Learn the step-by-step process that you must follow in order to raise venture capital. Learn how to design, create and use a pitch, how to build a team, raise capital and more during this powerful video tutorial.Sign Up to Watch
-And the business coaching definition from Pitch Index, real quick, on traction is, "Traction is a measure of your product's engagement with its market, aka product/market fit. In order of importance, it is demonstrated through profit, revenue, customers, pilot customers, non-paying users, and verified hypotheses about customer's problems and their rates of change. A story without traction is a work of fiction. You must start building your product and start testing it with your market before you start raising money."
That's just-- I mean, it makes sense. But that's specifically what you need to look for when you're trying to compile this traction to show your investors.
-And so if you're confused as to what traction is when you start a business, again, traction-- you listed off all those variables. But traction at the end of the day is you're saying what is the evidence that what you think might happen is actually happening?
-Good. So just real quick to touch on those. You talked about the product. Educate and provide business coaching to those who want to start a business on the product, the team, the social proof.
-Yeah, well the product, the idea is you want to have a working model.
-That was what made growing Thrive so hard. I couldn't show anybody what it was going to be, because I'm not a computer programmer. I built a successful company and sold it. And I knew to build it, it would require several million dollars.
But I couldn't show people an example of what Thrive did. So I had to have a super team. So as you go through this list, the traction was that other companies that were online education platforms were doing well in different spaces. That was the traction.
-So you could point to them.
CLAY CLARK: Point to them.
-But Jill Donovan, of Rustic Cuff, if she had gone to try to raise money and just talked about some cuffs that hadn't been made yet, that would've been different, because she could actually make a prototype.
-That's right. That's right. On the product, you want to show a prototype, like you just said. On the team, you want to surround yourself with people where you are the least intelligent person on the team.
Now, I want to repeat. Business coaching truth: You want to surround yourself with a team of people where you are the least intelligent person on the team. If you're ever in a business, in a startup, and you find that you're the most intelligent person on the team, you need to get a different team.
And that's tough, because what do you mean? How are you going to afford to hire all these geniuses? Business coaching lesson: Well, what happens is, in startups, is usually there's a board of extremely smart people. And then there is the team that's executing it, who might be very smart, but they've never done it before. And so, you need to build a team of experienced people that can coach you.
And then the final thing is social proof. Social proof is where there's kind of anecdotal evidence from the society or from the business world to show that your idea is good.
So as an example, for Thrive, do you guys know-- if you're watching Thrive, you probably know this-- but the cost of college has more than tripled over the past 20 years. It's tripled. College today, we have about 50% of graduates that are looking for work a full year after graduation. There's more college graduates right now working as bartenders and working as retail clerks than ever before.
So these are the evidence I can show. I can say, look at the social proof from the social tapestry that makes our country. These are things that point to that this idea is not just my idea, but it's something that's supported by society and the national trends at large, even the global trends.
-And this is under the elevator pitch point because, I mean, I assume that you have to have that elevator pitch--
CLAY CLARK: Yeah.
- --to catch people's attention. The idea is it should be explained in an elevator ride. But then to clarify, you need to be able to articulate these things,
-Yeah, what's funny is that you have to have your elevator pitch ready to go. And then when people ask you, well, what kind of traction are you having? You have to know it up here or have it written down.
And I recommend you have this thing called a One-Sheet. And a One-Sheet is an 8 1/2 by 11 sheet where it answers all these questions.
So an business coaching action step that you can do right now is you can go ahead and write your elevator pitch. You can go ahead, after you write your elevator pitch, write your clarifier. And then have an answer for the Traction, have an answer for Product, have an answer for your Team, have an answer for your Social Proof. Have it all ready to go.
-And Chet Holmes talks a little bit about the elevator pitch in "The Ultimate Sales Machine," does he not?
-Love that book.
-And so, if you want to know how to write that elevator pitch, I'd start there. It's a good book. He'll help you with that.
-One other business coaching tip if you're struggling to write an elevator pitch is you can go onto the websites of Twitter, Dropbox, Facebook, different companies that have done well. And you can notice how simply they communicate their mission or the problem that they solve on their home page. Usually on their homepage, they'll answer it very simply. And that should give you some ideas. So it really can help you clarify. But basically, your elevator pitch explains to the world what problem your company or product solves.
-Simply and concisely.
-Simple and concisely. By the way, simplicity, according to Steve Jobs, is the ultimate form of sophistication. Again, simplicity is the ultimate form of sophistication. So, it will be extremely hard to say it simply.
