Michael Seibel (Justin.tv / Socialcam)

Michael: My name is Michael Seibel. I am a current YC partner. I started two companies. One was called Justin.tv, which I ended up selling to Amazon. The other was called Socialcam, which sold to Autodesk. And what I really wanted to do is break down and demystify the process of creating a pitch, because I think what happens too often when I see companies come to talk to me, is that they don't know how to simply explain what they do and then ask for money. And that's basically what you have to do as a founder. So we're going to go over four things. The first is what your 30-second pitch is; this you need to be armed with constantly. This is basically how you talk about your company. This is magic. Whether you're talking to people who want to give you money, or don't want to give you money, you talking to your parents, this is your go-to.

The second is your two-minute pitch. This is for people who are more interested. This is people who you might want to raise money from, or people you might want to get to work for you, or people you actually need to get a little bit deeper [with].

Notice that's where I stop. A lot of people practice 10, 30 minute pitches, hour-pitches, I think that's all garbage. I think you can get everything you need done in 2 minutes, and one thing I like to tell founders is the more you talk, the more you have the opportunity to say something that people don't like. So just talk less! And it'll probably be better.

Then I want to tell you about when to fundraise, because I think a lot of companies get this a little bit wrong.

And then, quickly, how to set up investor meetings.

So, thirty-second pitch. This is so simply, it's three sentences. You can take your time, you can breath when you do this. You don't have to get that much information out. The first is one sentence on what does your company do. Everyone I meet for the first time screws this up. You have to be able to do it in a way that is simple and straightforward, that requires no pre-information on my part. You have to assume I know nothing, literally nothing, about anything. This is how you make it super-simple: usually what we tell people is, apply the mom-test -- if in one sentence you cannot tell what your mom what you do, then rework the sentence. There is a one-sentence explanation that your mom or dad is gonna understand. So really, really start there. And it's OK if you use really basic language. It's OK if you're saying, "Hey we're AirBnB, and we allow you to rent out the extra room in your house." That's simple, right? You don't have to say, "We're AirBNB and we're a marketplace for space". I don't know what that is! That's gonna require more time. So use simple language; very, very important.

The second is how big is your market. It makes sense a couple hours of research, figure out what general industry your product is in, figure out how big it is, investors like to hear that you're in a multi-billion-dollar market. It's pretty simple to do this. AirBnB might say, "How big is the hotel market, how big is the vacation rental market, how big is the online hotel booking market?" These are simple numbers to look up on Google, and it makes an investor understand, "Oh wait, if we're big, if we really blow this company up, it could be worth billions of dollars." Don't skip this step! Second sentence: how big is your market.

Third sentence: how much traction do you have. Ideally this sentence is saying something on the order of, "We launched in January, and we're growing 30% month-over-month, we have this number of sales, this amount of revenue, this amount of users." Very simple. If you can't speak to traction in terms of pre-launch, you need to convince the investor that you're moving extremely quickly. "So the team started in January, by March we launched a beta, by April we launched our product." Right? Convince the investors that you guys are moving fast. That this isn't some long slog, that you guys aren't thinking about this like a big corporation; you're thinking about it like a startup where you can move fast and make mistakes.

That's all you have to do in 30 seconds. Three sentences. From that basis, you should be able to start a conversation about your company. From that basis, I understand exactly what you do.You have no idea how valuable it is to be able to explain to someone what you do in 30 seconds. So really internalize that, like if you take nothing else away, that's gonna help you.

Ok, two minute pitch: now you've got someone you've actually got to convince of something. Maybe it's someone you have to ask for money. So, I like to add four additional components, and these also go by very quick.

The first is unique insight. Now, if you talk to VCs they'll say stuff like, "What's your secret sauce? What's your competitive advantage? What's your unique insight?" It's all the same thing. When I think about unique insight, what I think about is: Here's your opportunity to tell me something that I don't know. Here's your opportunity to tell me something that the biggest players in the market you're trying to enter don't understand, or don't do well. This is the "A-ha" moment. And you'd better have it down in two sentences. The 'Ah-HA' moment. So you've got to crystalize all of the reasons why you guys are going to kill the competitors, or the really intelligent thought that got this business started, in two sentences. And I need to 'Ah-ha'. You can see whether it's happening when you're saying it. That's why I like two sentences, so you get in and out fast. So if I look at you and I'm like, "Huh!", then that's OK! You nailed it! If I look at you and I'm like, "I already knew that", then you didn't nail it. If I look at you and I just don't understand what you're talking about, you definitely didn't nail it. So practice that unique insight. In your two minute pitch, you're only gonna get two sentences to get that out there. So it can't be complicated, and that's the basically the theme of this whole thing: it cannot be complicated.

Next, how do you make money? You know, your business model. I see so many founders run away from this question because they think things like, "If I say advertising, people are gonna be like, 'Oh, that's stupid'". Just say it! Don't run away, if it's advertising, say advertising. Facebook's a massive advertising business. So is Google. If it's direct sales, say direct sales. If it's a game, and you're selling in-app purchases, that's fine! Just say it! Don't run away from this sentence, it only has to be one sentence long. Where founders get tricked on how will you make money, is they say, "Well, we're gonna run advertising, maybe some virtual goods, we're gonna figure out how to do this, and maybe this, and maybe this." Well, now you're saying nothing. Now you've told me you have no idea how you want to monetize this. This was a check-mark that I just wanted to write, "Oh they know how they're gonna monetize." Instead, I'm writing a big question-mark. So do the thing that everyone else in your industry does to monetize, 95% of the time, say it, and move on. It's totally OK, no one's gonna hold your feet to the fire and say three years later, "You didn't monetize this way." But it's much better to be clear and concise than it is to start spouting out every single way your company can make money.

