There is a saying in the water industry. So, you have a spring. So what?

That was the founder of Neverfail Springwater, opening his pitch to institutional investors on the float we ran at Citigroup in late 1998. I am fairly sure those were his words, but 30-years later it’s more memory now than transcript. Either way the effect has stayed with me.

Every fund manager in that room walked in with the same private thought. Bottled water. A spring is a hole in the ground. How hard can this be? The founder said it out loud before any of them could say it to each other. By saying it first he took it off the table. And then he answered it.

The answer was that the business was never the spring. The business was food-safe systems and the logistics of carting fifteen- and twenty-kilogram bottles around the country to homes and offices, week after week, forever, with an enormous amount of double parking. That is much harder than it looks, and it is invisible until someone frames it for you. Once the room understood that the moat was distribution and compliance rather than water, the whole company looked different.

My recollection is that Neverfail priced at around 18 times, against something like 8 times for the typical small-cap IPO of that era. It traded up on listing and Coca-Cola Amatil acquired the business a few years later. I am telling this as one deal I watched from close range, not as evidence that a good opening line is worth ten turns of earnings.

But the phrase set the tone, and the tone survived the whole bookbuild.

Good analysis was the entry fee

I learnt this from the other side of the desk first. In the early 1990s I traded Australian equities and derivatives at BT Funds Management. Since BT was the largest trader in the market at the time, I had the privilege as a twenty-something to listen and learn from Australia’s best institutional stockbrokers all day long.

What I expected was that the good ones would have better numbers. Not always the case. Good analysis was a given. Everyone had a model, and most of the models were fine. What separated the brokers who moved stock from the ones who did not was their ability to tell you about a company with a story that organised the facts into something you could hold in your head and repeat to someone else.

Analysis does not sell, but narratives do. That is the single most useful thing I took out of a decade in markets, and it applies with more force to a startup pitch narrative than it ever did to a listed industrial.

The pitch is retold, not heard

The story matters more than the model, and it has nothing to do with people being lazy.

On the ECM desk, an equity story went through four sets of hands before it reached a decision. Our analyst briefed the sales desk. The sales desk called the portfolio manager. The portfolio manager took it to an investment committee. By the fourth hop, nobody was looking at the spreadsheet. What travelled down that chain was a sentence, and the quality of that sentence determined the size of the bid.

Venture capital works the same way and founders routinely misread it. You think you are pitching the partner. Most of the time you are pitching a young analyst who has to re-pitch your company to their partners on Monday morning, without you in the room, from memory, in about ninety seconds. If you have not given that person the words, they will invent their own, and theirs will be worse.

Angel investing is no different, and I am the analyst. I sit on the Brisbane Angels deal screening committee, which means I hear a company and then have to carry it to a room full of other investors. If the founder has handed me the narrative, I can do that. If they have not, I must build one from their deck, and mostly I will not bother.

Put your words in their mouth. That is the job.

The dinner test

Ted Seides has just re-released two storytelling episodes of Capital Allocators as a Summer Series two-fer, Matthew Dicks and Donald Miller back-to-back. Both are worth an hour of your walking time, which is where most of my ideas come from anyway.

Dicks has a test I like. Pitch the idea in the conversational, direct tone you would use with a friend over dinner. Strip out the corporate jargon and the robotic setup. If you would not say it to someone across a table with a glass of wine in your hand, do not say it in a boardroom either.

Miller’s contribution is simplicity, and specifically the primacy of the problem. He is making, in a marketing frame, the same argument I made about the problem statement being the most important slide in your deck. A listener who cannot state your problem back to you has not understood your company, whatever else they nodded at.

My own version of this is domestic. I cannot make an investment unless I can explain it to my wife. It sounds like a folksy heuristic and it is not. It is a bandwidth test. If the company only makes sense with a diagram and eight minutes, then I do not understand it well enough to own it, and I certainly cannot sell it to anyone else.

Building one

The most frequent question I get from this topic is: What makes a good pitch? Honestly, you know it when you hear it. Which sounds like the most useless answer I can give you, but it’s true. It’s also the final step in a method that makes sense when you say it out loud; when you hear it.

Start with where it came from

For founders, I often find the origin story is the most powerful way to open, and it does a lot of heavy lifting.

It establishes domain expertise, which is the reader’s first unspoken question: why am I listening to you? It gives you the problem, and gives it to you with heat, because you are not describing an abstraction from a market report; you are describing something that annoyed you so persistently that you started a company about it. And if you went looking for a solution and could not find one, you have covered the competitors as well, in the same breath, without a grid of ticks and crosses.

Domain expertise, problem, competition, motivation. That is a good chunk of the investment thesis, all within the first thirty to sixty seconds.

Finish the sentence

There is an old pitch deck outline I still recommend, created by Mick Liubinskas at Pollenizer in the early 2010s. Each slide is a sentence with a blank in it, and the exercise is to finish the sentence. Do all of them, stitch the sentences together in order, and what falls out the other end is your elevator pitch.

Phil Morle later produced an upgraded version, though I never liked it as much. As a mathematician I responded to the axiomatic elegance of Mick’s original, where each slide was a single proposition and the deck was the proof. The discipline of filling it in properly gets you, I reckon, eighty per cent of the way to a full deck.

Structure is what makes it scale

A good narrative runs at one minute, five, ten and twenty, gaining detail without changing shape. If your five-minute version is a different argument from your one-minute version, you have two pitches and no narrative.

Getting there is a structural problem rather than an editing one, which is the part Dicks is genuinely useful on. Once the story has a skeleton, expanding and compressing it is easy, because you are adding flesh to bones that already hold. Without that skeleton, you are just choosing which paragraphs to delete, and the short version comes out mangled.

Repetition Repetition

The final step is repetition. Pitch it at a lot of investors and listen to what comes back. When someone retells your company to a colleague accurately and with some energy in their voice, that version is your pitch, and you should steal it from them. When they reach for your deck to explain you, it is not working yet.

Investors are not the only available test audience. Practise the elevator version at barbecues. The people there have no reason to be polite about it, no stake in your round, and no vocabulary for your sector. That’s exactly what makes them a much harsher instrument than a professional who has learnt to nod, which is perfect for the role.

New founders should expect to die the first time. Plan for it. Burn the early pitches on audiences who cannot fund you and cannot hurt you. And these days you can rehearse against an AI before you walk into the room, which is a free run at the same lesson.

Why I spend the time on this

I put real hours into helping founders prepare before they pitch to Brisbane Angels. Sometimes I get frustrated enough that I wish I could just stand up and pitch the company for them.

But I need to hear them say it, and there is an underwriting reason for that beyond wanting a tidy evening.

Funding risk is real and it is one of the more common ways a decent company dies. Whatever I put in at the seed, the business will most certainly need to raise again, from people I do not know and cannot influence. When I watch a founder pitch, I am forming a view on whether they can walk into that next room and make it happen. A founder who can hand a stranger the words is more likely to survive the next raise than one who needs me in the room to translate.

I am not marking the presentation out of ten. I am pricing the probability of the round after mine.

The spring was never the point. Someone just had to say so.

Richard Moore — MooCoo Ventures

Richard Moore is co-founder of MooCoo Ventures, an angel syndicate that co-invests alongside Brisbane Angels, one of Australia’s most active angel groups. He has made over ninety personal angel investments since 2013.

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