How to Package and Effectively Communicate Your Startup Idea; The Great Pitch by Y Combinator Partner Kevin Hale

Photo by Jason Rosewell on Unsplash

Y Combinator’s Startup school has often been referred to as the best startup school in the World; I can say it is no joke! This article is my fourth in the series, and now we are looking at how to Pitch Your Startup with Kevin Hale, an early Y Combinator partner and co-founder of Wufoo.

Recapping The Startup Hypothesis

If you have a startup idea, you are sure it is great, and you have been talking to customers, that’s awesome! However, a brief recap will not hurt us.

Kevin reiterates “I basically say a startup idea is a hypothesis for why your company is gonna grow really quickly. That hypothesis must compose of three different parts: the problem, the solution, and the insight.”

A great problem is widespread, meaning it is big in numbers and many are affected by it. It is growing, meaning it is not going away. It is urgent, and it needs a solution quickly. It is really expensive, meaning you will get your share when solving it. It is mandatory; it can not be ignored. And finally, it is frequent, meaning coming up repeatedly.

Remember that The Solution needs to be to a real problem, and you need to avoid, at all costs, solutions in search of a problem, or SiSP as Kevin illustrates. This means that you need to build your business from your customers’ problems and not build customers from your product, which is hard.

The Insight refers to your unfair advantage. Ideally, you and your Founders need to be, at least, in the 1 of 10 people -category. The Market needs to grow at 20% a year, and you need a unique position in it. Your Product needs to be 10X better than competitors. Your customer Acquisition cost is eventually a plain 0$. Monopoly is boolean meaning it’s tough for others to compete with you.

How to deliver a great pitch; three essential things!

A great pitch essentially is these three things (the problem, the solution and the insight) packaged so that your idea communicates clearly. You need to be able to share your idea so that others will understand you. This is essential. Kevin points out that probably half of their startup applications fail due to not communicating their idea clearly.

Kevin says that as an investor or as a team of investors, he is first looking at these three questions:

1. Do I understand the idea?

2. Am I excited by the idea?

3. Do I like the team?

Kevin explains that a clear idea is a foundation for growth as he takes the dinner table conversation as an example. The most exciting person in the table is the one who can clearly explain his or her idea so that others understand it; it excites them and then what follows is that they will tell it forward.

Kevin says that the best companies, in fact, grow by word of mouth and that advertising is a tax that is paid by companies who do not make something remarkable.

Essentially, a great pitch needs to be legible, simple and obvious, as Kevin wrote in his article How to Design a Better Pitch Deck, which you can check at your leisure.

The Pitch Needs to Be Legible

Kevin points out that “a legible idea can be understood by people who know nothing about your business” and that you need to design your slides, given a typical group presentation session, so that “even old people in the back row with bad eyesight can read” them.

Have to say that I agree with Kevin. I attended in 2009 the legendary course “Creation of Small and Medium-sized Enterprises” by the award honoree, startup guru, educator, academic scholar and a billion-dollar revenue GE veteran Pier A. Abetti, who taught me among other things that I need to present my idea clearly enough so that my mother understands what I am doing. To date, while I would add my children to the legibility-test-group -group, I still think that is a piece of good advice to all contemporary tech entrepreneurs. Imagine a room full of your older relatives and think how clear you need to be for them to understand you.

Practice, practice, practice talking about your startup!

You need a lot of people to succeed. You not only need customers, but depending on your venture, you need co-founders, users, investors, employees and other stakeholders. Admit it; there is a lot of talking that you need to do. You save a lot of time and cut corners if your message is tuned to perfection.

It is also a quick acid test; if you can not clearly and briefly communicate your startup hypothesis, when asked, there are good chances that you still need to understand what you are doing.

Avoid Ambiguity, Complexity, Mystery, Jargon and Ignorable

Kevin emphasises that you do not want your idea to be ambiguous, meaning muddy, unclear, abstract or something that can be interpreted in two ways.

Kevin illustrates that “simplicity means you are not trying to mix a bunch of things in your description”. At the same time, he explains that in complicated things, at the core, you have multiple braids that are intertwined, which means that complex ideas are not easy to understand. You want to avoid this; complex descriptions take more effort from your listener, and you might lose a great bunch of your audience at the start.

While mystery can bring a lot of joy for us, it does not belong to your business. Kevin agrees. Personally, I would also count science fiction into things to abandon; develop your ideas so that you can actually build the solutions, and you do not need to wait for the tech to emerge.

