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  • Okay, great.

  • So okay, great, thanks for having me.

  • So, my name's Tyler I'm the CEO of Clever and

  • what I want to talk today is about sales.

  • And I've a little bit of insight into this I graduated

  • college, I actually studied math and

  • statistics, probably like some of you here in this room.

  • And thought I was destined for this world of, finance.

  • I was about to go start at a hedge fund.

  • And at the last second, a friend of mine roped me in to

  • join his startup, and asked me to do sales there, which was

  • something that I knew nothing about, and so, had to

  • figure out on the fly, and spent a couple of years there,

  • figuring out sales for this very early stage company.

  • And then, when it came to start Clever, you know,

  • we started Clever, and I did it with two co-founders who

  • are very technical, and one very product-oriented, and

  • we wanted to build this product for schools, and I

  • thought that experience would have no relevancy whatsoever.

  • But it turns out that some of the things that I picked up at

  • the, this previous job, where it was figuring out sales,

  • have been huge parts of what's made Clever grow so

  • quickly today.

  • Quick background on Clever, we build software for schools.

  • We are an app platform used by developers and

  • it's used today by about one in five schools in America.

  • And we started it about two years ago.

  • And so sales have been a be, key piece of that, and

  • I want to use this time to just share some of

  • the things that have worked for me along the way.

  • Of course, there's a million ways to do this,

  • so you'll find what works for you.

  • So first I want to start about how most,

  • how I used to perceive sales.

  • And a lot of people see sales as having this, you know,

  • a lot of mystique around it.

  • You know, it's people who are you know,

  • really articulate and impossibly charming.

  • And they have these, you know,

  • killer closing lines that they use.

  • And I think this is how I saw sales, and I think this is

  • how a lot of founders I talked to see sales, because they say

  • things to me like, you know, we're just going to work on

  • the product and build a great product, and then when it's

  • finally finished we're going to hire the salespeople.

  • And what I've learned is that hire the salespeople,

  • as a founder, the reality is that's you.

  • And so you know, Paul Graham likes to talk about how

  • there's two things you should be doing at any point in

  • time when you're starting your company.

  • You're either talking to your users or

  • you're building your product.

  • And that talking to your users part, that's selling.

  • And so.

  • You know, this is intimidating to some people because

  • they're like, I've never done sales, and I don't,

  • wouldn't even know where to begin.

  • But it turns out that as a founder,

  • you have some unique advantages that make it,

  • possible for you to be really, really good at sales.

  • And one of those is your passion for

  • the product, and what you're building.

  • And the second is your industry knowledge of what

  • your, of the industry and the problem that you're solving.

  • And those two things actually totally trump sales experience

  • from what I've seen.

  • So, this is actually my cofounder, doing sales.

  • This is what sales,

  • looks like in the very early stage of a startup.

  • It's not Don Draper.

  • It's a lot of calls like these.

  • But this is something that even as

  • a founder who's never done it before, it's very easy to do,

  • but you have to commit yourself.

  • And what we did at Clever was we dedicated one founder,

  • which was me, to peel off and say,

  • okay, Tyler you're going to go figure this out and and work

  • on this full time because it's so important to our business.

  • So, couple things that I've picked up about sales along

  • the way and in, in trying to figure this out.

  • You know, the first thing that everybody knows about sales is

  • they say, okay, it's a funnel.

  • And you have these different stages of funnels and you, of,

  • of the funnel and you move your customers through it.

  • Pretty common categories.

  • There's this prospecting category where

  • you're trying to figure out who's even interested.

  • Then you're having a lot of conversations,

  • which is the second level of the funnel.

  • Then you're finding out who's really serious and

  • you want to close them and sign the deal.

  • And then of course,

  • you're in the promised land of, of revenue.

  • And what I thought would be interesting would be to talk

  • about each of the stage, a couple strategies that

  • we've used at Clever that have, worked really well.

  • So that these aren't abstract things but

  • things that, you know, you can hopefully use at your startup.

  • So, prospecting.

  • So, prospecting is the process of

  • figuring out who will even take your call.

  • And you know, one of the things that I

  • realized early on, so there's this guy Everett Rogers who,

  • who's created this technology life cycle adoption curve.

  • And he describes it as bell curve where you've got you

  • know, your innovators and who will try new things, and

  • you've got your early adopters,

  • your mid-stage adopters, your late adopters, your laggards.

  • And one of the things that was really helpful for

  • me in understanding sales in an early startup is he's

  • quantified the tail of this bell curve and this part over

  • here, the innovators, those are your potential customers.

  • And it might seem discouraging that only 2.5% of companies

  • are your potential customers that would even consider

  • buying from a startup that has no users and no revenue.

  • But actually, I found just the opposite.

  • I found it to be extremely helpful to have this frame of

  • mind, because you realize, when only 2.5% of companies

  • will even take your call or consider using your product,

  • you realize what a numbers game this becomes.

  • So if you want to reach that 2.5% and

  • you want to get some early sales, you, you've,

  • if you're starting to do math, you're hopefully starting to

  • realize you have to do a lot of calling.

  • You have to do, talk to a lot of people.

  • So early on in the early days at Clever, this was my job.

  • You know, in the,

  • in the 2 months the first two months of YC,

  • I reached out to over 400 companies trying to get them

  • to take a call and and talk to us about what we're building.

