But then I read the answer here, written by Bret Fox, former CEO of Touchstone Semiconductor, and now a CEO coach.

Here is Bret’s answer:

And the following is Bret Fox’s answer to how to pitch a startup idea by email, on Quora. Direct quote.

When I was feeling really desperate (a common occurrence when I was raising our initial funding), I would build up a list of potential investors I had no way of getting a warm introduction to.

You can learn how to develop a cold email that works too. Just follow these three steps:

Email Pitch Step 1: Narrow the Target

Step 1: The first thing I would do was make sure I was targeting people who were investing in our product area.

It seems obvious. But you’ve got no chance if you target a random group of VCs.

So do your homework and make sure the firm is investing in your business area, and you identify the partner that actually does investments in your business area. Oh, and make sure the firm invests in the stage of operation your company is at.

Email Pitch Step 2: Make your subject line to the point.

In our case, we were making Analog ICs. So my subject line was: Analog IC investment opportunity.

That’s it. You can’t trick people into opening your email. They’re either interested or not.

Email Pitch Step 3: Make your message short.

Introduce yourself and tell them what you’re doing. A key point is don’t try and sell the deal in the email.

You want to provide enough information to let them know what you’re about, but not so much that you’re trying to pitch in an email.. The goal is to get a meeting or a phone call.

So, I did something like this:

Hi Name,

My name is Brett Fox. I am the CEO of Touchstone Semiconductor.

Touchstone is a high-performance Analog IC company (think Linear and Maxim) that achieves profitability with minimal funding.

The founding team, including the design team, are alumni of Maxim. The designers average over 20 years of experience.

We have a term sheet from a very good VC on Sand Hill Road, and we are looking for an additional investor. Please let me know how you would like to proceed.

Best regards,

Brett Fox

Let me break this down for you, so you can understand what we were doing.

Each sentence had a purpose.

Each sentence had a purpose. The sentences in your cold email should as well.

The first sentence was introducing myself and the name of our company.

My name is Brett Fox. I am the CEO of Touchstone Semiconductor.

The second sentence explained what we did, how to think about our company, and how we were different in a meaningful way:

Touchstone is a high-performance Analog IC company (think Linear and Maxim) that achieves profitability with minimal funding.

The two companies I referenced, Linear and Maxim, were considered the two most successful companies in the Analog Semiconductor space. The reference to minimal funding addressed a concern that investors had about the costliness of investing in semiconductor companies.

The third sentence showed that the team was strong:

The founding team, including the design team, are alumni of Maxim. The designers average over 20 years of experience.

The final sentence explained where we were at in the fundraising process:

We have a term sheet from a very good VC on Sand Hill Road, and we are looking for an additional investor. Please let me know how you would like to proceed.

Already having one investor in the bag, especially a highly regarded VC, is a good thing.

So what were the results of this simple, to the point, email?

It worked.

We got meetings with this simple pitch. I think we had about a 20% success rate.

Now we didn’t get an investment with this approach (the traditional warm-introduction approach eventually did the trick), but that’s not the point.

The point is you can get meetings with cold emails. Target the right investors and be direct and you put yourself in play.

For more, read: The Nine Facts Of Fundraising You Need To Know – Brett J. Fox

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No, it’s not really the format, the pictures, or the design … although those help. Ugly, confused, or disjointed is never an advantage. But what makes a successful pitch in a pitch presentation to investors is not the cosmetics; it’s the content.

Question: Is there one unique piece I’d seen in a successful pitch that made angel investors immediately interested in a startup? No, not really. No one unique thing comes to mind. But here are five things that I’ve seen that make for a successful pitch. Important, but not unique.

1. A line chart showing very fast — geometric, viral, hockey-stick — growth in subscriptions to a SaaS or website product.
2. A strong expression of commitment from a powerful distributor, with guaranteed minimum sales.
3. Substantial non-dilutive funding from a government agency funding research and development.
4. Strong evidence (patent along with real-world validation by some credible sources) of innovative technology that makes disruption of a big market a reasonable hope, and will offer barriers to entry.
5. An unusually strong group of co-founders with known successes already and a good match of skills to what’s needed.