-All right, business coaching lesson number six, the definition of a high concept pitch. So in "Pitching Hacks," they describe the term high-concept pitch as "What does the product help the customer do? Who is the customer... a single sentence that distills your startup's vision." So how is this different then your elevator pitch.
-Business coaching lesson: Well, your elevator pitch is, basically, if you're an elevator, you should be able to, on the way down from floor 15 to the bottom, explain all these elements-- the traction, the product, the team, the social proof. But your high-concept pitch is basically kind of like the opening line. It's kind of like that opening-
-That's what you said when you said, Thrive provides entertaining education for entrepreneurs.
-Yeah, so someone said well, what is Thrive? On a very high level, I would say, Thrive provides entertaining education for entrepreneurs. And it's all taught by millionaires and everyday entrepreneurial success stories.
-So that's not your elevator pitch. That's your high-concept pitch.
-Yep, and then all the things underneath that become--
-The traction, the product, the team, the social proof-- that's your elevator pitch?
-Yep, so I guess to make sure we're clear here, your high-concept pitch is right here. Cool? And then all of the things that go underneath that like, your traction, yep, and your team, and your product, all of that stuff here. That goes into making your elevator pitch.
CALEB: That make sense.
-OK, that makes sense? Cool.
-Because, the high-concept pitch is just immediately.
-You are, literally, on the phone with a venture capitalist, and they'll say, tell me about it. And I can tell you man-- I have jacked that up.
-You start vomiting information
-You cold-call for months. I remember I was on the phone with one major Silicon Valley fund. I'd been cold calling for months, and he's like, Clay Clark, hey, this is such and such. He's like, so what's your high-concept pitch.
-Well, I don't know what that means.
-That's exactly what happened. And I'm like, uh, well, basically what it is, and he's like, are you done? He's like I asked you again, what is the idea? And I again, about two minutes on the phone trying to explain it. And he goes, I think we're done. But if you can get a better concise idea of what you're talking about, call me later. That was it, I mean, really that's what happened.
-Chet Holmes talks about that to. He talks about how to do the cold-calling, but he says, you better be ready when they ask you those questions.
-Yeah, and I got to be real. I didn't know what I was doing. But I think doing something wrong is better than doing nothing. All the time. So I would encourage you, if you're like, I could relate to that. You work so hard to get invited to the home of a multimillionaire so you can explain your idea. And then, when you do, you just
And you mess up. But if you'll watch this episode over, and over, and over, and you'll define these 14 business coaching points, I promise you that your likelihood of closing a deal, it goes up tremendously.
-Right, and you've already touched on it. And you've touched on it probably in every business coaching episode on Thrive. But you will fail. Not every investor's going to invest in you. So if you're not doing it because you're afraid that you're going to fail, you got to start failing.
-Look up George Lucas. Just look up George Lucas, and see how many times he pitched the "Star Wars" script. Look up Sylvester Stallone and see how many times he tested the "Star Wars," or the "Rocky" script or "Rambo" script.
Or, another example, was just look up Jack London. That's the guy who wrote "White Fang." That dude was rejected over 600 times on his books. I mean, we can go on and on. Business coaching truth: you have to get-- failure is a prerequisite to success. And you have to get rejected before you get that success.
-Especially, In this area of venture capital.
-This is tough, yeah.
-OK, business coaching for number seven, the definition of a "pitch deck" or a "ten-slide." OK, I know, I think I've heard you say you have some somewhat embarrassing stories of people requesting a pitch deck. Just tell us those stories.
-Well, OK. Well, one time I was on the phone with a guy-- and, again, I was trying to raise capital-- and he said, can you send me your deck?
-So how did you respond to that?
-I didn't know what he was talking about.
-Did you say yes, though?
-Yeah, I was just like, yeah, absolutely. What do you mean? What are we doing? He's like, you know, I want your ten-slide. And I was like, um, what?
-That like, 10 slides on my slide show?
-And he was like, um, just email me what you have. And this kept happening. I think about the third time, I'm like, what is this word? What are they saying? I'm like, are you saying it like deck? D-E-C-K? Like a patio? And then, you know, a 10 slide? What is that?
And then you realize, that these people are-- if you worked in a factory and all you did all day was made airplane parts, you would start to refer to stuff as like, yeah go over there and grab the T371. Go ahead and get the TPS reports over there by the R valve. And everyone in your office is like, oh yeah, that's the R valve. That's the TPS reports. That's the--
-Yeah, if you've never been there, you don't know what he was saying.