Next, you want to avoid jargon. You might think you sound pretty professional while using fancy industry terms, but does it really matter if nobody understands what you say?

Use language that sticks and resonates with those hearing you out. Do not use language that others can easily ignore. Kevin’s Ignorable means that “[it] won’t stick in your head”, as Kevin eloquently puts it, like MBA speak full of buzzwords that do not give the audience anything extra and which has zero information.

The three vital questions that your pitch needs to answer to make your idea understood

Kevin shoots:

“What are you making?

What is the problem?

Who is the customer?”

Kevin then gives a few good examples starting with Airbnb, which Y Combinator invested early on and Dropbox similarly. Let us take Airbnb first, whose company description below, taken from Kevin’s presentation, is

• Legible
• Simple
• Clear
• Communicates what the service is, what is the problem and who are the customers.

Then the next example with Dropbox, again taken from Kevin’s presentation, has all the essentials.

Kevin then gives his advice that we should in our company descriptions “Lead with what. Not why or how.” This means that, as you can also see from the two great examples above, you should answer with clarity the three questions set above and not venture further. Kevin stresses that the why and how gets on the way of clarity at this point.

How looking at your company from the perspective of an investor can be a major advantage in developing your idea description

Kevin explains that he is reading 1000 applications in a Y Combinator application batch. So, you can imagine he is sitting with his computer and going through the applications. Let us take two examples:

1. The company X’s description is simple, straightforward and Kevin understands in 60 seconds what they do, what the problem is and who are their customers. He reads further and learns quickly more about the service or products. He is like, wow, that is excellent! He can then start to think about how he could help you and how your ideas/business model could be improved and what Y Combinator would bring to the table. He goes to check your website; it is beautiful, articulate and concise! Within 15 minutes, he is already brainstorming well past your application. He’ll pick you to the next evaluation round. You succeeded!
2. The company Y’s description is unclear, abstract and contains vague marketing jargon. Kevin does not understand what you do, what is your product and who are your customers. It takes him 15 minutes and 5 minutes of his colleagues time, and they both still do not understand you. You also provided a lot of text, which he does not have the time to go all through. But he still is trying. He goes to your website to be disappointed; he gets further confused as your website has some contradicting information, and he does not even know what is your leading product/service, meaning the thing that you do. He has used 30 minutes for your application, but he is still trying to understand. He has not even gone to the point of thinking past your application. An idea comes to his mind that it might be hard to work with these people; they do not know how to communicate their ideas and what they are doing. He can not tell if the business is good or not. He closes your application. You failed!

So, what I was trying to explain to you was that you need to take your audience's viewpoint. In fact, it is crucial! You miss that, and it does not then matter any more how great you are or how well you have solved a problem.

We had above the example of Kevin reading his Y Combinator startup applications, but the same applies if you have investors sitting across the table.

Remember to adjust your presentations and talk to your audience. Think what is your goal and then create and polish your communication to perfection using the above points. I assure you that your probability of succeeding goes from zero to above-average, even to great. I know, I have seen this my self!

Kevin’s process tips on how to develop a clear and simple idea description.

Kevin has a great example of developing the idea description further:

Kevin illustrates that the above that is not okay. Ask yourself, do you understand what they do, what the problem is and who are their customers?

If you are like me, you probably did not grasp it quite well.

Next, Kevin points out the nouns in the description.

See, it is already a lot clearer. “Almost there”, like Kevin says.

Before you read further, think briefly, how would you write the final piece? Just think it in your head before reading Kevin’s polished version below.

What do you think? Pretty good, eh?

Now go back to your own startup description and do the works!

The goal for your pitch

Think who are you talking to, while customising your presentation, and have your goal in mind, e.g.what you want from the meeting. And, be prepared to the next phase, if you raise enough curiosity.

In general, you know you have gone past the first gate when your audience has understood what you do, what the problem is and who are your customers. You can see it; people usually communicate non-verbally that they have understood you. If you are unsure, ask if they have understood!

Kevin says, when your idea is understood, it ‘creates the foundation for curiosity”.

You need to want this; if you do not raise curiosity, you do not have any people to converse with you. You will not go forward.

Because in the end, it is all about you, not your slides. Your slides are there only to make you look better and showcase your thinking.

If there are eager minds, congratulations, you have raised enough curiosity, and perhaps even inspiration, for them to justify spending more time with you. Take this interest and proceed!

Henri Yoki is an experienced startup business professional interested in improving his craft and using his life doing something worthwhile. You can check out his LinkedIn profile.