence or locking up

703
00:34:31,230 --> 00:34:32,480
or things like that.

704
00:34:32,480 --> 00:34:34,310
Try it.

705
00:34:34,310 --> 00:34:35,920
Do your homework,
like I said earlier.

706
00:34:35,920 --> 00:34:38,080
Know who you're talking to.

707
00:34:38,080 --> 00:34:40,190
And practice your pitch.

708
00:34:40,190 --> 00:34:42,330
Practice it.

709
00:34:42,330 --> 00:34:44,210
Have all the points
at your fingertips.

710
00:34:44,210 --> 00:34:47,580
Be ready to go over
them at any time.

711
00:34:47,580 --> 00:34:52,100
And then pull questions
out of the quiet people.

712
00:34:52,100 --> 00:34:55,940
Even if, you can tell, this
person does not like me

713
00:34:55,940 --> 00:34:59,590
or what I'm doing or anybody
that I brought up here,

714
00:34:59,590 --> 00:35:01,630
still, pull them out.

715
00:35:01,630 --> 00:35:02,305
Ask questions.

716
00:35:02,305 --> 00:35:03,930
Because if nothing
else, you will learn

717
00:35:03,930 --> 00:35:05,250
what they don't like about you.

718
00:35:05,250 --> 00:35:07,166
They might say, well, I
don't understand that.

719
00:35:07,166 --> 00:35:09,637
You said that, I
don't believe it.

720
00:35:09,637 --> 00:35:11,470
You may not be able to
convince that person,

721
00:35:11,470 --> 00:35:13,210
but make sure
everybody in the room

722
00:35:13,210 --> 00:35:14,930
has been able to say
something, or ask

723
00:35:14,930 --> 00:35:20,700
them a question of these
venture capitalists.

724
00:35:20,700 --> 00:35:23,200
OK, here's some pitch examples.

725
00:35:23,200 --> 00:35:25,900
You saw some earlier from
Joe, here are some more.

726
00:35:25,900 --> 00:35:26,730
Good and bad.

727
00:35:29,410 --> 00:35:31,600
Name are changed to
protect the innocent.

728
00:35:31,600 --> 00:35:36,490
This was a pitch made to me,
I think, in 2003 or 2004.

729
00:35:36,490 --> 00:35:38,640
don't do what they did.

730
00:35:38,640 --> 00:35:42,020
So here's a company,
CyberEx LLP.

731
00:35:42,020 --> 00:35:45,050
Here's the executive summary.

732
00:35:45,050 --> 00:35:49,130
Remember, the year
is, I think, 2004.

733
00:35:49,130 --> 00:35:52,030
The year was 2004.

734
00:35:52,030 --> 00:35:55,320
What they're
telling me, in 2005,

735
00:35:55,320 --> 00:36:00,350
we'll have customers, and in
2007 $60 million in sales.

736
00:36:00,350 --> 00:36:01,420
How about that.

737
00:36:01,420 --> 00:36:04,572
2007, investor IRR
greater than 200%,

738
00:36:04,572 --> 00:36:06,030
you all are going
to get money back

739
00:36:06,030 --> 00:36:08,135
and the investors are
going to be happy.

740
00:36:08,135 --> 00:36:12,560
What a terrible, terrible pitch.

741
00:36:12,560 --> 00:36:13,960
It's insulting.

742
00:36:13,960 --> 00:36:16,090
You're telling me this is
what's going to happen.

743
00:36:16,090 --> 00:36:18,080
You haven't even told
me what you do yet,

744
00:36:18,080 --> 00:36:20,880
and you're telling me how much
money I'm going to make on it.

745
00:36:20,880 --> 00:36:22,370
Please.

746
00:36:22,370 --> 00:36:26,390
And here's the people-- the next
slide is, here's who we are.

747
00:36:26,390 --> 00:36:29,200
I don't know what you do, but
you're telling me who you are.

748
00:36:29,200 --> 00:36:33,140
So we got Aunt May, Peter
Parker, Doctor Octopus,

749
00:36:33,140 --> 00:36:36,830
and here's our advisory board.

750
00:36:36,830 --> 00:36:37,810
Great.

751
00:36:37,810 --> 00:36:41,990
I see all the backgrounds, is
it relevant to what you do?

752
00:36:41,990 --> 00:36:43,480
I don't know yet.

753
00:36:43,480 --> 00:36:44,690
I don't know what you do.

754
00:36:47,640 --> 00:36:52,440
So, now maybe they're going
to get to what they do now.

755
00:36:52,440 --> 00:36:53,320
Let's see.

756
00:36:53,320 --> 00:36:56,400
Sentinel eStrand technology.

757
00:36:56,400 --> 00:36:57,290
What does that mean.

758
00:36:57,290 --> 00:36:59,320
"Dynamically adjusts
to block emerging"--

759
00:36:59,320 --> 00:37:00,300
what kind of threats?

760
00:37:00,300 --> 00:37:02,940
Emerging threats, holy cow!

761
00:37:02,940 --> 00:37:04,160
DNA, I see DNA.

762
00:37:04,160 --> 00:37:06,130
They're a medical
product company.

763
00:37:06,130 --> 00:37:07,610
There's DNA there.

764
00:37:07,610 --> 00:37:10,840
Special ISTAT-- is
that like a statin?

765
00:37:10,840 --> 00:37:14,760
ISTAT detects mutation--
oh, that sounds terrible.

766
00:37:14,760 --> 00:37:17,000
Mutations,
immunization of-- spam?

767
00:37:19,565 --> 00:37:20,065
Spam.

768
00:37:20,065 --> 00:37:23,645
There's a DNA, Powerful
[INAUDIBLE] Identify Spam.

769
00:37:26,260 --> 00:37:29,060
Don't do that.

770
00:37:29,060 --> 00:37:32,430
And then CyberEx
technology benefits.

771
00:37:32,430 --> 00:37:34,990
"The sentinel technology
provides complete cyber

772
00:37:34,990 --> 00:37:37,650
messaging"-- this
is a lot of words.

773
00:37:37,650 --> 00:37:40,220
This isn't 30 point font, is it?

774
00:37:40,220 --> 00:37:42,050
No, not exactly.

775
00:37:42,050 --> 00:37:43,910
So, OK.