Note: this comes from one of my Quora answers: What is one thing you’ve seen in a pitch that makes you stand up and take notice?

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Bootstrapping is underrated

Which would you rather — steer by committee, with people looking over your shoulder? Or just do it yourself, you drive, you decide?

Also, before I go too far, yes, there are opportunities that demand investment. These are the opportunities that you can only address with substantial deficit spending, which are also worth it, with a big pot of gold at the end of the rainbow. If that’s what you’re looking at, hooray.

I’ve said it before: bootstrapping is underrated. I get frequent emails from people asking how they can get investment for their new startup, and I’ve admitted to being a member of an angel investor group. But let’s not forget, while we’re thinking about it, these 10 good reasons not to seek investors for your startup.

Startup investors are partners, co-owners, and sometimes bosses

1. After investment, it’s not really yours anymore. That dream you had of building your own business ends when you take on outside startup investors. You have partners now. You have people who have a claim to ownership, shares, and having a voice in key decisions. You no longer set your own goals, strategy, milestones, and pace. You’ve got a share in a business, but not your own business. Investors write checks to own a serious portion of your business. I admit that’s patently obvious, but you should see the emails I get in which people think of investors as if they were some sort of public agency.
2. Investors aren’t generic. Some become collaborative partners and even mentors, some are nagging insensitive critics. Some are trojan horses. Some help, some don’t. (Hint: choose carefully which investors you approach.)
3. Investors can be bosses. You are not your own person when you have investors; you’re part of a team. You can’t decide everything by yourself. Politics matter. Investor relations matter. If you screw up, you do it in front of other people, and it hurts those people.
4. Just getting financed doesn’t mean diddly. For an example of what I mean read this piece from the New York Times. You haven’t won the race when you get that check.
5. Investors sometimes take your company from you. Well-known strategy consultant Sramana Mitra has a couple of eloquent minutes on that them in this two-minute video. She seems to be talking about India, but she’s well known in the Silicon Valley, and what she says applies perfectly well here.
6. Valuation is critical to them and you. Simply put, valuation means the price. If you want to give only 10 percent of your company to investors who pay $100,000, you’re saying your company is worth $1 million. And so on. Simple math, but wow, not so simple negotiation.
7. Investors don’t make money until there’s a liquidity event. That’s why we always talk about exit strategies. You can be the world’s happiest, healthiest, most cash-independent company, but your investors won’t be happy until you get them cash back. The win is getting money back out of the company. Some big company stock buyers like dividends. Startup investors don’t.

Besides which, startup investors are hard to land

8. It’s almost impossible to get investment for your very first startup. If you don’t have startup experience, get somebody on your team who does. Chris Dixon said it best: either you’ve started a company or you haven’t. And if you haven’t, and nobody in your team has either, that makes it very hard.
9. If it’s not scalable, forget it. The real growth opportunities are scalable. It used to be products only, but now there are some scalable services, like web services, for example. But if doubling your sales means doubling your headcount (that’s called a body shop), then investors aren’t going to be interested.
10. If it’s not defensible, it’s tough going at best. Not that I trust patents as a defense, but trade secrets, momentum, a combination of trade secrets and patents, plus a good intellectual property defense budget … if anybody can do it, then investors aren’t interested. (Of course, what would I know, I thought Starbucks was a bad idea because I thought that was too easy to copy … there are always exceptions.)