  • There's, there's three ways that I

  • have found most successful in, in prospecting and

  • getting these people, one is your personal network.

  • That's obvious.

  • I'm not going to spend any time there.

  • Another one is conferences,

  • which is surprising to a lot of people, and then the one

  • that people are most familiar with is cold email.

  • And when I say conferences, this is what people think.

  • They think I'm talking about CES or, you know,

  • E3 or something.

  • And actually, the kind of

  • conferences where sales happen look more like this.

  • And we've got, we would in the early days would go to a lot

  • of these because you've got to where your users are.

  • And if they're, if you're selling to CIOs and there

  • happens to be a gathering of them at a hotel in Milwaukee,

  • guess what, that's probably where you should be.

  • So we go to conferences like these.

  • We get the attendee lists in advance.

  • We email every single person in advance, and, and try and

  • set up meetings so that when we get there,

  • every single minute of that trip was, was well spent.

  • And this was huge in Clever's early days.

  • These, this was where we met all of our earliest customers.

  • The second thing I mentioned is cold email.

  • A lot of people don't know how to write cold emails.

  • It's actually really easy, and the key is not to write a lot.

  • Should be really concise.

  • This is an email template that I used early on and

  • you're welcome to copy it, but it's really short.

  • Here's who I am, here's what I'm building, and

  • I'd love to talk to you about this.

  • Could we find time tomorrow?

  • It's really easy and, and you can customize this and

  • find out for

  • every business you want to sell to who's the right person

  • to send it to and you can send out quite a few of these.

  • So all right, that's prospecting.

  • And the reason this is so important is because you've

  • gotta build that first layer of the funnel.

  • Then you get them to take your call.

  • And this is another place where a lot of

  • founders I think just have a lot of

  • questions about what to actually do.

  • And the biggest thing to take away,

  • in fact if you only take away one thing from this

  • presentation today, the number one thing you should remember

  • is when you get them on the phone, remember to shut up.

  • And that's really surprising to people.

  • So many founders, when I help them with

  • their first sales pitch, they finally get somebody on

  • the phone who wants to talk to them about their product.

  • And they're so proud of this thing they've been

  • building for the last three months that all they want to

  • do is get on the phone and talk about every feature and

  • talk about all the different things they can do and

  • talk about why it's the greatest thing in the world.

  • And I have that temptation too.

  • It's just part of being really proud of something.

  • But it turns out that if you watch the best salespeople,

  • like the best salespeople in the world, the top 1%.

  • And you have a chance to listen in on a call with some

  • of those people, like I have,

  • the most surprising thing is how little talking they do.

  • In fact, I've seen calls where the,

  • where the salesperson told me their goal was to

  • only spend 30% of the call talking, and

  • have 70% of the call the other person.

  • And they would ask a lot of questions.

  • They'd say things like,

  • why did you even agree to take my call today?

  • This problem that we're talking about solving for you,

  • how do you solve it today?

  • You know, what would your ideal solution look like?

  • And they're not, they're not doing the talking.

  • They're finding, they're doing everything they can to find

  • out what this person needs, and hopefully understand their

  • problem even better than they do.

  • That's what really great sales is and in fact this is

  • something I, I, I, I drill into everybody at Clever.

  • It's a really important part of sales and

  • there's actually now if any of you use Uber Conference,

  • they have this amazing feature where when you hang up

  • a call it sends you an email automatically and tells you

  • how much you talked versus how much the other person talked.

  • And looking at one of those emails you know,

  • if someone doing sales at Clever, I get one of those

  • emails, I can tell immediately how likely the sale is

  • based on how much talking we were doing.

  • So, you got all these people, now you got on the phone,

  • do a lot of listening, really understand their problem.

  • And then the other part of this stage that surprises

  • a lot of people is follow up.

  • So here's a lot of different steps that you

  • can imagine going through.

  • You know, emailing somebody, not getting a response, and

  • emailing them back.

  • Calling them, leaving a voice mail, having a pricing call.

  • You know, there's probably like you know,

  • 60 things up here on this slide that could be steps for

  • closing a deal.

  • These actually aren't just random things,

  • this is one deal that,

  • this was the second deal Clever ever signed.

  • These are all the different steps that we had to in

  • order to get this done.

  • And you can see there's a lot of really embarrassing things

  • up there like I emailed somebody and they didn't

  • respond and I emailed them again and they didn't respond.

  • And then I emailed them again and

  • this is from somebody who wanted to buy our product.

  • Isn't that crazy?

  • Ana that surprises a lot of people.

  • I see so many founders today have a great call with

  • someone, they send an email, they dont hear back and

  • they say, oh that person might not be interested.

  • well, guess what,

  • this is what it looks like in the best case and.

  • And so you really have to have kind of,

  • this unhuman, unreasonable willingness to follow up, and

  • drive things to closure.

  • Now, qualify with that with one thing.

  • Which is to say, when you're starting a company,

  • your time is extremely valuable.

  • because it's your only resource.

  • And, and you couldn't possibly do this for

  • every single person who might buy your product.

  • So your goal should be to get people to a yes or

  • a no, as quickly as you can.

  • Where you die is if you have a thousand maybes.