776
00:37:43,910 --> 00:37:46,325
This meeting ended really fast.

777
00:37:51,890 --> 00:37:56,870
This is a good example
of an on-the-spot pitch

778
00:37:56,870 --> 00:38:00,770
made by somebody in a company
I helped start up in Boulder.

779
00:38:00,770 --> 00:38:03,760
Everybody's heard of
the internet of things?

780
00:38:03,760 --> 00:38:07,460
You have the [? Hue ?]
light bulb and shades

781
00:38:07,460 --> 00:38:09,650
and the lights that you
can control in your house,

782
00:38:09,650 --> 00:38:12,070
and the Nest thermostat,
all that sort of thing.

783
00:38:12,070 --> 00:38:13,770
The house is being
filled up with

784
00:38:13,770 --> 00:38:17,340
smart, intelligent,
IP-addressable, programmable

785
00:38:17,340 --> 00:38:17,910
objects.

786
00:38:17,910 --> 00:38:19,320
It's really cool.

787
00:38:19,320 --> 00:38:21,180
But if you have
15 things that are

788
00:38:21,180 --> 00:38:23,780
programmable in your home
that do things automatically,

789
00:38:23,780 --> 00:38:27,260
you need 15 apps to do it.

790
00:38:27,260 --> 00:38:29,560
So we have a company
in Boulder that's

791
00:38:29,560 --> 00:38:32,440
integrating all these
addressable things,

792
00:38:32,440 --> 00:38:34,910
programmable so things
can talk to each other.

793
00:38:34,910 --> 00:38:39,064
This is an example of
a fairly decent pitch.

794
00:38:39,064 --> 00:38:39,730
[VIDEO PLAYBACK]

795
00:38:39,730 --> 00:38:41,498
-Brought to you by Toyota.

796
00:38:41,498 --> 00:38:47,980
--[INAUDIBLE] CES 2014 at Digital
Experience is the [INAUDIBLE]

797
00:38:47,980 --> 00:38:51,389
And I found Mike from Revolve.

798
00:38:51,389 --> 00:38:52,850
Hi, Mike, how are you?

799
00:38:52,850 --> 00:38:54,285
-Good, Sharon, how are you?

800
00:38:54,285 --> 00:38:55,285
-Doing great, thank you.

801
00:38:55,285 --> 00:38:57,130
Now Revolve, I hear
that this is going

802
00:38:57,130 --> 00:38:58,911
to make my life so much easier.

803
00:38:58,911 --> 00:38:59,410
I'm excited.

804
00:38:59,410 --> 00:39:02,970
Please, tell me how this
makes my life easier.

805
00:39:02,970 --> 00:39:06,370
-Well, Revolve is essentially a
smart home automation solution,

806
00:39:06,370 --> 00:39:09,200
focused on taking those
premium devices like Philips

807
00:39:09,200 --> 00:39:12,080
Hue, [INAUDIBLE]
Nest, and Sonos,

808
00:39:12,080 --> 00:39:14,910
bringing them all together
under a single application

809
00:39:14,910 --> 00:39:17,660
and then allowing you to
automate them in ways that you

810
00:39:17,660 --> 00:39:19,815
can't do with just a single
native application that

811
00:39:19,815 --> 00:39:20,790
comes with those.

812
00:39:20,790 --> 00:39:22,110
-Oh, that's excellent.

813
00:39:22,110 --> 00:39:24,930
I have like 10 of these
apps sitting around at home

814
00:39:24,930 --> 00:39:27,360
because I have the
Hue, I have Sonos,

815
00:39:27,360 --> 00:39:30,356
and It drives me nuts that
I have to skip from one app

816
00:39:30,356 --> 00:39:31,390
to another.

817
00:39:31,390 --> 00:39:33,807
So is this easy for consumers?

818
00:39:33,807 --> 00:39:35,640
-It's really easy, and
actually, again, it's

819
00:39:35,640 --> 00:39:37,386
direct to consumer play.

820
00:39:37,386 --> 00:39:40,140
So, if you want, I'll walk
you through how easy it is.

821
00:39:40,140 --> 00:39:42,160
We pride ourselves
on 60-second setup,

822
00:39:42,160 --> 00:39:44,800
and you'll be up and running,
discovering your devices

823
00:39:44,800 --> 00:39:46,110
and being able to control them.

824
00:39:46,110 --> 00:39:47,040
-OK, I'm counting.

825
00:39:47,040 --> 00:39:47,850
Do it.

826
00:39:47,850 --> 00:39:48,720
-All right.

827
00:39:48,720 --> 00:39:50,330
So here we set the app here.

828
00:39:50,330 --> 00:39:51,850
And the first thing
that you'll see

829
00:39:51,850 --> 00:39:55,480
is that we essentially
allow you to just plug

830
00:39:55,480 --> 00:39:58,730
in the hub in a central
location in the home.

831
00:39:58,730 --> 00:40:00,510
You're not tied to
your router, is often

832
00:40:00,510 --> 00:40:02,657
in the basement or
some obscure place.

833
00:40:02,657 --> 00:40:04,490
And the reason was we
wanted to get the best

834
00:40:04,490 --> 00:40:06,690
signal to talk to all the
devices that you have.

835
00:40:06,690 --> 00:40:08,271
So the key, though
is getting this

836
00:40:08,271 --> 00:40:09,520
onto your local Wi-Fi network.

837
00:40:09,520 --> 00:40:12,900
And what we've done is created
a proprietary technology

838
00:40:12,900 --> 00:40:15,550
that essentially takes
your Wi-Fi credentials

839
00:40:15,550 --> 00:40:19,580
that you that you have
on your iPhone or iPad

840
00:40:19,580 --> 00:40:22,130
and then transmits that
optically to the hub.

841
00:40:22,130 --> 00:40:25,280
So if you just enter
our password, hit done,

842
00:40:25,280 --> 00:40:28,910
replace the iPad right
onto the hub and optically,

843
00:40:28,910 --> 00:40:32,560
it's transmitting the data to
the hub, and within 30 seconds,

844
00:40:32,560 --> 00:40:34,832
we'll get notification
that the hub is now

845
00:40:34,832 --> 00:40:36,750
on your local WiFi network.

