The Term Sheet | Wattys 2016 Winner

Chapter 16

"Do you think we have a chance in hell?" asked Andrew.

"Winners are the ones left standing," said Andrea.

David and Andrew were standing in Andrea's corner office overlooking the Willamette River explaining their traction and their recent call with the Pitch Deck producers. The producers had talked to David a few more times. Every time they called, they asked David all sorts of questions that seemed strange. Questions about Megan and their relationship. How long had they been dating? Did they fight a lot? What was the hardest thing they had ever overcome? They also wanted to know about David's sister. When did she learn about the disease? How did their parents take it? The producers seemed much more interested in David's backstory than the fledgling company.

David asked: "So how do you come up with a good investor pitch?"

"You have to remember that fundraising is first and foremost about people, not companies. It's about people trusting other people. In fact, if you think about it, it's actually pretty absurd that you could stand in front of these investors for just a few minutes and walk away with a check for hundreds of thousands or even millions of dollars. Out of context, that sounds pretty crazy. Right? You might even think someone who would so readily part with so much money was insane. But they aren't crazy, they're just trying to find people they feel they can trust."

David started scribbling notes on a yellow legal pad. "And how do you get someone to trust you?"

"Well, let me tell you a little story, David." Andrea pulled a chair out and signaled for David to sit down. Andrew pulled a second chair out and sat down without any provoking. "You don't need notes for this part. The first time I started a company, I was about your age. My hair went down to my hips, and I was as bright-eyed and starry-eyed as you two are today. My idea was ahead of its time, it was the Internet of Everything. It could connect toasters with microwaves and refrigerators over Internet protocols. If I had just picked thermostats instead of toasters, I might have been Nest. But I have always loved cooking and so I focused on the kitchen first."

"That's a great idea, Andrea." Andrew chuckled. "Hell, you should start that company today. How long ago was this?"

"The mid-nineties."

"Oh. Way ahead of your time."

"So I had a geeky friend of mine build me a prototype. It was an old a toaster with a huge 14.4 baud modem stuck on the back. We went to the only venture capitalist I knew: Frank Wilson. I told Frank why he should invest. I explained that the toaster could call the fire station if it caught on fire. I told him that it could detect the done-ness of the toast and turn off automatically. I listed all the reasons I could think of for how this toaster would change the world. Do you know what Frank told me?"

"Yes?" said Andrew. "But then he offered only half the money you wanted."

"No. None of the money I wanted."

"Because you didn't have a big enough team?"

"No."

"Then he must not have understood the technology?"

"No, Frank was an investor in Geocities and comScore. He understood technology better than most."

"Then why?"

"He said I was too focused on the solution, not on the problem. I was so busy giving him a list of features, like reading a brochure, that I forgot to answer the basics first. Like what was the big problem with toasters today? He said I needed to study the market more. What was so frustrating about toasters that they need internet access? I had also used up forty-five minutes talking just about the toaster's features, which left me no time to get to know him or let him get to know me. If fundraising is primarily about people trusting people, I had failed at task number one: treating the investor as a person."

Andrew started writing that down and Andrea continued.

"You start by telling a good story. A good story always starts with a problem which then frames the solution. The more drama, the better. Bigger problems make for bigger dramas. Also, when you tell a good story, you are showing, not just telling. You can't just say: 'I am trustworthy, I'll work hard for you, trust me.' You must show them that you are trustworthy. You must show them you will work hard. This must be part of your story, woven into the tapestry almost invisibly. Investors are pattern matchers, and within those first few minutes you will need to show that you have integrity, passion, experience, knowledge, skill, leadership, and commitment. And you can't tell them you possess any of these qualities outright."

"That sounds impossible," said Andrew. "Can't we just get money on the merits of the business idea?"

"If only it were that easy, Andrew," said Andrea with a smile. "Did you notice how I convinced you of the value of storytelling by telling you a story? Storytelling is natural. It's human nature to communicate with stories. Did you know that nobody wrote down Homer's epic poems, the Odyssey or the Iliad, for four hundred years? For generations the stories were passed down orally. That's how strong good stories are at surviving and communicating. Those stories are over three thousand years old now."

David stood up and walked over to the window. As he stared out at Mt. Hood, he thought about the old tree in Eastern Oregon. He felt equal parts scared and excited, a common duality of late. He also felt like the curtain had been pulled on something he had always taken for granted. He knew from watching TED Talks how powerful stories could be, but hadn't made the connection to use them in his pitch.

David said: "So how do we start?"

"Start with Frank's advice to me. Think about why you guys are doing this in the first place. What problem are you solving? Why is it a problem? For whom is it a problem? What's the market? How big of a problem is it, really?" Andrea walked over to David and put a hand on his shoulder. "And when you think you have the answer, ask the question again. Whatever you think the reason is, whatever you think the problem is, there is a deeper reason and a deeper problem. You need to get to the root of it. Often you will have to go four or five levels deep to truly understand what you are trying to do."

Andrew's hand tapped impatiently on his leg. "Philosophy's great, but how do we put together our pitch?"

"Once you understand your problem and solution, tell the best story you can about it. Make it personal. Something that incorporates the problem, the solution, and things about you that you want the sharks to know."

"That's it? Just tell a story?" said Andrew.

"Dude, don't be rude. She's trying to help us," David said under his voice.

"I know, but anyone could have told us to tell a story. I need more practical and hands-on advice if we're going to stand a chance."

Andrea just listened and smiled.

"Besides the story, there is only one more thing that's critically important."

At that very moment, Jenni popped her head in the door.

"Andrea, you are five minutes late for your two o'clock."

"Sorry guys, I have to take this. Good luck and let me know if you need any more guidance. You are going to do great, I just know it."

David and Andrew slipped out as Andrea picked up her phone and started apologizing for her tardiness. Andrew winked at David and started running to catch up with Jenni. David wandered slowly toward the elevators. As he walked by, he saw a few guys near a table playing hacky sack under a "Code Monkeys" flag. One of the guys had long dreadlocks and was wearing whitewashed skinny jeans and a vintage Burberry plaid button-up shirt. The other guy was a more common stock programmer, also lanky but with thick horn-rimmed glasses and a grey T-shirt tucked into his khakis with some kind of chimpanzee on the front promoting some startup.

How Portland, David thought.