What does ‘keeping it simple’ mean when fundraising?
One of my pitch coaching clients recently reminded me of a talk by Vinod Khosla from a while back and I was worried whether his pitch deck was too complicated.
It’s a good question, but the answer was, in short, ‘not really’. The truth is, that founders often go way too deep into the details when they try to explain why an investor should invest.
I agree with almost everything in the talk - but the thing Khosla doens’t really dwell on as much, is what ‘keeping it simple’ actually means. That’s what I get into here.
A brief summary of the talk
Here are my takeaways from Khosla’s talk (if you’ve already seen it, or if you don’t care, feel free to skip along to the next section:
Understand Investor Emotions: Investors oscillate between fear (things that could go wrong) and greed (potential gains). Appealing to these emotions is crucial, as investment decisions are often driven by emotion rather than rationality.
Simplicity and Clarity: Avoid visual and verbal complexity in your presentations. Complexity, including jargon and overloaded slides, can scare investors and reduce the effectiveness of your pitch.
Honesty Over Hubris: Authenticity is key. Investors appreciate transparency about what’s missing or challenging rather than overstating your capabilities or avoiding discussing risks.
First Impressions Matter: The first 60 seconds of your pitch are critical. Engaging investors immediately with a compelling “what if” scenario can determine whether they continue to pay attention.
Steer Into Objections: Address potential objections head-on instead of avoiding them. This shows confidence and preparedness, making your pitch more credible.
Focus on the Narrative: Your pitch should tell a coherent, emotional story rather than just presenting facts. Crafting an engaging narrative is more important than detailing every aspect of your business.
Tailor the Presentation to Investors: Different investors interpret pitches differently. Customize your message to resonate with the specific investor you are pitching to, and be prepared for various questions or objections.
Be Prepared with Backup Slides: Include detailed slides in the appendix to address specific investor questions. This demonstrates thorough preparation and can impress investors.
Test and Iterate: First, practice your pitch with less important investors, gather feedback, and refine your presentation before approaching your top choices.
Valuation Strategy: Be transparent about your valuation expectations but also flexible. It’s often better to let the market set the price than to anchor on a specific number prematurely.
What ‘keeping it simple’ really means
Raising funding for a startup is really bloody complicated - no two ways about it. However, a lot of founders are making it a lot harder for themselves by overcomplicating what they are trying to do. And what is that? Simple: Show that you’ve found a huge problem worth solving, in an enormous (and ideally rapidly growing) market, that you have the right team to execute, and that your solution and product does something different / new / unique that sets you apart from the competition.
Okay, fine, that sounds like a lot. But honestly, it really isn’t. It’s simple:
What Investors Need to Know
To understand how to simplify your pitch, it’s important to first grasp what investors are looking for. Ultimately, investors need to return vast amounts of capital to whoever gave them money - and, as Khosla points out, that drives two emotions: fear and greed.
Fear stems from the potential risks associated with investing in your startup—whether those risks involve market conditions, competitive pressures, or execution challenges. Greed, on the other hand, is motivated by the allure of substantial returns if your startup succeeds.
When an investor listens to your pitch, they are constantly balancing these two emotions. They’re asking themselves, “What could go wrong?” (or: How am I going to lose a ton of money if I invest here) and “What could go right? (Or: Could this investment be a fund-returner?
In a nutshell, your presentation must strike a balance by addressing both sides of this emotional equation. The name of the game is assuring them that the risks are manageable (huge market, great product, problem that people are willing to pay for a solution to) while simultaneously convincing them that the potential rewards are significant.
This is one of the things the AI tool I made does so well: Pay really close attention to the red flags: Investors are going to have questions…
Keeping it at the 30,000-foot view
One common mistake entrepreneurs make is diving too deep into details early in the presentation. It’s essential to keep your pitch at the 30,000-foot level, especially in the early stages of the conversation. This means focusing on your business's strategic, high-level aspects rather than getting bogged down in minutiae.
In the first meeting, investors don’t need to know every intricate detail about your technology or the step-by-step customer acquisition process. They need a clear and compelling overview of your startup’s mission, the problem you’re solving, and why it matters. The goal is to provide enough information to understand the potential without overwhelming them with details that might obscure the bigger picture.
Going too far into detail can lead to unintended consequences. In my experience, it often means one of two things:
It can come across as if you’re trying to prove how smart you are, which can be off-putting. Investors are more interested in whether you understand the market and the opportunity than in how much technical jargon you can include.
Additionally, it can signal that you’re over-compensating for something you don’t know well enough. If you can’t explain your business in simple, clear terms, investors may question whether you have a solid grasp of it yourself.
Remember, the initial goal of your pitch isn’t to close the deal but to secure the next meeting. You want to pique their interest, not exhaust it. Save the deep dives for follow-up discussions when investors are ready to delve into the specifics.
Eyes on the prize (i.e. the size of the opportunity)
Ultimately, investors are looking for opportunities that can provide significant returns. They need to believe that your startup has the potential to grow substantially and generate a strong return on their investment. This is why your pitch should be laser-focused on the size of the opportunity.
To do this effectively, you need to articulate the market potential clearly. Show that you understand the size of the market you’re entering, how you plan to capture it, and why your startup is uniquely positioned to succeed. Investors want to know that your problem is significant and that your solution is both innovative and scalable.
Avoid getting lost in top-down market projections. For instance, simply stating that your target market is worth $20 billion doesn’t tell investors how you plan to capture even a tiny percentage of that market: yes, you need to show that the opportunity is huge, but you also need to show where your beachhead market is: Where is your first $10k, $100k, $1m and $10m of revenue going to come from?
Khosla recommends doing bottom-up market sizing; that’s certainly one way to go (and it works for Musk), but I keep favoring the top-down approach. Explain how big the company could ultimately become, then use the go-to-market slide to show where you’re going to start.
The thing definitely worth keeping in mind, however, is that investors are looking for companies that can become category leaders. Your pitch should communicate why your startup has the potential to dominate its niche, either by creating a new market or by significantly disrupting an existing one. Highlight any unfair advantages you have—proprietary technology, a strong founding team, or exclusive partnerships—that give you a leg up on the competition.
It’s not about dumbing it down
Just to be clear: keeping it simple is not about dumbing down your pitch or glossing over important details. Simplicity is about presenting your business in a clear, concise, and compelling way. By focusing on what investors need to know—balancing risk and reward—keeping your pitch at a strategic, high level, and clearly articulating the size and scale of the opportunity, you can create a presentation that resonates with investors and moves you closer to securing the funding you need.
Learn much more
Did you know: Our Ready to Raise in 14 days course will teach you everything you need to know to put together a world-class pitch in just two weeks.