  • And sometimes I talk to founders who say oh, yeah,

  • I have this great pipeline of you know, a hundred people who

  • are, who have expressed interest in our product.

  • And the maybes are what kill you.

  • If you can get to a yes or

  • a no, in some ways a no is, is even better than a maybe.

  • Because it allows you to move on and

  • focus on somebody who might be a yes.

  • So, have this super-human level of,

  • of follow up and ambition.

  • But make sure you're focusing it on the right pieces.

  • All right.

  • So you've talked to someone,

  • you've talked to a ton of people.

  • You've had all these phone calls.

  • You've followed up with them ridiculously.

  • To the point where they,

  • they just know you're not going away, and

  • they've gotta sign an agreement.

  • This final step is something that,

  • if you haven't done before, it might seem opaque, but

  • it's actually really simple.

  • It's called redlining.

  • So you'll send over an agreement.

  • Their lawyers will mark it up.

  • Your Lawyers will mark it up and

  • you kind of go back and forth.

  • If you're part of YC, this is really easy because YC

  • has standard template agreements that they give you.

  • So you don't have to find these and

  • you can just you know, use those.

  • But they've never been available, you know,

  • if you weren't part of YC you kind of had to

  • figure this out on your own.

  • One of the things that I'm really excited about is,

  • as part of this presentation,

  • YC has agreed to open source their deal documents.

  • So these documents that YC founders used to

  • get are now going to be available to everybody.

  • So this should never, hopefully,

  • never be a barrier to anyone who wants to do sales for

  • their start up.

  • You've got some great documents.

  • And then the other thing I'll say about this,

  • a place I see so many smart, smart people go wrong,

  • is you gotta remember what your goal is.

  • Your goal is to sign some deals, and

  • get some reference customers, and

  • get some validation and get some revenue.

  • That, if you don't do that,

  • your start up is, is, you know, toast.

  • So in light of that, it's really surprising how many

  • smart people will want to do ten rounds of document review.

  • Quibbling over the most minor points because of pride,

  • because of intelligence, whatever.

  • You know, make sure the agreement is the way

  • you want it, but then sign it and move on.

  • I've seen founders spend months quibbling over

  • some indemnification clauses.

  • And their business would have been way better off if they'd

  • you know, just signed the deal and moved onto the next one.

  • So, that's one closing trap you can fall into.

  • I've two more.

  • One other closing trap that I see founders struggle with

  • a lot, is they're talking to a company who says,

  • I will use your product, but I just need one more feature.

  • You know? Or

  • they say you know, I'd love to use your product but

  • it doesn't have this one feature so

  • we're just not ready.

  • And to most people, especially if you're ambitious,

  • when somebody says that to you what you want to hear is, oh,

  • well I can build that feature.

  • Great. You know,

  • I'll build that feature and

  • then they're going to use my product.

  • But the problem is, it almost never works that way.

  • In fact, somebody telling you that they would use your,

  • they want to use your product but

  • it's just missing this one feature.

  • I would almost map that to a pass in your mind.

  • Because nine times out of

  • ten if you actually build that feature.

  • You go back to them and

  • then there'd be one more feature, or there'd be

  • some other reason that they're not using the product.

  • So, if somebody says to you hey, I want to, but, you know,

  • there's this one thing that's preventing us

  • from using your product.

  • I would do one of two things.

  • One say, well that's great.

  • Let's sign an agreement.

  • And we'll put in

  • the agreement that we're going to build this feature.

  • In which case, you know,

  • you know that if you build it you're off to the races.

  • Or more commonly,

  • what we did at Clever was we would say, that's great.

  • We're going to wait to see if

  • we hear that demand from more customers.

  • And then once you have a lot of customers requesting it,

  • then you should build it regardless.

  • And then, and then you're not,

  • you don't have to worry about doing something that's

  • customer one-off, which is what you really want to avoid.

  • So, don't fall into this trap, it happens all the time.

  • And the other trap I would highly,

  • highly recommend you try to avoid is the free trial trap.

  • Because this hap, happens all the time.

  • People, you know, they go down this path with a,

  • with a customer, it seems really exciting.

  • And then the customer says, oh,

  • well can I get a free trial?

  • And you can't blame them.

  • That's a totally reasonable thing to ask for.

  • But the problem is,

  • when you're starting a start up you need revenue,

  • you need validation, you need users, you need commitment.

  • And free trials get you none of those things.

  • So you go, you do all this work, and

  • if you end up with a free trial,

  • unfortunately, you haven't made as much progress as you.

  • It's actually terrible.

  • You, you think you've made progress.

  • But really, at the end of the free trial,

  • you're going to have to sell them all over again.

  • So the way I handle this that has worked really well,

  • is when somebody says, can I get a free trial?

  • You say, well we don't, we don't do free trials.

  • But what we can do is we're going to,

  • we do annual agreements here.

  • And what we'll do is for the first 30 or 60 days, if for

  • any reason you're not happy, you can opt out.

  • And that's a way to get you the things that you need,

  • while giving them the comfort that they might need to take

  • a chance on a start up.

  • So that minor change is actually makes a night and

  • day difference when you're,

  • when you're thinking about these things.

  • All right. So, you've prospected.

  • You've had a lot of conversations.

  • Now you've closed people.

