The Pitch

A few weeks ago, GrowLab co-founder Debbie Landa sent out the latest 500 Startups demo day video with a simple one-liner “Hey - this is the 500 startups preso's - this is how you present.”

The first one, CompStak, is killer. 3 minutes and 30 seconds of high-energy traction-packed excitement, well designed, and well done Michael Mandel.

Next week I’m delivering my own Demo Day-style pitch – the first time I’ve pitched Learndot on stage in almost a year. To get back into the mindset, I decided to reverse engineer the CompStak pitch. The goal is to produce:

  1. The overall structure of the pitch.
  2. The ideas each section should to communicate.
  3. The strategic intent.
  4. The choice of words.

Here’s the pitch. CompStak starts around 42:20.

The Blueprint

Overall:

  • Target audience: Seed-stage VCs and large Angel investors.
  • State of Audience before Pitch: I don’t know much about CompStak but I like 500 startups and I’m interested learning more.
  • Desired State of Audience after Pitch: Wow, CompStak is killing it. They’ve got a smart solution in a huge market and seem to have great traction. I want a meeting.

Outline:

I recommend reading this while listening to the pitch

  • Hello & Welcome
    • "Hey everybody. Thanks for coming, I am super psyched to kick off batch 5 Demo Day, this is awesome. And you are going to see some of the best entrepreneurs in the world today."
    • Warm up crowd, juice anticipation.
  • Intro
    • "My name is Michael Mandel I’m the co-founder of CompStak and we crowdsource commercial real estate data."
    • Set context. Who he is and what CompStak does in 1 short sentence.
  • Traction headline (1-line traction eyebrow raiser)
    • "In the past year, brokers from every major brokerage firm in New York city started using CompStak"
    • Get their attention early.
  • High-level value prop (solution)
    • "Why? Because we know what these people [companies on map] pay for office space."
    • Make value concrete, anchor relationship with known brands.
    • Add to picture
      • In fact, we know what everyone pays for office space.
      • One-two punch!
  • Why what they do is hard
    • "This is information that’s been fragmented and difficult to compile but we’ve compiled it."
    • Hint on barriers to entry, differentiators
  • Need
    • And when you’re looking for office space your broker needs this information to help you get the best deal.
    • Personalize the need, make it relevant & relatable to audience.
    • Teach me something:
      • These records are called comparables or ‘comps’
      • When I learn something I build trust with the speaker and they seem smart. Also now the name “CompStak” makes sense.
  • Life before product
    • Before CompStak brokers traded comps via email and via phone and via market meetings.
    • Paint problem, have audience to easily envision and feel the pain.
    • Personal appeal
      • I was a broker and I know how crappy this process was.
      • Show domain expertise.
  • Life after product
    • Now brokers go on CompStak, they use our point system. They share the comps the have to find the comps they need.
    • In two sentences show how CompStak elegantly solves the problem.
  • Unique Value Proposition
    • And as a result, we build a clear picture of the commercial real estate market.
    • Sounds like could be valuable data: commercial real estate is big money
  • How we make money
    • And we sell this picture to to real estate private equity funds, banks, asset managers, real estate investment trusts and hedge funds.
    • 1) They have a business model 2) They make money today 3) They sell to people who have lots of money. Describes multi-sided business model implicitly. Validation that data is, in fact, valuable.
  • Success point one: current status
    • In New York – virtually every single broker from every major brokerage firm is in New York – and we’ve got nearly all of the comps in the city. And we’re starting to sell this data to property owners, some of the largest property owners in the world.
    • New York is the world’s largest commercial real estate market and they have most of its data. Implies momentum.
    • Data point as back up
      • As a frame of reference Tishman Speyer has over fifty billion dollars in commercial real estate assets. And these companies pay us five-figure annual contracts.
      • Concrete client, big number to throw at audience, good sized contracts to give a rough idea of ARPU.
  • Success point two: social validation
    • Our data is so good that it is used regularly by the Wall Street Journal. In fact, we’ve been in seven different articles in the Journal so far.
    • Social validation: WSJ is only going to use credible data sources.
  • Success point three: ability to expand beyond New York
    • In San Francisco, we launched two weeks ago. We already have 70% of the major brokerage firms signed up. And we’ve got 61% of all of the commercial office deals completed in San Francisco in the past year in our system.
    • Shows ability to scale beyond New York, further validate need by showing rate of adoption. Note the pitch is being done in the Bay Area: make the product relevant to the audience.
  • Scaling vision
    • We’re going to start selling to property owners in San Francisco. But in fact we’re going to sell throughout the entire country because we are going to scale into every major city.
    • Swinging for the fences, this will be a home run not a base hit.
  • Hard traction
    • Our traction is fantastic. New brokers sign up for CompStak every single day and our revenue is increasing with 30,000 dollar annual contracts. And that’s just for New York Data
    • Give the essential traction metrics: users & revenue. Backs up previous traction points.
  • Long term vision
    • But trading lease comps is just the first step. Commercial real estate technology is in the dark ages, and we’re transforming it using our proprietary crowd-sourced model to bring the light to commercial real estate
    • A Big Hairy Audacious long term vision. Hint on differentiators/IP-protection by using ‘proprietary’. Shows he is thinking long-term, how CompStak could become a big company.
  • Market Size
    • Show one big number [500B]
      • And the Market opportunity is massive. Half a trillion dollars in commercial real estate transactions take place per year. Brokers do those transactions and we help them do those deals.
      • Shock with a huge number: Wow that’s really big. Position CompStak in relation to this number.
      • Show even bigger number: [6.7T].
        • But that’s nothing compared with the nearly 7 trillion dollars in commercial real estate assets in the united states. And real estate owners – our customers – are buying those assets and using our data to make the analysis to do those deals.
        • Try to blow away with an insanely large number.
  • Team
    • We have a terrific team. I’m a former broker but we also have experts in technology, marketing, operations, design, and data analysis.
    • Domain expertise and well-rounded team in place ready to scale.
  • Backers
    • Our investors are at the intersection of real estate and technology
    • Other people have already given CompStak money (more social proof), they are value-add and relevant.
  • Raise
    • We’ve raised over a million dollars so far and we’re raising a new round to scale CompStak throughout the country.
    • CompStak has investor traction, and will use money to grow faster and acquire market share: a good ROI on investment dollars
  • Wrap Up
    • So. If you want to be a part of transforming the 500 billion dollar commercial real estate industry, come talk to us after, we’re in these shirts [show compstak shirt]. Thanks a lot.
    • Remind them of huge market, make it easy for audience to recognize CompStak’s founders so they can find them to book a meeting.

