How Pitching Investors is Different Than Pitching Customers - Michael Seibel

Although I'm Michael Seibel and partner Y Combinator, today I'd like to talk about the difference between your investor pitch and your customer pitch.

When most founders typically screw up here is that your customer typically knows a lot about the problem that you're trying to solve and is extremely personally interested in the solution that you have. Whereas the investor might not have the problem that you're trying to solve at all and might be only interested in the solution in so much as they think it can build a big company.

What this means is that the same pitch often doesn't work for these two communities. So when you're talking to a customer, one of the ways that you build credibility is that you use jargon; you use the language of the industry. Another thing that you do is you try to get them to speak a lot about the problem that they have. You want them to be talking more than you.

Then the third thing is that you try to figure out how the solution can help them personally as soon as possible. When you think about where to use this customer pitch, it can be on a sales call, it can be on the front page of your website, in your FAQ, or in user interviews. A lot of the language is really relevant to them.

On the other hand, when you're talking to an investor, unless you're pitching a consumer product that you're pretty sure that they'd want to use, you have to assume that they don't really understand the problem. In this situation, jargon is actually going to hurt you; it's not going to help you.

So you want to make sure your pitch is jargon-free. In addition, what you want to do is make sure that you're using language that they can understand. Oftentimes, people will incorporate flowery language, like "we're building a platform" or "this is like the first thing ever done—it's the most unique thing ever". What I call marketing language is unfortunately fluff that an investor has to filter out to understand what you really are trying to do.

The best example I give about this is pitching Google. Imagine if I was pitching Google and I said, "Google organizes the world's information." For an investor, that's actually not telling them anything. If they understood what Google did already, then sure, that’s great. But if they don’t really understand what Google does, that doesn’t tell them anything; it doesn’t create any picture in their mind.

A much better pitch for Google is to say, "Google's a new type of search engine. With Google, you actually go to our website, you type what you want to know into a search box, you click enter, and we report in an ordered list websites that we think can help you with the information you're looking for."

What makes people different is that those websites are ranked by how other websites link to them, and so those results are way more relevant. That is something that people can understand even if they don’t use a search engine; that is something that people can understand when they don’t know any of the jargon of your industry.

And so you have to be really, really careful when you're thinking about an investor pitch. Your investor pitch is probably not something you want to put on your website; it's probably not something that feels comfortable when you're talking to a customer. It's something that really is only typically reserved for your pitch deck.

If your front page of your website and your pitch deck are saying the same thing and you don’t have a product where you assume the customer is also a user—like a product like Yelp or Uber—you might be doing it wrong.

So an investor pitch typically addresses what the investor is curious about: one, what do you do in the simplest language possible; two, how far along are you—just an idea phase? Are you building the product? Have you launched the product? Do you have customers, deep growth? Three, how big of a total addressable market do you think you're addressing? Four, how do you plan to charge your users?

Five, what do you think you know about this market that other people or competitors don't understand? And six, who's on your team, specifically who are the founders? More specifically, do you have the ability to build the product that you are trying to bring to market?

So those things are what the investor is really interested in, as opposed to the customer, where the customer often doesn’t really care about at least half of those things. The customer certainly cares how much you're charging, and they certainly care about what you're doing, but they're actually probably far more interested in what the functionality of what you're doing is, what the onboarding process is like, and specifically how the pricing applies to them—specifically, does it solve their specific problems versus like maybe some more general problem?

In a customer conversation, you end up getting into a lot of interesting nitty-gritty. You might bring up screenshots; you actually let me do a live demo. In an investor conversation, more often than not, you're really getting to the nitty-gritty about the business, about how big the market is, but their customers actually want to buy this product, what their demand level is, how many customers there are potentially for this product—all of those types of things are on the business and less getting into screenshots and demos and so forth.

Of course, there are certain exceptions on all sides. I would certainly say that like mass-market consumer products, the investor pitch looks a little bit more like the customer pitch. But for most companies that are going through YC, we have to split these up. We have to kind of teach founders that just going one-to-one from investor pitch to customer pitch is not the way to do it.

Interestingly enough, it takes them some practice. Within the first month, YC founders are still trying to figure out how to meld their customer pitch into their investor pitch. Only after constant trying do we convince them it's better just to have two separate pitches.

So in summary, the customer pitch and the investor pitch are two very different things. The investor is trying to understand, can you build a big business? The customer is trying to understand, does your product solve their specific problem? Because there are two different motivations for these two different audiences, most likely you're going to need two different pitches. So that's one thing that you should focus on even at the early stage of your company.