846
00:40:36,750 --> 00:40:38,890
And as soon as it does,
it'll automatically

847
00:40:38,890 --> 00:40:40,670
start discovering
these great devices

848
00:40:40,670 --> 00:40:44,450
like Sonos, Nest, Phillips Hue.

849
00:40:44,450 --> 00:40:45,594
[END PLAYBACK]

850
00:40:45,594 --> 00:40:47,760
STEPHEN PEARSE: It goes on
for another minute or so.

851
00:40:47,760 --> 00:40:49,450
[INAUDIBLE] kind of cool.

852
00:40:49,450 --> 00:40:51,930
I like that show.

853
00:40:51,930 --> 00:40:55,420
So that's an example
of how you get

854
00:40:55,420 --> 00:40:58,900
to the point, talk about why do
I care about your technology?

855
00:40:58,900 --> 00:41:00,970
If you have things
in your home that

856
00:41:00,970 --> 00:41:02,470
needs to be controlled
or automated,

857
00:41:02,470 --> 00:41:03,790
but they don't
talk to each other

858
00:41:03,790 --> 00:41:05,520
because they're from
different manufacturers,

859
00:41:05,520 --> 00:41:06,490
that's the solution.

860
00:41:06,490 --> 00:41:09,220
And he gets to
the point quickly.

861
00:41:09,220 --> 00:41:14,510
Here's another example of
a presentation or a pitch

862
00:41:14,510 --> 00:41:18,380
that we did in the year 2000
to telecommunications company.

863
00:41:18,380 --> 00:41:23,550
We built a box that was 10
times faster, smarter, smaller,

864
00:41:23,550 --> 00:41:27,800
better, than the Nortel
box, where I had just left.

865
00:41:27,800 --> 00:41:31,370
And this is an
example of how you

866
00:41:31,370 --> 00:41:34,200
might want to use
pictures and clearly

867
00:41:34,200 --> 00:41:38,830
talk about the superlatives
of what you're trying to sell.

868
00:41:38,830 --> 00:41:42,520
So talk about a big,
total addressable market.

869
00:41:42,520 --> 00:41:44,850
Now, remember, this
was a long time ago.

870
00:41:44,850 --> 00:41:48,400
In 2008, the prediction
was, this kind of technology

871
00:41:48,400 --> 00:41:49,570
was going to be huge.

872
00:41:49,570 --> 00:41:53,430
So therefore, we need a
product in that space.

873
00:41:53,430 --> 00:41:59,080
And why is the stuff that you're
competing against terrible?

874
00:41:59,080 --> 00:42:03,100
Talk about why things
are terrible today.

875
00:42:03,100 --> 00:42:07,000
And then talk about
why what you're selling

876
00:42:07,000 --> 00:42:09,030
is being purchased,
and people want it,

877
00:42:09,030 --> 00:42:13,770
but they want it faster,
cheaper, smaller, better.

878
00:42:13,770 --> 00:42:17,400
And then talk about the
evolution of how your product--

879
00:42:17,400 --> 00:42:20,450
and how the history of
the technology, inevitably

880
00:42:20,450 --> 00:42:22,970
is going to lead to what
you're trying to sell.

881
00:42:22,970 --> 00:42:25,430
So you want to show a nice
picture showing things

882
00:42:25,430 --> 00:42:29,520
getting better and faster,
and more products later on.

883
00:42:29,520 --> 00:42:33,200
And then in our case, we're
simplifying the telephone

884
00:42:33,200 --> 00:42:37,100
central office, so we show how
complicated things are now,

885
00:42:37,100 --> 00:42:39,400
and how the picture gets
a little simpler when

886
00:42:39,400 --> 00:42:40,830
you buy our product.

887
00:42:40,830 --> 00:42:42,250
Keeping it simple.

888
00:42:42,250 --> 00:42:44,650
Now, all these things were
technical, kind of jargony,

889
00:42:44,650 --> 00:42:47,460
but the audience
we were pitching to

890
00:42:47,460 --> 00:42:50,650
knew it intimately,
because that was

891
00:42:50,650 --> 00:42:52,190
the big bubble at that time.

892
00:42:52,190 --> 00:42:54,840
Fiber optics and
telecommunications.

893
00:42:54,840 --> 00:42:56,750
And everybody knew
a lot about it.

894
00:42:56,750 --> 00:43:00,190
But I try to keep it even
simpler than what they might--

895
00:43:00,190 --> 00:43:04,060
they were being given
pitches of terribly complex,

896
00:43:04,060 --> 00:43:08,240
brand new protocols, new-wave
division-- experimental stuff.

897
00:43:08,240 --> 00:43:09,570
We kept it simple.

898
00:43:09,570 --> 00:43:11,630
And I think that's
one of the reasons why

899
00:43:11,630 --> 00:43:14,240
we had lots of customers
and we had lots of money

900
00:43:14,240 --> 00:43:18,000
coming in, because we
made our value proposition

901
00:43:18,000 --> 00:43:20,248
compelling, simple, and easy.

902
00:43:24,470 --> 00:43:25,702
I'll talk about that later.

903
00:43:25,702 --> 00:43:27,035
When do you want to raise money?

904
00:43:30,360 --> 00:43:33,850
So you always, always,
always, always get money

905
00:43:33,850 --> 00:43:37,360
when you do not need money.

906
00:43:37,360 --> 00:43:38,890
Why?

907
00:43:38,890 --> 00:43:41,960
What if I just had a round not
too long ago, I got $2 million

908
00:43:41,960 --> 00:43:46,640
in the bank, and I'm good
for another nine months,

909
00:43:46,640 --> 00:43:50,560
a year, now's a good time to
start raising money again,

910
00:43:50,560 --> 00:43:53,680
because people who
have money don't want

911
00:43:53,680 --> 00:43:56,750
to give it to you under duress.

912
00:43:56,750 --> 00:44:00,930
If you're going to run out of
money in six months, and it

913
00:44:00,930 --> 00:44:03,690
takes six months
to close a deal.

914
00:44:03,690 --> 00:44:07,500
And assume it's going to
take six months for you

915
00:44:07,500 --> 00:44:10,590
to start your campaign
and close a round.

