December 18th, 2012
How I became a better entrepreneur by failing my first meeting with a VC
First off, I’m afraid of speaking in public. This may surprise a few people, but it’s true. I get really nervous when presenting or competing in front of a crowd.
In high school I played wide receiver on our football team. I would catch every ball in practice, but had a bad habit of dropping them in games. It sucked! I would lose sleep over it. The crowd felt like a curse. I would get nervous and my body would uncontrollably shake. It was embarrassing. My head coach eventually stopped throwing to me. Since then I always get anxious performing in front of any sort of audience.
Upon arriving at Rogue Venture Partners office, I was relieved to discover I’d only be meeting with Tom. This eased a lot of anxiousness. We briefly got to know one another through sharing past experiences and talking about the majestic city of Portland, OR. From the beginning Tom said he’d be straightforward with his opinion and has a “no bullshit” attitude. Although this may come across as threatening, confrontational or discouraging, I was excited I’d be receiving some useful feedback from him. Knowing he’s been on both sides of these meeting (as both an entrepreneur and investor), it was comforting that he understood what I was going through.
I wasn’t five minutes into the pitch before he referenced a list of 13 Slides most venture capitalists are looking for in a deck. Each one of my slides was met with questions and comments, most of which was critical. The meeting became interesting when I showed him our “market opportunity” slide. He challenged the numbers and made a case for why I was misrepresenting our actual market size. “What do you mean?” I said. He said my data was an inaccurate snapshot of our paying customers, and contrasted that figure to a general snapshot of our industries size. At this point the tables turned and I was taking a lot of notes. From then on I wasn’t pitching to an investor, it felt more like a meeting with a mentor who analytically questioned everything I said and challenged each word in our deck. I was hungry for answers, feedback and advice.
Ninety minutes later I left with pages of notes, opinions and constructive criticism. I learned a lot from my meeting with Tom and believe the topics we discussed are worth sharing. Here are the important concepts I walked away with:
1. “Why do I care?”
Crafting a clear message that states what we offer and why we are different is the foundation to answering this question. Over and over Tom rhetorically asked, “Why do I care?” From our value propositions to customer segments, he was persistently getting to the bottom of why TresPlace is important and why our story and product is relevant.
2. “Who is your primary customer?”
Another question Tom was constantly asking was “Who is your customer?” I gave him an exhausted list of different customer segments and user profiles and why they’ll interact with our product. He reminded me that it’s important to distinguish between customers and users (customers are the part of the user base that pays for the product while a user is the part that only interacts with your product).
3. “What is your market size?”
He actually laughed at our numbers within seconds of reading them. I instantly thought, “Oh shit!” He informed me of what numbers he was looking for and worked through the numbers I had. We defined our primary customer segment, talked about what the actual market size was and calculated the monetary opportunity based on our cost structure. By talking through all of these points, I was able to better define our early adopters and their attributes.
4. Simplify Your Idea!
I pitched a complex 18-month strategy that involved scaling our business from Portland to New York City. Tom suggested to we simplify our idea. Although I believe in the long-term growth, he reminded me to “own your home” and prove the business model works in Portland. I agreed. This strategy will give us an opportunity to build, measure, learn…and re-build. We’re extremely dedicated to owning our home and TresPlace is committed to making our business model work in Portland, first and foremost. We are honored to work with Portland’s specialty coffee community, and positively contribute to the local startup ecosystem.
Was our pitch deck perfect? Absolutely not. There are a lot of changes to be made. Am I thankful that a VC spent almost two hours helping us become more successful? Yes. Although Tom did not invest in our company with cash, he invested with wisdom and time, which many say can be a lot better than money. After thanking him for our time together he said, “Sounds good dude. Let me know how else I can help.” You can bet I’ll be reaching out to him for advice. TresPlace is lucky to have made a new friend who is committed to fostering the Portland startup community.
[Editor: TresPlace has volunteered to share their entrepreneurial journey through a series of guest posts. Catch up on TresPlace's entire journey.]