  • You've gone through the redline process.

  • You worked out the free trials.

  • And you're on your way,

  • hopefully, to your first sales.

  • Now early on, you could think of

  • sales as just like any other thing of a start up.

  • Your goal is to, you don't have to do things that scale.

  • In fact you can purposely do unscalable things to try and

  • get early customers.

  • That's, that's the fun of it.

  • But the other thing that I think is really important to

  • keep in mind is, once you've done this enough.

  • What you should start thinking about is,

  • well what aspects of this are repeatable?

  • And, and what aspects of this, you know,

  • are we going to scale further?

  • And there's this,

  • Cristoph Janz has this really great blog post online about

  • the five ways to build a $100 million company.

  • And he talks about, he can have a thousand customers buy

  • a product that costs $100,000.

  • Or he can have 10,000 customers buy

  • a product that costs $10,000.

  • Or he can have 100,000 customers buy

  • a product that costs $1,000.

  • And even though you don't need to know on day one,

  • which bucket you're going to fall into.

  • Most companies do fall into one of these buckets.

  • And so, you should start thinking about that as

  • you're doing this.

  • If, if you want to be in the elephant category of

  • $100,000 product, that's great.

  • And you're going to have a really high touch sale cycle,

  • and that's fine.

  • You know, that's sales force.

  • That's work day, that's great.

  • But if you think you're going to be a rabbit, and

  • sell products for $1,000 a year to businesses.

  • And your sales process involves flying out

  • to see them three times and eight demos and, and you know,

  • three months of redlining.

  • Then you probably have to rethink something.

  • And so I see a lot of startups most commonly in that,

  • who want to be the rabbits.

  • And sell for a low priced product to businesses,

  • not thinking about how to do it in a scalable way.

  • And that's one area where you can get underwater.

  • Or it just forces you to increase your prices.

  • So this is how I think about different businesses.

  • And it'll be helpful for you when,

  • once so you can get started, and

  • once you've done enough of the sales to say, okay.

  • You know, where am I?

  • And the corollary to that is, is, how do

  • I have to price my product, to be a viable business?

  • So that is, those are some of the things that I figured out

  • along the way building, building sales now at a few,

  • at a few different companies.

  • And specifically on this very narrow stage of,

  • of zero to 1 million.

  • After you get to 1 million,

  • you'll find there's a million blog posts, you know,

  • about how to get from 5 million to 50 million.

  • Or 10 million to 100 million.

  • But this zero to one step, I wanted to ded,

  • focus the presentation on that today.

  • Because there's not as much written about it and it is

  • something that I think is very opaque to a lot of founders.

  • I figured this out just by doing it.

  • And I'm confident that if you're starting a company,

  • you can too.

  • If for whatever reason you would like to do what I

  • did and join a startup that's figured it out and,

  • and hone your skills and hone your craft.

  • We are hiring at Clever, so that's an option.

  • >> But even if, and if that doesn't,

  • if you do want to start your own company, and

  • you have questions about sales,

  • I put my e-mail address up here.

  • And feel free to reach out at any time, I'm happy to help.

  • So, thank you.

  • >> Thank you very much.

  • >> Yeah. >> That was awesome.

  • All right. So now, we're going to talk

  • about a little bit more detail on how to raise money.

  • Michael Seibel is first going to talk about how to

  • have a pitch.

  • And then Dalton and Qasar will do investor role playing.

  • >> Yeah, sure.

  • My name is.

  • Mind blowingly you know, new.

  • It really is basic blocking attack.

  • And the one point I wanted to make before we get started is,

  • we actually don't spend a lot of time at YC

  • focusing on this.

  • The main reason is, the best way you can

  • make your pitch better is to improve your company.

  • If you're, if you have traction and

  • your product is doing well, these conversations are like,

  • the investors want to see you succeed.

  • And so, if you remember anything,

  • it's make your company better and the pitch will be easier.

  • We're going to spend the time in the three kind of sections

  • before the meeting, which Michael will kind of focus on.

  • We'll do a kind of,

  • a role play of what meeting's actually look like.

  • And then we'll just wrap it up.

  • We are going to do Q&A at the end,

  • we'll kind of save five minutes.

  • So if there's something we don't cover,

  • please write down your questions and

  • we'll go through them.

  • Now, without further ado.

  • >> Beautiful.

  • >> All right.

  • >> So, my name is Michael Seibel.

  • I'm a current YC partner.

  • I've started two companies.

  • One was called Justin TV.

  • It ended up selling to Amazon.

  • The other was called SocialCam,

  • which sold to Auto Desk.

  • And what I really wanted to do was break down and

  • demystifying 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're 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 who you might want to get to work for you, or

  • people you actually.

  • Kind need to get a little bit deeper.

  • 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 two 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.

  • So, then I want to tell you about when to fund raise,

  • because I think a lot of

  • companies get this a little bit wrong.

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

  • So, 30 second pitch, this is so

  • simple, it's three sentences.

  • You can take your time, you can breathe 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.

  • So you know, usually what we

  • tell people is apply the mom test.

  • If in one sentence you cannot tell your mom what you do,

  • then rework the sentence.

  • There is a one sentence explanation that your mom, or

  • your dad is going to understand.

  • So really, really start there, and

  • it's okay if you use really basic language.