916
00:44:10,590 --> 00:44:13,726
If that's the case, then
by the time you close,

917
00:44:13,726 --> 00:44:15,350
you're going to be
almost out of money,

918
00:44:15,350 --> 00:44:17,760
and if somebody holds up the
deal or bargain or whatever,

919
00:44:17,760 --> 00:44:22,150
your company's done, or
you start laying people off

920
00:44:22,150 --> 00:44:23,690
and you lose all your momentum.

921
00:44:23,690 --> 00:44:26,270
So always start raising
your money and plan

922
00:44:26,270 --> 00:44:30,510
to close around at least six
months before you really need

923
00:44:30,510 --> 00:44:31,010
it.

924
00:44:34,260 --> 00:44:36,320
How do you raise money?

925
00:44:36,320 --> 00:44:39,120
Let's go to this VC,
oh, they said no.

926
00:44:39,120 --> 00:44:42,460
Let's go to that
VC, oh they said no.

927
00:44:42,460 --> 00:44:45,930
Do you do it serially
or in parallel?

928
00:44:45,930 --> 00:44:49,250
You not only have to
do it in parallel,

929
00:44:49,250 --> 00:44:52,400
but you have to
orchestrate it in parallel,

930
00:44:52,400 --> 00:44:56,590
because this is important.

931
00:44:56,590 --> 00:45:01,832
If you go to one or two VCs and
spend a month or so with them,

932
00:45:01,832 --> 00:45:03,540
and they're kind of
dragging their heels,

933
00:45:03,540 --> 00:45:06,342
and then you go
to the next ones,

934
00:45:06,342 --> 00:45:07,800
and the next ones
are saying, well,

935
00:45:07,800 --> 00:45:09,450
what did the first one say?

936
00:45:09,450 --> 00:45:10,830
Well, they're thinking about it.

937
00:45:10,830 --> 00:45:12,540
How long did-- OK.

938
00:45:12,540 --> 00:45:16,470
They see hesitancy on some other
people, some other investors'

939
00:45:16,470 --> 00:45:18,845
part, they're going
to make them hesitant,

940
00:45:18,845 --> 00:45:20,220
and all of a
sudden, everything's

941
00:45:20,220 --> 00:45:21,090
being strong along.

942
00:45:21,090 --> 00:45:22,960
Everybody's waiting
to see, well,

943
00:45:22,960 --> 00:45:27,150
why didn't they-- if you do
everybody at the same time,

944
00:45:27,150 --> 00:45:31,400
nobody knows what hand
is being dealt where,

945
00:45:31,400 --> 00:45:35,219
what potential partners might
be thinking, because you often

946
00:45:35,219 --> 00:45:36,760
don't get money from
just one person.

947
00:45:36,760 --> 00:45:39,720
You get it from several
venture capitalists,

948
00:45:39,720 --> 00:45:41,160
and they want to
team and partner.

949
00:45:41,160 --> 00:45:43,720
You want to create this feeding
frenzy all at the same time.

950
00:45:43,720 --> 00:45:46,414
Hey, did you get a
pitch by this company?

951
00:45:46,414 --> 00:45:47,830
They're going to
do you next week?

952
00:45:47,830 --> 00:45:49,770
Let's talk about them
right afterwards.

953
00:45:49,770 --> 00:45:51,500
They'll talk, they'll
compare notes,

954
00:45:51,500 --> 00:45:53,340
and you're just more
likely to end up

955
00:45:53,340 --> 00:45:56,090
with a really successful
high valuation

956
00:45:56,090 --> 00:46:01,080
if you orchestrate your pitch.

957
00:46:01,080 --> 00:46:02,560
Don't dribble it out.

958
00:46:02,560 --> 00:46:04,370
Do it all at once
at the same time,

959
00:46:04,370 --> 00:46:08,600
get all the feedback at the
same time, and hit it hard.

960
00:46:08,600 --> 00:46:14,640
Again, assume it's going to take
six months to close a round.

961
00:46:14,640 --> 00:46:16,490
Signal to noise.

962
00:46:16,490 --> 00:46:18,770
Why should they pay
attention to you?

963
00:46:18,770 --> 00:46:21,430
You have a nice,
pretty business plan

964
00:46:21,430 --> 00:46:24,010
and a pitch deck, why won't
they return your calls?

965
00:46:24,010 --> 00:46:25,330
Because they don't know you.

966
00:46:25,330 --> 00:46:31,020
And most pitches come
across their desks

967
00:46:31,020 --> 00:46:32,600
and they throw it away.

968
00:46:32,600 --> 00:46:35,860
So you really need to
have a differentiator.

969
00:46:35,860 --> 00:46:38,580
You need to be introduced or
have somebody do something

970
00:46:38,580 --> 00:46:40,020
that gets their attention.

971
00:46:40,020 --> 00:46:44,460
Or maybe an article in
a newspaper or something

972
00:46:44,460 --> 00:46:46,310
like that, to get
their attention.

973
00:46:46,310 --> 00:46:48,180
Think about what
signal you're going

974
00:46:48,180 --> 00:46:51,500
to punch through the noise
that they're hearing every day,

975
00:46:51,500 --> 00:46:53,470
If you can be introduced
because so-and-so

976
00:46:53,470 --> 00:46:57,760
knows somebody in this
venture capital partnership,

977
00:46:57,760 --> 00:46:59,650
that's the best way.

978
00:46:59,650 --> 00:47:01,800
So hand out a lot of
cards, meet people

979
00:47:01,800 --> 00:47:06,940
go to social
networking functions

980
00:47:06,940 --> 00:47:09,320
where VCs and angels
are going to be.

981
00:47:09,320 --> 00:47:12,920
An angel is a great way to
get introduced to big money,

982
00:47:12,920 --> 00:47:14,300
to the venture capitalists.

983
00:47:14,300 --> 00:47:17,120
Because chances
are, the good ones

984
00:47:17,120 --> 00:47:18,536
have worked with
them before, too.

985
00:47:21,140 --> 00:47:25,490
Oh, you've got two good offers
from two venture capital

986
00:47:25,490 --> 00:47:26,300
companies.

987
00:47:26,300 --> 00:47:27,650
Yay!

988
00:47:27,650 --> 00:47:31,500
One is better than the other.

989
00:47:31,500 --> 00:47:34,300
One is better than the other.

