Tops-down, bottoms-up investors

I’ve been investing for about 2 years now, and I’ve noticed that investors fall roughly into two camps.  I call them tops-down and bottoms-up investors.

Tops-down investors

These are investors who want to be sold on the big vision — where is your company going?  What trends are you riding on to make this successful?  How big can this get?  Market size?

Bottoms-up investors

These are investors who want to be sold on your traction and progress.  Are your unit economics good?  How are you acquiring customers?  What steps are you doing today that can be scaled?

Using this to your advantage

Neither pitch angle is right or wrong, and all investors want to know both angles to a certain extent. However, I’ve found that investors tend to gravitate towards one type of pitch or the other.

For example, Dave McClure loves hearing about traction.  If you happen to run into him at an event and have only 30 seconds to pitch him, spend just 1, maybe 2, sentences on the high level vision and trend you’re on, but focus most of your time on KPIs and the progress you’re making.  Pitch something like this:

Hi Dave – can I tell you in 30 seconds about my company Hippos R Us?  Hippos R Us is an online store where you can buy hippos.  We are riding on changes in housing regulations and the growing trend of apartment buildings allowing large pets.  We have sold 100 hippos in the last month and have sold $200k topline in the last 6 months.   We have 50% margins. We are raising $250k to fuel our growth and pour more money into Facebook ads.  Does it make sense to chat more about this?

Note that this pitch mostly focuses on progress and what you are doing to move your business forward.  It is all about growth, growth, growth.  This is a good way to rise above the noise — there are so many entrepreneurs out there who are trying to sell a dream but haven’t done anything with their business.  By illuminating your traction, you can be amongst the top 10% of seed stage entrepreneurs who have actually made progress on their companies!  While this pitch doesn’t say anything about the market size, note that it does touch on riding a growing trend.

This is what your apartment building will soon look like… Originally posted by tinsoftware

In contrast, other investors prefer big vision pitches.  For this kind of investor, spend more time on why your company changes the world, what is causing this shift in the market, or why this is going to be super big, and spend just a couple of sentences on your progress.

For example:

Hi Ms. MoneyBags – can I tell you in 30 seconds about my company Hippos R Us?  The birth rate is declining in all industrialized nations.  People don’t want children anymore, but yet they need emotional satisfaction, and to fill this void, they have been buying pet hippos.  In fact, the pet hippo market has been growing 1000% year over year for the past 5 years, and apartment buildings now allow them as pets.  Hippos R Us aims to be THE PLATFORM for purchasing and managing pet hippos to provide people with emotional satisfaction.  This makes our total addressable market $5B.  Since we started 6 months ago, we now have more than 100 accounts under management.  Does it make sense to chat more about this?

Note how this pitch is largely about the trend (why now?) on which Hippos R Us is riding.  Also, this pitch sells a much bigger vision — this is a platform that ultimately helps people with their emotional needs; it’s not just about buying and selling hippos. Again, in order to rise above the noise of all the entrepreneurs who are just selling an idea and aren’t doing anything, you’ll want to mention a bit about what progress you’ve made to date.

Ultimately, you’ll want to craft your pitch to sell both the dream and your progress.  If you have some insight into who you’re pitching, you can cater your blurb or elevator pitch accordingly.  Often, I see a lot of entrepreneurs are really good at creating a pitch from one angle, but the best ones are able to incorporate key elements of both tops-down and bottoms-up pitches.  You don’t have time to dive into the weeds in just a few seconds, and so deciding which points are important is key.

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