  • It's okay if you're saying hey we're Air B and B,

  • 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 Air B and

  • B and we're a marketplace for space.

  • I don't know what that is.

  • And it's going to require more time.

  • So use simple language.

  • Very, very important.

  • The second is how big is your market?

  • It makes sense to do 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 multibillion dollar market.

  • It's pretty simple to do this.

  • You know, Air B and

  • B 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 can 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 number 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 working 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 cooperation.

  • Your 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 unders, 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 going to help you.

  • Okay.

  • Two minute pitch.

  • Now you've got someone you actually have to

  • convince of something.

  • Maybe even 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 ah-ha moment.

  • And you'd better have it down in two sentences.

  • The ah-ha moment.

  • So you've gotta crystallize 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 it's okay, you've nailed it.

  • If I look at you and

  • I'm like, I already knew that, then you didn't nail it.

  • If I looked 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, that's all, you're only

  • going to get two sentences to get that out there, so

  • it can't be complicated, and that's basically the theme of

  • this whole thing right, 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 going to 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, it's direct sales.

  • If it's you know, a game and

  • you're selling in-app in-app add ups, like 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 going to run advertising, maybe some

  • virtual goods, we're going to 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 checkmark that I just wanted to write, oh,

  • they know how they're going to 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.

  • Like, it's totally okay,

  • no one's going to 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, might,

  • 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 two and four.

  • What we want to hear is how many of them are technical.

  • How many engineers versus business people?

  • Hopefully it's 50 50 or more engineers.

  • We want to hear is that how long have you

  • guys known each other.

  • We don't want to hear you guys met at

  • a founders' dating event three days ago.

  • ideally, you've known each other either personally or

  • professionally for at least six months.

  • We want to hear is that you're all working full-time.

  • It's really helpful, we're all committed to this business.

  • And what we want to 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 overinflate 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.

  • So, the last one is the big ask.

  • When it comes to this and you have to figure out

  • whether this is a conversation involves fundraising or not.

  • What I tell people is like 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 these things,

  • investors going to be like, oh these guys aren't 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.

  • Like now it's time to

  • actually use a little bit of that jargon.

  • If you don't know that jargon, Google search it,

  • like, it's real simple.

  • You guys will learn it fast.

  • So, that's it by the way.

  • That's too, that's all your pitch.

  • Done, like, game over.

  • Now you let them talk.

  • So, when to fundraise.

  • I think this is so important.

  • Right, you've got this little Growth graph here.

  • 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.

  • Often times though,

  • you guys'll be in a 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're 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

  • you're 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 kind of 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 things moving,

  • we all left our jobs, we're all working full time.

  • And it's moving, if you want to jump on great, if not.

  • There are a lot of angel investors.

  • That's the attitude you want to have.

  • That's the confidence you want to 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 going to 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 eight months of work in one month, or

  • two months.

  • That you've got a great team that have all quit their jobs

  • and they're totally committed.

  • You get some of that advantage back.

  • But you don't get all of

  • the advantage unless you're launched and growing.

  • So something to keep in mind.

  • 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 want to start.

  • If someone who has 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 want to cold call these people,

  • you don't want to bum rush these people, the person,

  • the credibility of the person who's introducing you to

  • an investor is a big part on

  • whether the investor will take that meeting.

  • Second, think in parallel.

  • So many people that I meet will run the fundraising this

  • super slow process, we met with one guy this week,

  • we're going to schedule a meeting with

  • another guy next week, another guy three weeks from now.

  • When you're fundraising you're on.

  • It's a sprint, it's not a marathon.

  • So you want to 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 email you back.

  • You 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, I've e-mailed every one that, right?

  • So every one 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 could meet you in three weeks.

  • But we're building.

  • We're busy.

  • Like, it's signalling all of the right things.

  • So that's the best way to kind of go about how

  • you're going to 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.

  • Who am I handing it to?

  • Big Dalton.

  • Yeah, that might.

  • Oh, beautiful. All right.

  • Hi my name is Dalton Caldwell I'm one of the.

  • Camera can get us here, okay.

  • Yeah, I'm one of the partners at YC and one of the things

  • that we're going to do today real quick is a mock pitch.

  • And first of all I know this is a bit contrived but

  • this is in this format of like a college class,

  • we're going to do our best to, to have fun and

  • kind of demonstrate what it's like.

  • And I realize there's a million reasons why this,

  • why you could say, oh this isn't realistic of what pitch

  • is really like but you know, again, there's, there's a lot.

  • Yeah. That we can show you.

  • Just in terms of my background over my career,

  • I've raised 85 million over several companies, so

  • I've sat in a lot of investor meetings.

  • And so, I'm going to be

  • pulling as many things as I can.

  • So again, we're just going to try to show you

  • something to talk to, and use it as a learning session.

  • And you already did your intro earlier Caspar, right?

  • It's yeah I've, I mean, I've done a couple startups.

  • Cool. Yeah, yeah, yeah.

  • So we're going to do two pitches, and

  • we're going to go through them pretty fast.

  • And as, as Michael said, these tend to go fast.

  • So let's go dive into the first one.

  • Okay, so so Caspar, I understand you, you're coming

  • to pitch me to, can, what can you tell me about what you do?