The next one is team. I think that this answer is actually really clear. I think you're trying to do two things. If your team has done something particularly impressive, you need to call that out. "We were the founders of PayPal." Probably want to say that. "We were the founders of Amazon." Probably want to say that. So if you guys have done something that has made investors money, you want to say that. If not, then please don't go on about the awards your team has won, or the PhDs, or the--I don't care, I don't care. What we want to hear is, how many founders? Hopefully between 2 and 4. What we want to hear is, how many of them are technical? How many of engineers vs. businesspeople? Hopefully it's 50-50 or more engineers. What we want to hear is, "How long have you guys known each other?" We don't want to hear you guys met at a founder's dating event three days ago. Ideally you've known each other either personally or professionally for at least six months. We want to hear that you're all working full-time! It's really helpful: "We're all committed to this business." And what we wanna hear is, how you met. That's it! You can get in and out of that two sentences very easy. Your only way to build credentials is if you've accomplished something. And with an investor typically it's if you've accomplished something that's made someone some money. So don't try to over-inflate yourself if you don't have that stat on your resume; move on. The more you talk about a bad thing, the worse it looks.

The last thing is the big ask. When it comes to this--and you have to figure out if this is a conversation that involves fundraising or not--what I tell people is, this is the time where you kind of have to know what you're talking about. This is a time where you have to know: are you raising on a convertible note? Are you raising on a safe? You have to know what the cap of that safe is. You have to know how much money you're raising. You have to know what the minimum check size is. These are things where, if you don't know these things, investors are gonna be like, "Oh, these guys aren't that serious. Or they haven't done their homework." So, whereas in the rest of this whole thing you shouldn't use any jargon, in THIS part you shouldn't just be like, "Oh, we're just raising some money." Now is time to use a little bit of that jargon. If you don't know that jargon, Google search it. It's real simple, you guys will learn it fast.

So. That's it. That's all your pitch. Done. Like, game over. Now you let them talk.

So, when to fund raise? I think this is so important. Like, you've got this little growth graph here. [Shows graph] Investors like to invest based on traction. And so literally it's always better to raise money when you've got more traction than less. Oftentimes though you guys will be in this situation where you're just starting, or maybe you just launched. So what you need to do is you need to think about, How do you flip the equation? Your entire mindset should be: typically you are the ones asking investors for money, and therefore they are strong and you are weak. How do you create a scenario where you are strong and they are weak? Right? That's where you want to be fundraising. So, first, how do you know that you're strong? If investors are asking you to give you money, you're strong. That might be a good time to start fundraising. If investors aren't asking about giving you money, are you talking to people about your startup? Or are you running super-stealth? If you're talking to people about your startup and getting the word out, either that's through the press or just through talking to your friends, or people you know doing startups, that's a good way to try to start feeding that. The second thing is, have you created a plan so that you can launch and grow without needing to raise a bunch of money? 95% of the startups that I meet can get a product to market with a very, very little bit of money. So never put the investor in the ultimate position of power: "We can't do anything until you give us money." You always want to flip it around. You always want it to be: "This thing's moving. We all left our jobs, we're all working full-time. And...it's moving! If you wanna jump on, great! If not...there're a lot of angel investors." That's the attitude you wanna have, that's the confidence you wanna have. If you need money early, always plan for needing less money. And always be able to show that you've got a fully-committed team that's working fast. That's gonna be how you gain an advantage when you can't show traction. If you can show that investor that you haven't launched yet but you've done 8 months of work in 1 month, or two months, then you've got a great team that've all quit their jobs and they're totally committed, you get some of that advantage back, but you don't get all of that advantage unless you're launched and growing.

Finally, how to set up investor meetings. This is really, really simple, but I'm surprised at how many companies don't get this right.

The first is you want a warm introduction from another entrepreneur (preferably) or a previous investor of yours. That's where you wanna start. If someone who's passed on your company as an investor offers you to make introductions, that's kryptonite, don't touch that. So, first, warm introduction. Very simple. You don't wanna cold-call these people, you don't wanna bum-rush these people, the credibility of the person who's introducing you to the investor is a big part of whether that investor will take that meeting.

Second, think in parallel. So many people that I meet will run the fund-raising this super-slow process: "We met with one guy this week, we're gonna schedule a meeting with another guy next week, another guy three weeks from now." When you're fundraising it's ON, it's a sprint, it's not a marathon. So you wanna schedule all of your meetings during the SAME WEEK. It's extremely hard to do but here's one trick that I love: tell--when you're emailing investors, you're getting those warm intros, the investors are emailing you back--say, "Hey, we'd love to set up a meeting, but we're building like crazy for the next two weeks. So can we set it up in that third week?" Right? So then, you've emailed EVERYONE that. So everyone schedules that meeting three weeks out. It's better for them because their calendar's open. It's better for you because you've got all your meetings in one week. And also, what did you do? You hinted, "Hey, I'm not desperate for the money. We're building." Like, "I can meet you in three weeks, but we're building. We're busy." It's signalling all of the right things. So...that's the best way to go about how you're gonna do that.

The last thing is, one team member should be invested in fundraising full-time. It shouldn't be something that takes over the whole company, because it's very, very distracting.

So, with that, let's kick it off to the next part of this.