I believe that startups in Africa can jump ahead of many of their European counterparts if they develop better, stronger company stories. It’s time to follow more US examples. Let me explain!
Having seen several startup pitches recently, I notice a marked difference between those coming out of US accelerators like Singularity or Techstars and the average accelerator in Europe.
In Europe, those helping startups simply teach you to pitch. It is rather like a vegetable seller on the market in town. The guy on stage shouts that they have made something, names a price, tells everyone they are either unique or way ahead of any competition – and then hopes that investors will line up to buy afterwards. There is often no clear call to action – and it’s not clear what the guys on stage are expecting from those in the audience.
There is also a trend of filming the pitch or a “visit to the office” as though it is an item on a local TV news station and then uploading it to YouTube. Sometimes it feels like everyone seems to be making movie “trailers” without getting round to making the movie.
I’m afraid this video is typical of many I have seen. There is absolutely no story in this video. This is a shame because in fact they seem to have developed technology that, at first glance, looks to be quite remarkable. The startup spent a lot of money on hiring a drone (think helicopter) for some aerial photography. Yet their video can’t be seen outside the Netherlands on many YouTube channels because they use copyrighted music on the soundtrack (Pirates of the Caribbean!) which blocks them immediately in Germany. The video isn’t properly labelled, so it’s going to difficult to find in a couple of months when the buzz wears off. In short, it is not money well spent.
Where are the validated Business Canvases?
Meanwhile, in the US, I am increasingly seeing companies explain their journey so far. The story goes somewhat like this: “We made this product/service, validated the concept with customers. They told us to change a lot of things, so we altered our business approach as a result. Now we have 4 launching customers, we’re going in this direction, we need $X million to reach our next goal. Who wants to join us? ”
I’ve been watching how Singularity University is building its multi-million dollar business on a campus in Mountain View, a stone’s throw away from Google. SU organise all kinds of high-priced training events for corporates, with a seat costing US$30,000 on the course. That sounds expensive to us in the startup world. But for corporate types, it is half the price of getting an MBA at a European business university. Some of that money goes in to nurturing high potential startups. I believe that SU is more like a turbo accelerator than a “university”. I noticed that Singularity University is training the company’s it nurtures in building powerful narratives. They seem to be tapping in to the production knowledge from Hollywood, as well as fundraising expertise from KIVA. This ends up with kickstarter and indiegogo projects which break all funding records. Like the Scanadu Scout which raised US$ 1.6 million dollars in just a few days.
I’ve recently done a critique of the various forms of Demo Day that I’ve witnessed over the past 18 months. I’m particularly curious to measure whether the performance on the day itself was really the trigger for an investor deciding to build a relationship with a particular team. Or was it simply a performance in front of an invited audience? The hard truth is that few teams are getting seed funding after demo day – more like 7-9 months later!
I’ve been fortunate to have a front row at such events, being involved behind the scenes at various accelerator demo days in 7 countries. I have also been attending large demo-day/pitching events across Europe like Techcrunch Disrupt, TEDx, TheNextWeb, and contests like Accenture’s Blue Tulip Awards. Insights are beginning to emerge.
Demo Days are very similar in that most events are a beauty contest format. Each team gets between 5 and 8 minutes to present their company and then pitch for funding. They all end with an invitation to talk afterwards.
As John Hagel III pointed out in a blogpost late last year, the stories that young companies often tell are ineffective. They should be open ended narratives, explaining why those investors in the audience should get involved. Instead, the pitches are often a boast that a particular team who have been working together for a couple of years are more than qualified to wipe away the competition. In fact the audience has no real proof of the team dynamics. And often the core story is wrapped up in wild claims and stats which can’t be verified at the moment of delivery.
I’ve come to a point where I immediately draw a red line through any company that claims they are working in a billion/trillion dollar market. I’ll bin the newsletter, never to return.
I have seen companies with brilliant ideas and customer verified products fail miserably on Demo Day. Yes the presentation was slick, but it didn’t encourage me to investigate further. Because I was left with the impression that all the team needed was money. I have also seen very slick presentations which fall apart as soon as you start to do due diligence on the company story. All show, but no real substance based on facts. There are plenty of good search engines out there – make sure you do your own competitive search before claiming that “no-one else has done this”. At a recent demo day in Amsterdam I was doing searches on my tablet while the team was pitching on stage. It took seconds to disprove what some were saying.
Standing Out From The Crowd
There are over 300 tech accelerators in the world, not to mention countless start-up prizes, conferences, and competitions. So perhaps it is not surprising that many demo days are starting to look like the endless talent shows that we see on television. But just as interest in talent shows is waning, there’s a danger that demo days need to develop as well. They could be killed by their own routine.
I think Demo Day is still important. But it needs to pivot itself. And I believe that the founders of the Lean Startup Movement believe change is now overdue.
I have great respect for Steve Blank, especially the recent work he has done to take the Start-Up community to the next level with the US National Science Foundation. If you look at the Lean Start-Up Launchpad, or investigate the HUGE list of resources on his blog, you will discover that the conversation IS moving on.
Blank says in second part of the Forbes interview below that he’s concerned that not enough attention is being paid to the interaction between incubators and investors. He points the finger firmly at “Demo Days”. Most are too focussed on arranging the performance of a great pitch rather than assisting startups demonstrate to investors that they are really a viable company. There’s a lot of shouting when information sharing is called for. And, in my experience, people never collaborate with those who raise their voice.
Blank argues that instead of making a flashy demo pitch, companies need to show they have really built a match between what they make and what the customer needs. Startups need to explain why they started, what they built, what they found when they talked to customers, what they did as a result and where they are going. It’s an open-ended company narrative not a finished, polished story. Only then can the audience of investors judge if the company in front of them has discovered a way forward.
Steve Blank says he is going to address the issue of making more effective demo pitches later this year. But why wait? Now that we all know what investors are really looking for in a pitch, I believe that we should anticipate events like DEMO Africa and really prepare a world-class pitch to raise the standards. Is there interest in making Pitch training part of the benefits of being a member of the VC4Africa platform? What’s holding you back in creating your best pitch? Do you know what your own (potential) investors are hoping to hear? Here’s a call to react in the comments below.
Jonathan Marks is a Digital Business Strategist for Critical Distance