  • So we're building a communication platform that

  • will allow you know, businesses and consumers

  • to collaborate on one single platform rather than

  • the kind of fractured state that they're in right now.

  • and. I don't know,

  • I, I don't follow.

  • So, like think about like what like WhatsApp or

  • Snapchat that's for consumers.

  • We want to do that for businesses.

  • and, and so, what the.

  • I have to do this with a straight face.

  • What, what that what that means is we want to

  • enable consumers to talk to businesses.

  • And that's really, what really the goal of our business,

  • of our startup business.

  • I still don't, so, who uses this,

  • what does this product do?

  • so, I mean, it, it.

  • It's for consumers and

  • businesses, a messaging product.

  • a, it allows consumers to send.

  • Why, why would,

  • why would a consumer want to use your product?

  • Because they want to message a business.

  • okay. well, okay,

  • what can you tell me about the,

  • the market or what the opport, what's the size of this.

  • How is this coming together?

  • Well, I mean.

  • Messaging companies are very big.

  • Obviously Whats App sold for like $19 billion and Snap Chat

  • is like really growing very quickly as well so we,

  • I mean we think the opportunity is very big.

  • Okay ,. So, okay.

  • Okay, could you tell me a little about your traction,

  • your numbers.

  • Like, have you, have you given this to people yet.

  • yeah, I mean we don't want to kind of open the Komodo and

  • kind of go into all the details here.

  • I, kind of at a high level.

  • We're live.

  • We definitely have thousands of users in the Bay area.

  • Hundred of business, you know, have kind of.

  • Can you tell me who some of those businesses are?

  • There's ones that you've been to.

  • We don't, we don't really want to get too much into

  • the details, because, you know, we're still early and

  • we don't want, you know, we're trying to stay stealth.

  • Okay, well, can you tell me about what you've learned so

  • far, what insights you've had from.

  • Yes. The consumers are sending

  • messages to these businesses, and we think that's great.

  • so, and these businesses are responding to the messages,

  • and we think that's, you know,

  • I don't think that's obvious that that would happen.

  • So, can you tell me about what your business model is,

  • and how.

  • Yeah, so we,

  • we charge businesses like a monthly rate.

  • We haven't precisely figured out what that is we've,

  • we've, right now we're free for

  • the few hundred companies we're in right now.

  • But we're looking to probably do a monthly something.

  • How much do you

  • think a business will be willing to pay?

  • We think certainly 10 to $15,000 a month.

  • Okay so, so anyway could you tell me a little bit

  • about your team and who you have working on this.

  • yeah, there's we have five founders technically I'm

  • the only one who's full time right now the,

  • we're raising money so we can get, you know,

  • the rest of the team on board yeah.

  • That's this.

  • Or can any of the founders program, or, or.

  • yeah, yeah.

  • I mean we have, I mean one of them is a bio PhD but

  • he's like he's really picked up coding.

  • the, the.

  • I mean, I'm a Python developer,

  • I did learn Python the hard way.

  • Oh, look at the time.

  • Well, it's been really great meeting you.

  • Please keep me in the loop, this sounds fantastic.

  • [CROSS-TALK].

  • I'll send you an update.

  • Great. That was awful.

  • So let's just go through, so.

  • That was obviously not strong.

  • So let's just talk about some of the mistakes.

  • So first of all, you need to

  • make sure the person you're talking to knows what you do.

  • This just seems really simple, but it's not.

  • Yeah, this seems simple, but it's not.

  • So many times, people get flustered.

  • They get nervous, and they start talking really fast.

  • And there's no way you're ever going to convince anyone of

  • anything if they don't know,

  • even what your app actually is.

  • You have to know your numbers obviously.

  • If you're very vague or

  • evasive, like don't even have the meeting.

  • If you don't feel comfortable telling an investor what your

  • numbers are, don't even meet with them.

  • It means you're not ready yet, right?

  • For market size, try to give some plausible bottom-up

  • analysis and don't just name-drop big companies that

  • aren't even really related to what you're doing.

  • People tend to do that a lot.

  • Try to have insights, try to convince me that there's

  • something that I don't already know about the market that I

  • learn talking to you, rather than just

  • what everyone knows about what the market is.

  • Right, I learned nothing during that particular pitch.

  • also, the team's just like, why are you working on this,

  • why are you suited for it is a good thing to do.

  • And finally, like,

  • he didn't drive the conversation anywhere.

  • Like, obviously that went poorly, and

  • he just let the conversation just, like,

  • flail around until I cut the medium because we ran out of

  • time as fast as I could.

  • So anyway, that was, that was not a good pitch.

  • So let's, let's try that again.

  • Okay, all right.

  • Let's do this.

  • Okay. All right Caspar,

  • well so I understand you have a company and can you,

  • can you just tell me a little about what you guys do.

  • Yes. So we're a messaging product.

  • We allow, I mean that sounds kind of vague, so

  • what we allow you to do you to do is essentially message

  • a location.

  • So when you walk into a Crate and Barrel,

  • you can send the Crate and Barrel manager a message like

  • hey there's puke in the hallway.

  • Or if you're in the airport, I'm trying to find this

  • specific gate because I'm not at this airport,

  • where is you know where's a terminal for Virgin.

  • Or if you're at Target, what aisle.

