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Why Startup Pitches Fail: A Guide for Investors

Every business needs to pitch itself at some point, whether it's for fundraising, partnerships, or even hiring. But many pitches fail, not because of poor delivery or lack of passion, but because they address the wrong questions.

• The key to successful pitching is understanding the perspective of your potential investor.
• Every investor stage has a specific set of questions they need answered.
• Tailoring your pitch to those key questions will significantly increase your chances of success.

The Hierarchy of Startup Pitches

This article outlines a hierarchy of startup pitches based on the stage of the business. Each level represents a different point in the entrepreneurial journey and requires a different focus in your pitch.

• Printing money: This stage is for companies with proven track records and strong financial performance. Investors are looking for reassurance about the numbers and the team's ability to maintain growth.
• Promising results: This is for businesses demonstrating significant traction and a clear path to monetization. Investors want to see evidence of success and a convincing plan for scaling the business.
• Micro-scale results: Here, companies have achieved initial validation and a clear understanding of their target market. Investors seek to understand the business economics and market potential.
• Working product: Companies at this stage have a fully functional product ready to be launched. Investors are interested in the launch plan, marketing strategy, and the team's ability to execute.
• Prototype product: This is for companies with a working prototype and a clear vision for the final product. Investors want to see evidence that the product solves a real problem and the team has the technical expertise to bring it to market.
• Breakthrough technology: Companies with revolutionary technology are at this stage. Investors are looking for strong intellectual property, the potential for a product, and barriers to entry.
• All-star team: Investors seek to understand the team's expertise and track record, as well as their commitment to the idea.
• Good product idea: This is the initial stage where the company has a compelling idea. Investors are concerned with mitigating risks, the team's capabilities, and the potential for success.

Investor Focus: Key Questions and Most Important Slide

For each stage of the hierarchy, there are key questions that investors will be asking. By focusing on these questions in your pitch, you can effectively communicate your value proposition and demonstrate your company's potential.

Table 1: Pitch Hierarchy and Key Questions

Stage	Key Questions	Most Important Slide
Printing money	Are the numbers real? How big is the market? Can the team execute the growth plan?	Valuation
Promising results	Can you monetize that traffic? Do you know why you've achieved those results?	Hockey stick
Micro-scale results	Who is the customer? What is the potential market size? What are the business economics?	Lessons learned
Working product	What does the product do? What's the launch plan? Who's on the marketing team?	Live demo
Prototype product	What will it take to ship a working product? How do you know anyone would want it? Who's on the engineering team?	Demo (if the product solves an obvious problem), engineering resumes (if the product is nearly impossible to build), or “a day in the life of a customer” (if neither of the above)
Breakthrough technology	Who owns the patents? Can we make a product out of this technology? Are there any good substitutes?	Barriers to entry
All-star team	Has the team made money for their investors in the past? Are they domain experts? Are they committed to an idea in their domain of expertise?	Problem we are trying to solve
Good product idea	What kinds of risk does this company need to mitigate? Is it a revolutionary and novel idea? Is this team the one to back? Can the team bring the product to market? Who is the customer? Who is the competition? Will they fail fast?	About the founders

Focus on Investor Needs

When pitching to investors, focus on addressing their key questions and providing evidence to support your claims. If you find yourself answering questions that don't align with the key questions for your stage, it's a sign that your pitch might not be clear or persuasive.

• Re-evaluate your pitch: If investors aren't engaging with your message, it might be time to reassess your approach and refine your narrative.
• Move down the hierarchy: Sometimes it's more effective to start by presenting a less ambitious pitch and build from there. This can help you gain traction and demonstrate progress.
• Seek feedback: Don't be afraid to get feedback from other entrepreneurs, mentors, and experienced investors. Their insights can help you improve your pitch and refine your approach.

Key Takeaways for Investors

A successful startup pitch requires a thorough understanding of investor expectations and a clear message that resonates with their needs. By following these guidelines, you can increase your chances of securing funding and propelling your business forward.

• Understand the hierarchy of pitches: Knowing where your business fits in the hierarchy helps tailor your pitch to address investor concerns and priorities.
• Focus on key questions: Address the questions that are most relevant to the investor's stage and interest.
• Be transparent and data-driven: Back up your claims with evidence, data, and metrics to build credibility and confidence.
• Practice and iterate: Rehearse your pitch, get feedback, and refine your approach until you feel confident and compelling.