General Notes

  • Delivery was polished, never once said “um or ah”.
  • Sentences were short. Words kept simple.
  • Kept energy high, lots of confidence.
  • A Subtlety: respects audience’s intelligence by not hitting them over the head with things they can infer. For example, he never explicitly pointed out that there are network effects in this market – even though it’s clearly something investors like to see. They can figure that out pretty easily. Also, despite have a multi-sided model (users and customers aren’t the same people) he never explicitly has to draw this model but illustrates it through example.

What he left out

You have to leave a lot out in these speed-pitches and there’s always one investor/panelist who chides for one of your choices. These are a few of the things some people consider essential that he left out:

  • Competition
  • Competitive Advantage
  • An analysis of his (actual) market size (his TAM, SAM, etc...) [*]
  • Go to Market (Everything around how he acquires customers: channels, messaging, sales process, acquisition costs, etc...)
  • Product & engineering questions (How is it built? What platforms does it run on? Is it scalable? Is it well designed?)
  • Discussion of IP or barriers to entry
  • Exit Strategy (I’m firmly on the side that this shouldn’t be in your pitch and you really shouldn’t be thinking about exit at this stage. But I've seen many investors ask for exit strategy in the pitch, so it’s worth noting he made a choice not to include it).

[*] The one big asterix: Misleading the Market Size

The one thing he left out that bothered me was the market size analysis – because he pretended to include it. This is a pet peeve of mine. I see it all the time and am going to take this opportunity to explain my beef. The issue is that he (as many startups do) put up numbers for ‘Market Size’ that weren’t his market at all – they were for a (much larger) tangentially related market.

Consider his 500B number, this was for total value of commercial real estate transactions during the year. These aren’t the dollars he’s competing for! People are not going to buy a subscription to CompStak instead of a 10,000sq ft office in downtown manhattan. His ‘nearly 7 trillion’ number is even more nonsensical: it is the assessed market value of all commercial real estate, the literal bricks, mortar, and land. Of course that is ginormous. It’s also a total red herring. It is like inventing a new utensil and pointing to the value of all food in existence as your market.

CompStak’s actual market (their TAM) is the amount of cash being spent today on commercial real estate transaction data. CompStak sells data, they don’t sell real estate. Their SAM (serviceable market) is the dollars being spent on data like theirs, in the regions they serve (or will serve shortly) and consumed on the platforms and channels they support. I don’t know the size of this market, but it is clearly a small fraction of 500B.

Again, I see this in pitches all the time. But the ability to reason about markets critically – and to choose accuracy and honesty over putting up questionable big numbers – are two skills that great CEOs need to have in abundance. We should start developing them early.

Aside from this, the pitch was fantastic. Thank you to Michael, CompStak, and 500 Startups for putting it online and making the rest of us up our game.



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Published

07 March 2013