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1. First, make sure you really want angel investment. Read 10 good reasons not to seek investors for your startup. Take it to heart. If you don’t need investment, really, you are better off without it. And also, read startup sweet spot too.
2. If you do, then next, make sure your business is a good investment. Read up on what makes a business a good investment. It’s about the team, the growth potential, ability to scale, traction, etc. Many great businesses are not good investments. Read Do you have what investors want and angel investment self assessment.
3. Wait until you’re ready. Don’t seek investors before you have a team in place, milestones met, numbers to show, good evidence of traction and validation. Investors invest in businesses, not plans, and definitely not ideas. Sometimes they invest in people, like known startup successes with great track records; but if you were one of those, you’d know it.
4. Know the basics. Understand the normal process. Research investors near you, interested in your industry, and target specific people and groups. Never spread cold emails all over the map.
5. Investors  invest in your business, not your pitch. What they buy into is the business, the facts, the achievements; not the pitching. If you don’t have milestones met, progress made, concrete numbers to show, then don’t waste your time. You need an intro or profile or summary first, and then a pitch, and, if they are still interested, a business plan for due diligence. But don’t ever mistake the plan, profile, and pitch for what matters. You tell them about the business.
6. Do a lean business plan first, before the profiles, before the pitch. It’s for you, not the investors. It’s just bullet points, milestones, metrics, and projections. You need to know how much you need, and what you’re going to spend it on, before you start. Review it and revise it. A pitch without a plan is like a movie filmed without a screenplay. Don’t sweat the big plan with all the summaries and descriptions, at least not at first. Maybe not ever. But have a plan, keep it fresh, review and revise often.

(Note: I posted this first as an answer to a Quora question.)

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1. Profits. Talk of profits, overestimated profits, the failure to understand that investors make money on growth, not profits; startups with high growth rates are rarely profitable; profits in high-growth startups stunt growth and reduce the odds of successful exit. That’s why you need to spend other people’s money, right?
2. “I don’t need no stinking projections.” Surprises me how often I’ve seen it. “We all know,” the pitcher says in a cynical tone, “that all those projections are useless.” And dismisses the idea, often with a wave of the hand. Or sometimes it’s a holier-than-thou tone. But no. I need you to think though unit costs, realistic volume, the conceptual links between marketing spend and volume, what it takes to fund growth. I want to know that you know, roughly, that you’re growth will take a ton of marketing spend, and that when you get to $20 million annual sales you are going to have a big payroll and overhead.
3. Expecting me to believe your numbers. You’re damn right I want to see them, but don’t expect me to believe them. I use them to guess how well you know the nuts and bolts of your business. But at the moment of truth, I’m going to trust my instinct for what I think you can sell, and how much I think you can grow, given the stories you’ve told me and the markets you’ve carved out.
4. Discounted cash flow. IRR and NPV. Amazing how people can believe numbers that project the future based on a compounded absurdity of assumed sales, less assumed spending, multiplied by an assumed discount rate, five years from now. And yet, I see young people crushed because I wanted something that had a lower IRR than their thing. Y’see, I didn’t believe the IRR either way. I went with the people and the market. This is actually a particularly annoying subset of the point above it.
5. The annoying myth that nobody reads business plans. Big mistake: confusing the obsolescence of the big pompous formal use-once-and-throw-away business plan of the past with not wanting or needing planning. Ask the two faces of lean startups, Eric Ries and Steve Blank, whether startups need to set strategy, tactics, milestones, metrics, and essential projections for revenue, spending, and cash, and they’ll say the equivalent of “yes of course.” But they are (mis)quoted often as saying don’t do a business plan. What they mean – ask them – is don’t do an old fashioned business plan. Keep it lean, revise it often, and manage with it.
6. Knowing everything. Sometimes people think investors want founders who know everything, answer each question no matter what, and are the world’s leading expert on any possible subject to come up. No. I want people who know what they don’t know, and aren’t afraid to be not certain.
7. I don’t want people who get all defensive when challenged. The win is in the relationship, long term. I can’t tell you how many times I’ve seen private discussions between investors, after a pitch, go negative for somebody who investors feel “isn’t teachable.” It’s easier to work with people who listen, digest, than with people who think every doubt is a challenge to their leadership and authority.
8. The small piece of a huge market. No, please, don’t ever tell me that your $10 million sales figure is realistic because it’s only one percent of a $10 billion-dollar market. Or 1/10th percent of a $10 billion market. That logic never works. Build your forecast from the units up, not from the top down.
9. Oversharing the science or technology. I want to hear about the business, not the physics, not the biology, not the chemistry. Pitches and plans are not the right place to show off all of your knowledge.
10. Not needing the money. If you don’t need the money then don’t seek investment. Own it yourself. Never seek outsider money you don’t really need. People who can live off of their generated cash flow are never going to exit
11. (bonus point) Stock words and phrases like “game changer” and “disruptive.” Don’t tell us that you are either that. Cross your fingers, and hope we tell you that you could be.