990
00:47:34,300 --> 00:47:36,760
What should you think
about when you decide

991
00:47:36,760 --> 00:47:38,740
whose money should I take?

992
00:47:38,740 --> 00:47:40,510
Does it matter?

993
00:47:40,510 --> 00:47:41,510
One's a better offer.

994
00:47:41,510 --> 00:47:44,740
One is going to give you $25
million for 10% of the company.

995
00:47:44,740 --> 00:47:47,110
The other is going to
give you $25 million

996
00:47:47,110 --> 00:47:49,460
for 15% of the company.

997
00:47:49,460 --> 00:47:51,785
Hey, that's my company
you're taking there.

998
00:47:51,785 --> 00:47:53,900
I want that.

999
00:47:53,900 --> 00:47:56,210
What do you think about?

1000
00:47:56,210 --> 00:47:58,550
Go for the best offer?

1001
00:47:58,550 --> 00:48:00,630
It really depends.

1002
00:48:00,630 --> 00:48:05,870
If one is a mid-level, not
so well-known venture capital

1003
00:48:05,870 --> 00:48:10,950
company, and the other
is a super top-tier, NEA

1004
00:48:10,950 --> 00:48:17,960
or one with a great track
record and history of getting

1005
00:48:17,960 --> 00:48:20,680
their companies acquired,
you should probably

1006
00:48:20,680 --> 00:48:26,120
go with the name brand because
they can make deals happen.

1007
00:48:26,120 --> 00:48:29,810
They can bring in money
for the next round.

1008
00:48:29,810 --> 00:48:31,270
They have a cachet.

1009
00:48:31,270 --> 00:48:33,550
That's hard to compete with.

1010
00:48:33,550 --> 00:48:35,300
That's my belief.

1011
00:48:35,300 --> 00:48:39,490
And don't focus too much
on the equity dilution,

1012
00:48:39,490 --> 00:48:44,490
because chances are,
founders and CEOs,

1013
00:48:44,490 --> 00:48:46,550
even if you have a
highly diluted round,

1014
00:48:46,550 --> 00:48:48,870
they don't want you to
walk away or lose interest.

1015
00:48:48,870 --> 00:48:52,800
They're going to
re-up your percentage.

1016
00:48:52,800 --> 00:48:56,650
So good management tends to
keep a big hunk of the company,

1017
00:48:56,650 --> 00:48:58,890
no matter how many
rounds you go through.

1018
00:48:58,890 --> 00:49:01,480
So don't focus too
much about dilution.

1019
00:49:01,480 --> 00:49:05,430
It's important to focus
on it, but not too much,

1020
00:49:05,430 --> 00:49:08,130
Anybody know what this means?

1021
00:49:08,130 --> 00:49:14,690
C-F-I-M-I-T-Y-M. There's usually
someone who knows what that

1022
00:49:14,690 --> 00:49:16,630
means.

1023
00:49:16,630 --> 00:49:22,820
Cash Is More Important
Than Your Mother.

1024
00:49:22,820 --> 00:49:25,060
Ever heard that term?

1025
00:49:25,060 --> 00:49:28,490
Finance people use
it all the time.

1026
00:49:28,490 --> 00:49:31,510
Cash is really,
really important.

1027
00:49:31,510 --> 00:49:33,570
Cash flow.

1028
00:49:33,570 --> 00:49:35,590
The fastest way to
kill your company

1029
00:49:35,590 --> 00:49:38,020
is not pay attention
to cash flow.

1030
00:49:38,020 --> 00:49:41,990
Wait a minute-- we have
orders pouring in like crazy.

1031
00:49:41,990 --> 00:49:43,670
Everything's going great.

1032
00:49:43,670 --> 00:49:46,250
What do you mean, we're dead?

1033
00:49:46,250 --> 00:49:47,380
We have to shut the doors?

1034
00:49:47,380 --> 00:49:50,660
Because you can go bankrupt
if you're not paying attention

1035
00:49:50,660 --> 00:49:53,740
to cash flow, and you
need emergency debt,

1036
00:49:53,740 --> 00:49:55,740
and you scared off the
investors from giving you

1037
00:49:55,740 --> 00:49:58,250
a bridge loan because you
weren't paying attention

1038
00:49:58,250 --> 00:49:59,870
to the business.

1039
00:49:59,870 --> 00:50:05,020
So if you don't
want to hire a CFO,

1040
00:50:05,020 --> 00:50:09,325
have a good rental-- and a lot
of startups just rent a CFO,

1041
00:50:09,325 --> 00:50:11,200
but make sure they're
paying attention to it.

1042
00:50:14,420 --> 00:50:16,080
Flexibility and pivots.

1043
00:50:16,080 --> 00:50:18,810
You're not going
to end up selling

1044
00:50:18,810 --> 00:50:22,120
the product you think you are.

1045
00:50:22,120 --> 00:50:24,320
In fact, the company
probably is not

1046
00:50:24,320 --> 00:50:28,450
going to be the company
you think you're building.

1047
00:50:28,450 --> 00:50:33,110
A very large percentage, and
no one has the data statistics,

1048
00:50:33,110 --> 00:50:38,800
but I think most startups end
up, at some point, pivoting.

1049
00:50:38,800 --> 00:50:41,160
Pivoting a little
bit, pivoting a lot.

1050
00:50:41,160 --> 00:50:46,050
We were going to build-- this
company, Revolve in Boulder.

1051
00:50:46,050 --> 00:50:47,850
They came to me
and said, we want

1052
00:50:47,850 --> 00:50:53,300
to build an internet-addressable
irrigation system.

1053
00:50:53,300 --> 00:50:55,960
Well, OK, that's interesting.

1054
00:50:55,960 --> 00:50:58,640
Nest is building the
thermostat, and now they're

1055
00:50:58,640 --> 00:51:01,690
building fire alarms and
stuff, and maybe irrigation

1056
00:51:01,690 --> 00:51:03,700
is important, too.

1057
00:51:03,700 --> 00:51:05,240
But we talked, and
I convinced them

1058
00:51:05,240 --> 00:51:06,900
that there is a bigger problem.

1059
00:51:06,900 --> 00:51:10,550
And you can be the one.

1060
00:51:10,550 --> 00:51:13,850
The ring that rules all
devices in the home.

