If you’re an early-stage startup looking to raise capital, chances are that your investors are looking for disruptions. If they say, “well, duh,” in your pitch meeting, that’s not a good sign. It means they’ve likely heard your idea from plenty of other people.
Telemedicine comes to mind. Eight months ago you were a genius, but if that’s your pitch today, you ain’t blowing anyone’s minds. Sure, you might have a product that does something marginally better than companies already in market, but that’s not what investors are looking for. That’s incremental improvement. Early-stage investors are looking for something completely new.
What they are looking for is something both unexpected and inevitable. An unexpected and inevitable idea often looks something like this:
The investor hears it and at first they don’t believe you. “Nah,” they say, as they start to argue with you whether that’s the way the world really works. Then, after a beat or two, they go, “wait, you’re right.” And after another moment, they think “fuck, that’s the only way it can be.”
In the span of just a few seconds, something they had never thought about before is now simply the way the universe works. It resonates so strongly, they can’t imagine a world where your product doesn’t exist. And win.
I’ve intuitively thought this for a while, but I found a concrete example a few weeks ago when I was writing my first newsletter. I mentioned mmhmm, both as an app I thought people should know about and also as as insane story about how their founder, Phil Libin, raised $31 million, including $4.5 million from Sequoia, PRE-LAUNCH. What is this magical app you might ask? It’s a plug-in for Zoom that allows you to put SNL Weekend Update-style slides in your background for presentations. That’s it.
But, if you read the Forbes article about this guy, it becomes more clear. Libin never pitched his company as a Zoom plug-in. He pitched his company as augmented reality (AR) for your computer.
Microsoft, Google, Apple, and everyone else are all working on AR solutions right now, and it’s hard because you need AR devices. Glasses. Maybe a phone. But that’s such a shitty experience. It’s also hard because — before mmhmm — AR really only applied to when you were outside your home or office. How much of your time is that really, especially now?
Libin describes his company as AR for all the time you’re sitting in front of your computer. While you’re chatting with your office, family and friends on Zoom, you can provide additional information and context at the same time, in the same window. And I think, in response, Sequoia said “holy shit.” They heard the unexpected — that AR is useless for most of our lives — and then an inevitable solution. And for that he gets $31 million just to try it out and see what happens.
A client of mine recently went through a similar revelation. After a deep dive into their industry, eSports, a few months ago, Pivan stumbled upon a problem that many game streamers have — how to maintain viewers and keep them engaged. They came up with an AI solution that watches the game you are streaming and automatically launches production-level overlays and information, including celebrations, replays and more. Basically, they turn streamers into broadcasters, with no extra work on the gamer’s part.
More than that, they realized that at a certain point, what starts out as a fun thing will become something that every single streamer has to have. Early on, it makes you more interesting. Eventually, if you don’t have it, you’re boring compared to everyone else. It’s unexpected — AI creating broadcast-level streaming for gamers — and yet, inevitable that at a certain point, everyone will have to use it.
If you’re reading this with a growing sense of dread that your company or idea is neither unexpected or inevitable, let me say there are plenty of super successful companies that have never found a truly unique thing, but they do what they do very well. And likely, if they do it very well, their marketing team comes up with a way to make it look revolutionary. There are lots of products successfully marketed in this way that just aren’t.
If you’re trying to raise capital, though, unexpected and inevitable is what you should be aiming for. Without that framing device, you can still find funding. But if you frame your pitch in these terms, you’re going to be much, much better off.
It might take months and months of refinement and work, and you still might never get there 100 percent. But you’ll definitely never get there if you don’t put in the effort.
This isn’t table stakes for a successful company, or even for raising capital. But it is a best practice that you might not hear from anyone else. If you want to create immediate engagement with potential investors, give them something they’ve never thought of before, and frame it in a way that that’s the only way the future can be.
Unexpected. And inevitable.
— Eric Marcoullier
At some point, I will be putting together a series of posts about best practices for fundraising. And I hope you’ll find them interesting, because I have a fairly nontraditional and slightly antagonistic approach to fundraising you won’t hear from many other people (surprise, surprise, I know).
If you don’t want to wait for me to get around to writing that series, I’ll happily talk to any founder for an hour about fundraising best practices. Hit me up at firstname.lastname@example.org or my coaching web site.