This is another of my Quora answers. The original is at: What are the things that annoy you when entrepreneurs pitch to you Angels and VC? And someday I’m going to answer the question what annoys me about my fellow investors. Because writing these items generates a thought about that side of the table too.

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I decided to answer this question here because I see it so often in email and in question and answer sites on the web, especially Quora, which is where I first saw it and answered it.

Yes you do need a business plan

In the U.S. market the business plan generally stays in the background while investors look at summaries first, then pitches, and only eventually, after a lot of screening, if they are interested enough to do the detailed study called due diligence, then the business plan.

You want a bare-bones lean business plan to guide your summary and pitch deck. You need to know strategy, tactics, milestones, and essential projections. But investors screen startups based on summaries and pitches before they look at full business plans.

But that’s not what you show investors first

So here are the normal steps:

1. Summary. That’s either summary memo, or profile on Startup Funding & Investing and AngelList, or similar.
2. If and only if the summary is interesting, then the pitch. There is a lot more information on the business pitch here on bplans. And for more of my posts, on this blog, choose the business pitch category.
3. If and only if the pitch is interesting, investors will want to see a full business plan for due diligence.

However, this applies as general norm only, and in the U.S. market only. Generalizations are never always true. There are always exceptions.

(note: this first appeared as my Quora answer to What are the steps involved in submitting a business plan?

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This is what happened

• Two minutes into the pitch, he said he had been screwed by a partner in a previous venture.
• Ten minutes into the pitch, he said that he had been screwed by attorneys in a previous business deal.
• Fifteen minutes into the pitch, he said he’d been screwed by an employee he had to fire.

Normally, after every pitch, after the founder has left and we’re alone, the group takes time to discuss what we saw and heard. In this case, the room was quiet for a few seconds. Then one of us said:

“One thing we know for sure … if we invest in that guy, he’ll be blaming us for it later.”

Everybody laughed.

He didn’t get the investment from us. Do you know why not?

This is what reminded me

This morning I saw this question in Quora, the world’s best question and answer site.

“Every time I’ve gone into business, I’ve gotten screwed badly, either by partners or by customers. How do I avoid this the next time around?”

I’m answering here first.

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The direct link for the YouTube source is: https://www.youtube.com/watch?v=5ZXU84_sGXo&feature=em-subs_digest

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This blog post is a compilation of my own items and a lot of others contributed to the Quora question. 

My big two: 

• Issues around trust or integrity. Alternative truths don’t fly. Lies, gross exaggerations, hiding significant information. Fudging past financial data. Not mentioning about or grossly exaggerating their previous business history. Omitting significant facts. the pitch brags about a founder’s previous successful exits that turn out, later, to have been either grossly exaggerated. Founders holding back critical information for problems of perceived confidentiality or trust. Lawsuits that weren’t mentioned. Cap tables that hide things. Gaps in the history.
• Issues around Leadership. For example, the scientist alone, instead of the scientist in a team with experience in the industry and business sense and experience. Or the team that lacks the CEO and is promising to get one after funding. Or the team of very young people that assigns all C-level positions to team members without realizing they need somebody else.

Four other good ones from Heather Wilde. 