1061
00:51:13,850 --> 00:51:16,040
You can build this product,
because you guys are all

1062
00:51:16,040 --> 00:51:18,970
[? ex-Amber ?] people, and
you know how to do wireless,

1063
00:51:18,970 --> 00:51:22,260
and we have seven radios in
the box and can control every

1064
00:51:22,260 --> 00:51:24,730
protocol in the universe.

1065
00:51:24,730 --> 00:51:26,690
You can do it!

1066
00:51:26,690 --> 00:51:28,690
And they went and built it.

1067
00:51:28,690 --> 00:51:29,980
They pivoted.

1068
00:51:29,980 --> 00:51:32,990
They were building
this irrigation system.

1069
00:51:32,990 --> 00:51:36,190
So you might end up having to do
that once or maybe even twice.

1070
00:51:36,190 --> 00:51:37,930
Don't be afraid
of being flexible.

1071
00:51:37,930 --> 00:51:42,540
Don't be afraid of taking
rapid customer feedback.

1072
00:51:42,540 --> 00:51:46,710
Use the lean, Eric Ries'
lean startup methodology.

1073
00:51:46,710 --> 00:51:48,060
Do a lot of prototypes.

1074
00:51:48,060 --> 00:51:48,935
Show it to customers.

1075
00:51:48,935 --> 00:51:50,143
What do you think about that?

1076
00:51:50,143 --> 00:51:52,940
Well, I don't like the color,
or I don't like that button.

1077
00:51:52,940 --> 00:51:55,680
Whatever it is, take
that feedback quickly,

1078
00:51:55,680 --> 00:51:57,680
build more prototypes,
and don't be

1079
00:51:57,680 --> 00:52:00,322
afraid to change course
in what you're building.

1080
00:52:04,350 --> 00:52:06,640
A few more success factors.

1081
00:52:06,640 --> 00:52:08,640
So intellectual property.

1082
00:52:08,640 --> 00:52:11,630
I have five patents.

1083
00:52:11,630 --> 00:52:15,240
I really don't care,
because patents have never

1084
00:52:15,240 --> 00:52:19,720
successfully, in my experience,
or most VCs I've talked to,

1085
00:52:19,720 --> 00:52:22,180
has never successfully
defended anything.

1086
00:52:22,180 --> 00:52:27,240
In fact, most of
the patents that

1087
00:52:27,240 --> 00:52:31,490
startups pull out
of universities end

1088
00:52:31,490 --> 00:52:36,410
up being handed back later,
either because the terms are

1089
00:52:36,410 --> 00:52:38,280
too onerous, from
the university,

1090
00:52:38,280 --> 00:52:40,399
I want so much thousands
of dollars a year.

1091
00:52:40,399 --> 00:52:42,190
Well, I'm going to
figure out a way how not

1092
00:52:42,190 --> 00:52:44,140
to have to give that to you.

1093
00:52:44,140 --> 00:52:48,120
But anyway, IP is good
and it's important,

1094
00:52:48,120 --> 00:52:50,030
and some people who
might buy your company

1095
00:52:50,030 --> 00:52:52,240
may say, thank you, I
would like that patent

1096
00:52:52,240 --> 00:52:55,840
as part of my war chest
to defend this or that.

1097
00:52:55,840 --> 00:52:57,160
It could be important.

1098
00:52:57,160 --> 00:53:01,210
But speed is far more
important than patents.

1099
00:53:01,210 --> 00:53:03,010
Outrun your competitors.

1100
00:53:03,010 --> 00:53:05,620
Even if everybody
steals your idea

1101
00:53:05,620 --> 00:53:08,310
and they're building
it right away,

1102
00:53:08,310 --> 00:53:12,300
and they're stealing all
your intellectual property,

1103
00:53:12,300 --> 00:53:16,390
if you beat them to the
market, first mover will win.

1104
00:53:16,390 --> 00:53:20,050
Just be first, be
fast, be the best.

1105
00:53:20,050 --> 00:53:25,390
So focus more on speed
than intellectual property.

1106
00:53:25,390 --> 00:53:27,857
Think about the mission.

1107
00:53:27,857 --> 00:53:28,690
What is the mission?

1108
00:53:28,690 --> 00:53:31,410
Well, isn't the
mission in the pitch?

1109
00:53:31,410 --> 00:53:34,300
No, it's really not.

1110
00:53:34,300 --> 00:53:36,647
The mission is when you
sit down with your team

1111
00:53:36,647 --> 00:53:38,230
and go, what are we
trying to do here?

1112
00:53:38,230 --> 00:53:40,590
Oh, well, we want to build this
box, we want to sell a million

1113
00:53:40,590 --> 00:53:41,150
of them.

1114
00:53:41,150 --> 00:53:45,441
No, what are we really
trying to do here?

1115
00:53:45,441 --> 00:53:46,190
What are we doing?

1116
00:53:46,190 --> 00:53:48,023
Well, we want to change
the way people think

1117
00:53:48,023 --> 00:53:52,550
about this whole field, or we
want to change the way people

1118
00:53:52,550 --> 00:53:56,030
interface with their
home, or what is

1119
00:53:56,030 --> 00:53:58,230
it you're really trying to do?

1120
00:53:58,230 --> 00:54:01,820
And you're using a technology
for right now to do it,

1121
00:54:01,820 --> 00:54:04,560
but later on you may
move on to other things.

1122
00:54:04,560 --> 00:54:06,190
But what are you
really trying to do?

1123
00:54:06,190 --> 00:54:08,690
Figure out your mission
statement, word for word.

1124
00:54:08,690 --> 00:54:10,910
Figure it out.

1125
00:54:10,910 --> 00:54:11,920
How am I doing on time?

1126
00:54:11,920 --> 00:54:12,430
Am I out?

1127
00:54:16,230 --> 00:54:18,530
I'm out?

1128
00:54:18,530 --> 00:54:19,030
I'm good?

1129
00:54:19,030 --> 00:54:21,130
OK, all right.

1130
00:54:21,130 --> 00:54:22,120
The team.

1131
00:54:22,120 --> 00:54:22,640
The team.

1132
00:54:26,350 --> 00:54:29,742
Really, venture capitalists
do look at the team,

1133
00:54:29,742 --> 00:54:31,950
and a lot of them say, yeah,
the most important thing

1134
00:54:31,950 --> 00:54:36,780
is the team and we're
betting on the team.