  • Okay, so is this a mobile app or what how do I use it?

  • Yeah, so on the consumer side we have iOS Android app,

  • but really getting consumers to

  • download apps is obviously very difficult.

  • Yeah. I don't, I don't.

  • In. I don't usually

  • just download apps.

  • Yeah. To send a message.

  • [CROSS-TALK].

  • In, in most businesses we have a called action,

  • which says text the owner directly.

  • Oh.

  • We've tested actually a bunch of

  • copy that works the best in small print.

  • We have, the messages are anonymous,

  • they also lowers the barrier to entry.

  • I think the most counterintuitive thing we've

  • learned in the kind of launch that we've had where,

  • in 350 locations in the Bay, we've been doing this for

  • about three months we're about 11%

  • weekly growth rate in terms of acquiring businesses.

  • But the most counter-intuitive thing that we learned,

  • because we weren't actually sure,

  • is, will people send messages when they walk

  • into [CROSS-TALK] and they do.

  • What's the number one type of message that people send?

  • So you would, so originally,

  • we started this product off thinking this is going to be,

  • like, in-location feedback.

  • That was the premise, in-location feedback.

  • What we found is more than half the messages,

  • are actually not about feedback at all,

  • they ask things like we,

  • we were in this location in San Jose this Kabob stand,

  • father and son, it's just a take out place, and

  • we saw messages that go through,

  • that went through that said like are you hiring?

  • And that's like very strange because you

  • would think like why wouldn't you just ask the owner.

  • Yeah. But we realized that we know

  • this is the owner, and

  • the person who's walking in doesn't and so

  • they, they do prefer to actually just text the owner

  • because they think that's a, that's an easier medium.

  • Okay, so it's like a suggestion box, or

  • it's like a way to just like message a business.

  • Yeah, initially that's what we thought it was, but

  • what we actually discovered was the vast majority,

  • I shouldn't say vast majority, over half

  • the messages are actually just things like when do you open,

  • when do you close because that's not on Google.

  • Do you, do, you know, are you catering can you,

  • do you have any reservations available tonight, et cetera.

  • Okay, okay. Well, look,

  • in terms of your traction it

  • sounds like you said you had some businesses, like.

  • Yeah. Tell me about what,

  • what you guys have right now.

  • So we have about 350 businesses,

  • all from San Jose to San Francisco.

  • We sold them ourselves as three founders.

  • We're all technical, but we actually did all the sales

  • because we learned a lot about how these businesses work.

  • We actually come from a retail background.

  • We originally built this product for

  • large enterprise players like Starbucks and Walmart.

  • But we recognize that closing those contracts, and

  • our limited amount of runway wouldn't really be possible.

  • So we wanted to get the product in the hands of users.

  • So we did SMBs.

  • And that's when we discovered hey,

  • this like, this messaging product.

  • >> Okay, okay, that sounds interesting.

  • It sounds like you have some customers.

  • >> Yes, so we get. >> How, how

  • could this be big though?

  • Like, okay, maybe you can 100,000 customers.

  • >> Yeah, so, in terms of like, numbers, we, we see one and

  • half messages on average per location per day.

  • That might not sound a lot, but

  • for a business, that's skidding 30 messages.

  • You take like a Yelp review or a Google review.

  • In a lifetime of visits, they might get five or seven.

  • So they're getting a, a huge volume of messages relative to

  • what they tend to experience and they're private, so

  • they're not public.

  • So in terms of, how do we actually make money, it's not,

  • you know, frankly speaking,

  • we don't have a very clear answer there.

  • The two paths are the SMB side or

  • the LCS side, the large customer side.

  • Large customers, we know from our retail experience,

  • just regular feedback tools are 3 to 4 million per year,

  • so a like a Sear's, where we came from.

  • SMBs we've tested with are willing to pay $50 a month,

  • so, I, I, you know, I certainly I think this is.

  • >> Okay. >> This can be a large

  • business, but, and there's clear ways to make money, but.

  • I could see, I could see that.

  • Just a couple things like,

  • can you tell me about your distribution strategy and

  • also just a little bit about the team.

  • >> Yeah. So

  • distribution so the thing that we learned in

  • selling to these SMBs is it's really freaking hard.

  • there, the formula LTV minus CPA, lifetime value minus cost

  • price acquisition in SMB is never going to work out.

  • Right. >> And so we

  • have two solutions.

  • One is to go up market,

  • like we originally planned, the Starbucks or

  • Walmarts or two is actually essentially pair with

  • consumer facing companies Yelp, Google, Facebook.

  • >> Have you been talking to them,

  • do they actually want to do it?

  • >> Yeah, so we've talked to Google and

  • Facebook we're meeting with Yelp.

  • What we're basically want to do is every time you

  • search for a business there should be a message button.

  • We want to get consumers in the habit of knowing,

  • they can send, essentially a text message to any business.

  • That can help us get broad distribution.

  • Our real vision is to become kind of that infrastructure,

  • that messaging infrastructure between consumers and

  • business.

  • If that doesn't work, let's say Google, Facebook, and

  • Yelp don't want to give up that valuable property.

  • It's really an ad unit.

  • >> Okay.

  • >> we, we do want to sell this as a feedback tool to large,

  • large players.

  • >> All right. Can you tell me

  • a little about the team?