• Lack of domain expertise – Anyone can have an idea, but if the person you’re considering has no clue about what’s possible, what’s been done before, or even a tangentially related background – that’s a huge red flag.
• Lack of Coachability – there’s a certain amount of arrogance expected in an entrepreneur (they need to beat down their competition), but if they aren’t willing to consider outside advice or suggestions, stay away.
• Terrible Idea – I shouldn’t need to say this, but the majority of ideas are actually just bad, really, really bad. Yes, you are investing in the human, but that doesn’t mean you should throw money at a bad idea in the hopes that something they come up with later might be good.
• “No Competition” – This is like one of those logic puzzles. Every time I hear someone say “we have no competition” it immediately is a red flag, for two reasons. One, it’s a sign they haven’t done their research, because there’s always competition, or at least something comparable. Two, it’s a sign they might be naive enough to actually think it’s true. Either way it’s a sign to stay away.

Four more from Greg Brown:

• Awesome team in a small market can figure out how to expand the market opportunity. Mediocre team in a brilliant market will produce mediocrity. Bet on the team.
• Legal and financing structures that violate the norms are non-starters for me. No need to reinvent the wheel.
• If a company is pushing too hard to get your investment that’s a bad sign. If it doesn’t yet feel right hold off. It’s OK to miss out on something. There will be other opportunities. You cannot ride every unicorn.
• Bad co-investors suck. Bad means fundamentally bad people or people who will provide bad advice or influence. Most founders will to some degree bend to the will of their board/investors. Make sure they will be getting good advice.

And a bunch from Terrence Wang

•  No Deck/No Financial Model. Sending decks are standard unless you are a Siri co-founder working on Viv. VCs want financial models. If you are investing later seed then the startup should send you a financial model where you can see the assumptions and play around with the variables to test different scenarios and outcomes. If founders won’t send you both, red flag.
• Finders/Brokers/Enthusiasts. At present the vast majority of finders, brokers and enthusiasts who connect founders and investors are working with non-great founders. Red flag.
• Super Angel or VC Advising, Not Investing. Peter Thiel is advising a PayPay mafia cofounder-CEO. The CEO pitches fellow angel investors and me. We ask if Peter is investing. The CEO says he wants to be careful about asking Peter to invest. So why are you pitching us then? Red flag.
• Product Not Needed. If someone loves a startup’s product and service, that could be because the product is free and a good time filler. Doesn’t mean they will spend money on the product or service. Maybe they don’t need the product. Red flag.
• Not Great Sales. A great product with bad sales is often a bad sign. For example, a startup might have a great e-commerce product but Amazon is going to out-sell them about a billion to one. If the product is easily monetizable and they haven’t even tested monetization, that is a red flag.
• Incompatible Goals. Some angel investors don’t want VCs involved later. This includes at least a couple Harvard Business School Angels who invest in startups that should not need VC funding because the startup is in a smaller market and should get to break-even pretty quickly. But does the founder agree? If you and the founder don’t agree on the financing goals, that is a red flag.
• No Grit. If the CEO does not have grit, the startup likely won’t work. Red flag.
• Uncompelling Pitch. CEOs need to be persuasive, regardless of context. They don’t have to be high energy. Elon is more reserved but still charismatic and persuasive. Uncompelling pitches are a red flag.
• Differing Visions Intra-Team. Talk to the CEO and other core team members individually. Are they on the same page as the CEO? If not, red flag.
• Can’t Lead. Has the CEO built and led a team successfully before in anything? Sports, clubs, etc.? Her siblings? Anything? If not, red flag.
• Unanswered Questions. If you have unanswered questions that are important to you about anything related to the startup, the team, the legal documents, etc., make sure the CEO or someone from her team who’s authorized (e.g., her law firm) answers your questions to your satisfaction. If you feel pressure to not ask too many questions, just ask this one
• Legal and Ethical Issues. Does the CEO do things that are highly unethical or technically crimes? If so, you may have a Theranos or Zenefits on your hands. Red flag.

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