1135
00:54:36,780 --> 00:54:38,844
Well, really, they
want your idea

1136
00:54:38,844 --> 00:54:40,010
to make them a lot of money.

1137
00:54:40,010 --> 00:54:41,460
That's the most important thing.

1138
00:54:41,460 --> 00:54:47,470
But the team can pivot or be
flexible and have the integrity

1139
00:54:47,470 --> 00:54:51,620
to be able to handle
shocks, whether it's a money

1140
00:54:51,620 --> 00:54:54,050
shock or a technology shock.

1141
00:54:54,050 --> 00:54:57,630
Or we just came to market and
so did three other companies.

1142
00:54:57,630 --> 00:54:58,560
What do we do now?

1143
00:54:58,560 --> 00:55:00,940
Do we buckle or are we tough?

1144
00:55:00,940 --> 00:55:03,290
Is this team going
to stick with it?

1145
00:55:03,290 --> 00:55:05,090
Are we going to work
whatever we have to?

1146
00:55:05,090 --> 00:55:06,672
The team is really important.

1147
00:55:06,672 --> 00:55:08,380
Think about that as
you're assembling it.

1148
00:55:08,380 --> 00:55:12,990
Make sure the chemistry works.

1149
00:55:12,990 --> 00:55:16,890
There will be the
time when you'll

1150
00:55:16,890 --> 00:55:19,210
have founder versus CEO issues.

1151
00:55:19,210 --> 00:55:21,730
Who's really running this
company, or this is my baby,

1152
00:55:21,730 --> 00:55:22,760
or whatever.

1153
00:55:22,760 --> 00:55:25,124
Or you'll have hires of
people who you really

1154
00:55:25,124 --> 00:55:26,540
like, but they're
not working out,

1155
00:55:26,540 --> 00:55:28,985
and what do we do with them?

1156
00:55:28,985 --> 00:55:31,590
These things have to be
thought out well in advance.

1157
00:55:31,590 --> 00:55:33,620
You have to be able to
make the tough decisions.

1158
00:55:33,620 --> 00:55:35,380
And part of that
toughness has to be

1159
00:55:35,380 --> 00:55:37,780
displayed to the
venture capitalists,

1160
00:55:37,780 --> 00:55:39,080
to the people giving you money.

1161
00:55:39,080 --> 00:55:40,830
Yet you have to have
good answers for when

1162
00:55:40,830 --> 00:55:42,380
people-- what would
you do if this

1163
00:55:42,380 --> 00:55:44,660
were to happen with the team?

1164
00:55:44,660 --> 00:55:45,784
Have that thought out.

1165
00:55:51,712 --> 00:55:53,670
How much money will it
cost to build a company?

1166
00:55:53,670 --> 00:55:55,290
That's part of
the business plan.

1167
00:55:55,290 --> 00:55:57,674
And how much money
you will you make us?

1168
00:56:01,190 --> 00:56:04,840
Also goes into your final exit
strategy when you go public.

1169
00:56:07,336 --> 00:56:08,710
Think about what
happens when you

1170
00:56:08,710 --> 00:56:11,130
go-- have a credible
story when you go public.

1171
00:56:11,130 --> 00:56:12,930
Even if you end up
getting acquired,

1172
00:56:12,930 --> 00:56:14,370
always plan on going public.

1173
00:56:17,040 --> 00:56:18,240
Just a few more real quick.

1174
00:56:22,970 --> 00:56:24,350
One of the things
about startups,

1175
00:56:24,350 --> 00:56:25,724
if you don't have
any experience,

1176
00:56:25,724 --> 00:56:28,220
it's really, really tough
to convince money people

1177
00:56:28,220 --> 00:56:29,790
that you know what you're doing.

1178
00:56:29,790 --> 00:56:33,330
So you have to surround
yourself with people who

1179
00:56:33,330 --> 00:56:35,000
compensate for your weaknesses.

1180
00:56:35,000 --> 00:56:36,590
If you want to be
the CEO of a company

1181
00:56:36,590 --> 00:56:38,870
but you don't have any
experience in finance or sales,

1182
00:56:38,870 --> 00:56:43,070
whatever, this is my
team, and everybody rounds

1183
00:56:43,070 --> 00:56:43,860
each other out.

1184
00:56:43,860 --> 00:56:46,664
You have to make sure you
answer that issue of, are

1185
00:56:46,664 --> 00:56:48,330
you really ready for
this startup, based

1186
00:56:48,330 --> 00:56:51,160
on your experience level?

1187
00:56:51,160 --> 00:56:54,120
We talked about trying to
do it again after a failure.

1188
00:56:54,120 --> 00:56:55,300
Failure is not bad.

1189
00:56:55,300 --> 00:56:59,670
In Silicon Valley,
it's a mark of courage.

1190
00:56:59,670 --> 00:57:03,220
Speed and execution
are personality traits.

1191
00:57:03,220 --> 00:57:05,070
They really are.

1192
00:57:05,070 --> 00:57:07,569
If you don't come
across as high energy,

1193
00:57:07,569 --> 00:57:09,110
I'm going to be a
hard time believing

1194
00:57:09,110 --> 00:57:11,390
that you have this as
a personality trait,

1195
00:57:11,390 --> 00:57:15,190
that you are going to get this
product done fast when you

1196
00:57:15,190 --> 00:57:16,310
say it's going to be done.

1197
00:57:16,310 --> 00:57:19,540
You're willing to put in the
late midnight oil, burning that

1198
00:57:19,540 --> 00:57:22,060
to get this thing out the door.

1199
00:57:22,060 --> 00:57:25,630
Try to convey that you're
capable of these things.

1200
00:57:25,630 --> 00:57:27,630
Focus, focus, focus.

1201
00:57:27,630 --> 00:57:30,630
The worst thing that
can happen to a startup

1202
00:57:30,630 --> 00:57:33,850
is, OK we started
out building this,

1203
00:57:33,850 --> 00:57:37,410
but oh, here's a shiny, pretty
little thing over there.

1204
00:57:37,410 --> 00:57:39,600
And I'm going to start
going build that.

1205
00:57:39,600 --> 00:57:40,440
Oh, wait a minute.