-Yeah, and so the world a venture capital is just like this. But these guys are so used to saying this stuff, that they have very little patience for people that can't speak their language. Because it's almost like, if you can't speak their language, then they know that you're not supposed to be there.
-It's bizarre but it's like-- I travel to Mexico a few times. I do not speak business coaching in Spanish very well at all. You don't blend very well either, do you? Well, I go there and a lot of people they think I might be Latin American.
-Yeah. They think that.
-Is it because you have tan skin?
-And so I'm there and I'll try to speak the language and I do it terribly. Well, right away, it's like putting your hand up and say I'm not from here.
-That's how it's like when you're calling venture capital firms and you're like I'm not from here but trust me.
-They're like, if you don't have enough savvy to at least to know these terms--
[MAKES WRONG BUZZER SOUND]
That's how it works. Can you throw out a couple more terms like this? [INAUDIBLE]? Or are we going to go into that later?
-Business coaching for ROI.
-What's your ROI? Who's Roy? I don't-- I don't-- I don't-- he's a good dude.
-I don't have a ROI.
-You know, well, ROI stands for return on investment. That's when they say tell us about your team. What they want to know is the cumulative bios of your team and why they have experience that matters. But you're just not ready for it because they just-- like high concept pitch. When was the first-- I mean, you probably heard it for the first time today if you're like most people. So these are just the things they do.
-And the reason why-- well, I mean, we're going through this is Clay says you can learn from either failure or business coaching mentors, right? Clay learned from failures. Now, he's your mentor. Take his advice. This has happened.
He's walked through it. And now, we're going to outline exactly some of these specific business coaching terms for you. OK, number seven-- the definition of a "pitch deck" or a "ten-slide." Now I know I've heard you mention a few times some slightly embarrassing stories in terms of people asking you for a pitch deck and you being confused. Can you explain-- just tell us these stories.
-The two that stand out to me as being a number one and number two example of what you should not do is one, I cold called a whole bunch of venture capital funds. I had mailed a ton of physical copies of our business plan.
And I thought I got a callback from someone and he says, what's your ROI? I don't know what that is, you know? So you kind of just say, who? Oh. Yeah. Yeah. I know what you mean. You feel dumb.
-You can't really just talk your way through that if you don't know what he's talking about.
-Another one is someone says, hey, you can send me your deck? Deck.
-The whole thing?
-The patio? You want me unbolt it from my house, send it to you? What are you looking for?
-If he'll invest, I'll do it. That's what I'll-- I'll build you a deck. I'll build you-- it was embarrassing that I didn't know what the word pitch deck meant. And people have also asked me, well, can you email me your ten-slide? Well, what's a ten-slide? These are things that, like, if you don't know-- if you don't know, it's kind of-- to quote the great notorious BIG, if you don't know, now you know. So we're going to teach you right now.
-OK, so we're going to dive into how to build a pitch deck. But can you quickly just tell us what it is? Just a summary? What is pitch deck? Business coaching lesson: It is a PowerPoint Presentation that has no more than 12 slides. I don't know why they call it a 10 deck, but you can't have more than 12 slides.
-So ten-slide and pitch deck are interchangeable? Same thing?
-Yeah. And this has to be in this exact order.
-We're going to lay it out exactly.
-If it's not in this order, boo
-And that's because of the language that venture capitalists-- I mean, they can tell if you're not speaking their language, if you're not meant to be there. It's weird for them, right?
-Let me give you an example. You know, in college-- those of you who went to college, those of you who, like me, went to college for a while, but what had happened was I didn't graduate. Well, what happens is you basically learn a format to write papers.
-I mean, like it or not, there's a format. And they're always like, well make sure you use this double-spaced, 12-point font, all that stuff. Site everything at the bottom and title, subtitle. Blah, blah, blah.
-That was your favorite part, right?
-Yeah, it was awesome. I actually did good at papers. But the thing is, if you just decided to make your own format, where you're like, my format is boss. I know you want 20 pages. I give you one page. I know you want to double-space. I put it single-spaced. And I know you want Arial font or Times New Roman, but I've decided to put it in Wingdings. So it's coded.
-It's not accepted well is it?
-No, you just get rejected because people reject the packaging, not the actual product. Business coaching truth: They reject the presentation, not the actual-- they don't reject your idea. They just reject the way it was delivered. And it's kind of like their filter.
-If you don't have it laid out like this, they know that there's this guy that doesn't know what he's doing exactly. He's new to this.
-It's like every time I show up at the Freemasons meetings unannounced, they kick me out.
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