  • We're running low on, on time.

  • >> Yeah, there's three of us.

  • All technical.

  • We Mike and I did a company before.

  • Sunny is an ex-Google engineer.

  • We come from retail.

  • So and our first startup was a failure.

  • So, I don't know if that's good or

  • bad but, we've, we've worked together and, yeah.

  • We're all technical, we built everything ourselves.

  • And we sold everything ourselves.

  • >> Okay. >> So we've already had

  • a couple conversations with your firm.

  • We're raising 500,000 and 8.5 million convertible note.

  • Of that 500, 250's committed by Mike Mapels,

  • Eli Gill, and Aiden Sinkit.

  • And Mike with Floodgate is willing to fill the round.

  • We think your, you know,

  • you particularly, you and your firm can bring a lot to

  • the team with your retail experience.

  • Is this something that's interesting to you?

  • >> Yeah, you know, I, I think this is really interesting.

  • I mean, I would need to talk to a couple more folks on my

  • side, but I do think this this,

  • this could be pretty big.

  • >> Yes, since we've had a couple conversations before

  • and and we're certainly willing to meet again,

  • we are closing a round this Friday.

  • And so, certainly take time and let, you know, and

  • let, your other partners know.

  • I'll be available between now and Friday.

  • I'll give you another call before Friday.

  • Before we close the round.

  • But we'd love to actually see you, see you in the round.

  • >> Okay. Well sounds good.

  • I gotta go, but thanks for talking to me.

  • >> Great. Thanks.

  • Okay.

  • All right,. >> So

  • very different class type of, type of a conversation.

  • >> Yeah, so do you have a clicker.

  • >> Yes. >> So in terms of that one,

  • you know, some key points here is, try to

  • actually tell a narrative that makes sense to people.

  • You notice there was narratives there.

  • He was talking about people, how they really use it.

  • Were able to tie it down to the real world, which is good.

  • He was able to demonstrate insights, and

  • actually tell me something I didn't already know about

  • the market, like, there were, there were some tidbits there.

  • It was more, it was more of a collaborative meeting where it

  • felt more like a conversation than just like a,

  • like I was interviewing him about something in,

  • in my opinion.

  • He actually asked for money.

  • And this is the other key thing is at the end,

  • you saw I could have easily just been like,

  • okay, gotta go.

  • But he, he did talk about fundraising as,

  • as Michael mentioned.

  • And he was able to provide all the context and

  • all the questions I would need

  • to actually have a serious conversation with him.

  • If he was cagey about it or shy about it,

  • and not clear on the numbers, that there's a very high,

  • good chance that, you know, I probably would have just ended

  • the conversation, due to time pressure.

  • >> Yeah, it's interesting.

  • And we, we sit on this side a lot.

  • You really, you can tell when people are very passionate and

  • know their business very, very well.

  • And that's what you have to become.

  • okay. So closing thoughts here

  • before we, what you want to do after the meeting.

  • Before we get into the Q&A.

  • We're running a little short on time.

  • After the meeting, the first thing,

  • just like Tyler said in the sales thing, follow up.

  • This is, this is important.

  • And anything other than a check, or wired funds is a no.

  • So if they say, we gotta keep talking to partners,

  • I assume that's a no.

  • And so, you do want to put some pressure.

  • The way that you can do that is get deal heat.

  • Deal heat is just a term which means there's a demand for

  • your, to, to be in your round.

  • This is the easiest way and

  • an important way to actually drive up price, et cetera.

  • Due diligence on the investors.

  • So let's say you have that 500,000 raise for your

  • seed round on the 8.5 million like we used in this example.

  • Due diligence investors.

  • If you do find it, I, I do, due diligence on adults, and

  • I find, hey, he's actually not a great investor.

  • I can get Elaud, or Mike Maples, or

  • whoever to actually fill the rest of the round.

  • It's surprising to us,

  • how many entrepreneurs don't do this.

  • You would, it's like,

  • you would actually spend a lot of time hiring somebody.

  • You're selling a part of your company to somebody,

  • you should know who you're selling it to.

  • To make sure they,

  • you know, they're the type of people you think they are.

  • And then last, know when to stop.

  • So some founders get so good at fundraising they just

  • want to do it all the time because it's much easier to

  • do than actually building the company.

  • >> Yeah, you think you can

  • fundraising does not equal success and just because.

  • >> Yeah. >> You fund-raise does not

  • mean you succeeded and nobody realizes that and

  • I'm, we say this and we'll say this now, but

  • I'm sure everyone will still equate fundraising with

  • success and read about someone's fundraising and

  • assume that means they're successful.

  • >> Well my, my, my intuition as to why this is

  • the case is because a lot of smart people their whole life,

  • they've like, applied to good schools and applied to

  • good jobs, and they, they just think fundraising is

  • another like application they can just kind of check off.

  • And building a company is much more ambiguous, but.

  • Anyways, that's, that's the session.

  • I don't if we have time for, oh.

  • The edge is under,

  • underlining, building your company.

  • Fundraising is not the goal.

  • >> Can you guys just stick around for

  • a few minutes after, and answer questions?

  • >> Sure. >> Yeah, we can do that.

  • >> All right. Thank you very much,

  • that was great.

Okay, great.

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