‘Too early’ signals a weak pitch, Iterative’s Brian Ma says

This article summarizes an episode of Iterative’s video series featuring Brian Ma, managing partner at Iterative.

Brian Ma, managing partner at Iterative / Photo credit: Iterative

Brian Ma, managing partner at Iterative, has a message for founders who receive unclear feedback from investors. If you hear you are “too early,” the investor isn’t the problem. Your pitch is.

Why investors give useless feedback

Founders often blame investors for not understanding their idea. However, when an investor cannot provide clear and helpful feedback, it is often because the founder has not explained the business effectively. This confusion makes the investor use vague reasons to decline.

Ma says, “Instead of them telling you, ‘Hey, I don’t get your company,’ they tell you exactly this line, which is, ‘You’re too early. Keep us updated.’… That is literally the feedback you get if someone doesn’t get your company.”

Test your pitch on a non-technical audience
Ma advises, “Try to explain things to friends of yours who totally don’t understand what you’re doing. So, find friends at the gym who are not in tech, and try to explain things to them in extremely simple terms.”

Nailing the first three slides

To be this simple, Ma suggests a plan to explain the whole business in the first few slides and get an investor’s attention quickly.

• Focus on one customer: Tell one customer’s story and base the pitch on the problem you solve for them.
• Lead with what makes you different: Show what is special about your company, like its technology, work, or sales plan.
• Get their attention right away: You have little time to impress them before they lose interest.

Ma instructs, “You really want one single narrative for one customer. That’s the single problem that you’re solving… The anchor customer is someone who you’re solving the problem, who’s paying you.”

Assume you have less than five minutes of attention
Ma also warns, “If you don’t get your company across in three slides, nobody is going to be able to give you specific feedback because they don’t get it… investors will not spend a ton of time on the deck.”

Run your fundraiser like an auction

A clear pitch is a good start, but it’s not enough. Many founders hurt their own chances by having a casual “always be fundraising” attitude. The best way to get a high valuation is to make investors compete.

Ma explains, “You want fundraising to be an auction… meaning limited time talking to 40 people at the same time. That’s how you get high valuations. And so don’t always be fundraising. You want to group everyone together.”

• Be all in or all out: You are either fundraising or you are not. Do not “always be fundraising.”
• Create a deadline: Schedule all investor meetings in a short time to create a bidding war and get a higher price.
• Get early support: Get verbal agreements from smaller investors before you talk to your main investor to show that others are already investing.

The strategic power of saying no

A bidding war gives founders power, but they must use it. This means guarding your time when you are not raising money. Turning down meetings when you are not raising money can be better than taking every first call.