1206
00:57:40,440 --> 00:57:43,370
I just read about
that, it's cool, too.

1207
00:57:43,370 --> 00:57:45,440
That's losing focus.

1208
00:57:45,440 --> 00:57:49,710
Sometimes you're going to be
forced to pivot because there's

1209
00:57:49,710 --> 00:57:52,342
a major block that you
didn't expect thrown up

1210
00:57:52,342 --> 00:57:54,300
in front of you, and you
need to get around it.

1211
00:57:54,300 --> 00:57:57,600
You need to pivot around it and
move on to something similar,

1212
00:57:57,600 --> 00:58:00,880
but you don't want to give
up one perfectly good thing

1213
00:58:00,880 --> 00:58:04,380
that you spent six months doing
just because something else

1214
00:58:04,380 --> 00:58:06,740
nicer and prettier came along.

1215
00:58:06,740 --> 00:58:07,800
So focus.

1216
00:58:07,800 --> 00:58:08,950
You have to stay focused.

1217
00:58:08,950 --> 00:58:12,062
If somebody says, hey
boss, look at this.

1218
00:58:12,062 --> 00:58:13,270
They just came out with that.

1219
00:58:13,270 --> 00:58:14,860
Shouldn't we be building that?

1220
00:58:14,860 --> 00:58:16,380
Focus.

1221
00:58:16,380 --> 00:58:17,971
We're getting this done now.

1222
00:58:17,971 --> 00:58:19,720
We're going to work
on it and that's that.

1223
00:58:23,120 --> 00:58:26,180
We talked about stock
dilution and control,

1224
00:58:26,180 --> 00:58:28,470
and not to worry
too much about that.

1225
00:58:28,470 --> 00:58:30,470
And then finally, take
help from your investors.

1226
00:58:33,090 --> 00:58:37,360
But investors probably aren't
going to be very helpful.

1227
00:58:37,360 --> 00:58:40,030
You might think they are,
they might tell you they are,

1228
00:58:40,030 --> 00:58:41,900
they're going to say
we're your buddies,

1229
00:58:41,900 --> 00:58:44,730
I love what you're doing, I
love you, I'm going to help you,

1230
00:58:44,730 --> 00:58:48,030
I'm going to roll up my
sleeves, and it's all BS.

1231
00:58:48,030 --> 00:58:49,116
They can't.

1232
00:58:49,116 --> 00:58:50,490
They're doing too
many companies.

1233
00:58:50,490 --> 00:58:53,010
They're sitting
on too many boards

1234
00:58:53,010 --> 00:58:54,330
They know people.

1235
00:58:54,330 --> 00:58:56,950
Use the network and
use their connections.

1236
00:58:56,950 --> 00:58:59,950
At the next round,
have them help you.

1237
00:58:59,950 --> 00:59:03,710
Who you're partnering with now,
can we parade in front of them

1238
00:59:03,710 --> 00:59:04,670
as well?

1239
00:59:04,670 --> 00:59:06,900
But they're not going
to help you that much.

1240
00:59:06,900 --> 00:59:09,820
Angel investors are more
likely to roll their sleeves up

1241
00:59:09,820 --> 00:59:12,820
because sometimes they're
retirees like me who

1242
00:59:12,820 --> 00:59:16,790
want to have fun and play with
gadgets and stuff like that,

1243
00:59:16,790 --> 00:59:17,810
and they could help.

1244
00:59:17,810 --> 00:59:21,100
But in general, the kind
of help from your investors

1245
00:59:21,100 --> 00:59:22,840
is more who they know.

1246
00:59:22,840 --> 00:59:24,790
Customers and
networks and partners.

1247
00:59:27,340 --> 00:59:31,400
OK, so the bottom line is,
this all really boils down

1248
00:59:31,400 --> 00:59:32,250
to leadership.

1249
00:59:32,250 --> 00:59:35,230
Whether it's technology
leadership, CEO leadership,

1250
00:59:35,230 --> 00:59:39,500
team management, you want to be
the leader in whatever you do.

1251
00:59:39,500 --> 00:59:42,520
So leadership wins.

1252
00:59:42,520 --> 00:59:46,980
In order to be a leader,
you've got to show passion,

1253
00:59:46,980 --> 00:59:51,970
you've got to be confident,
and you have to engage.

1254
00:59:51,970 --> 00:59:54,880
You have to do
those three things.

1255
00:59:54,880 --> 00:59:57,160
You need to have
a call to action.

1256
00:59:57,160 --> 00:59:58,500
I'm going to go do this.

1257
00:59:58,500 --> 01:00:00,310
Do you want to be a part of it?

1258
01:00:00,310 --> 01:00:03,000
I can give you a
piece of my company.

1259
01:00:03,000 --> 01:00:04,940
Love to have you
on board, but we're

1260
01:00:04,940 --> 01:00:06,530
going to change the world.

1261
01:00:06,530 --> 01:00:09,500
You need to make
that pitch and then

1262
01:00:09,500 --> 01:00:12,880
you win the war, even if
you don't win that battle,

1263
01:00:12,880 --> 01:00:15,390
even if you don't get that VC.

1264
01:00:15,390 --> 01:00:17,484
The word will get out,
what you're trying to do,

1265
01:00:17,484 --> 01:00:18,650
and you're going to do fine.

1266
01:00:26,044 --> 01:00:27,384
[APPLAUSE]

1267
01:00:27,384 --> 01:00:28,550
MODERATOR: Thank you, Steve.

1268
01:00:28,550 --> 01:00:29,630
STEPHEN PEARSE: Thanks, Joe.

1269
01:00:29,630 --> 01:00:30,320
Thank you, guys.

1270
01:00:30,320 --> 01:00:35,470
And by the way, all of you can
be the next Tony Stark or Betty

1271
01:00:35,470 --> 01:00:36,570
Stark.

1272
01:00:36,570 --> 01:00:39,890
We need another Tony
Stark, a female Tony Stark,

1273
01:00:39,890 --> 01:00:40,930
captain of industry.

1274
01:00:40,930 --> 01:00:42,127
So good luck, OK?

1275
01:00:42,127 --> 01:00:42,960
Thank you very much.

1276
01:00:42,960 --> 01:00:44,510
[APPLAUSE]