In many ways, product managers are uniquely well-suited to be startup CEOS. Product vision and revenue plans are two critical elements of early-stage startup success, and a good PM knows how to produce both. But the skills and obsession for building products that make you a great PM can sometimes trip you up when you try to raise money. I know because it happened to me. These days, I see hundreds of pitch decks and talk to amazing product-oriented entrepreneurs every day, who make a few common mistakes with their pitch.
Many of the product-oriented CEOs who pitch me have the following slides in their pitch deck:
Strength of the market “itch” or pain point
Description of the “magical” user experience
Their detailed product road map
Size of market estimate (unfortunately an afterthought, as in when you quote a $10B addressable market for enterprise insert-subcategory SaaS)
Impressive team and their prior ability to execute
Can you see the prioritization reflected above? What many first-time founders don’t realize is that a killer product is just one of many aspects of a successful business. Unfortunately, former PMs tend to obsess over the product experience and underemphasize other important pieces of their pitch. In PM speak, your pitch should be the wireframe for your business.
Here are some things that product managers turned founders should think about to be more successful pitching VCs, all while leveraging your unique PM superpowers:
Use only one product slide
Validated market need: You need more than an itch or a pain point, but actual evidence of customer traction
Prove your unfair advantage and deep knowledge of your space: Demonstrate knowledge of the vertical/ market/ customers you are targeting. Building products at big companies, with their deep technical teams and pre-established go-to-market channels is much different than trying to launch something as a three-person team in SOMA.
Target a specific use case: the more specific the better. It doesn’t matter how cool your all-encompassing platform business will be once you have millions of users and yottabytes worth of data. You need to be able to explain how it will appeal to users on day one.
Concrete, practical go-to-market plan: Explain how you’ll be moving from theory to plan, or better yet, how the plan is going and metrics you’re tracking because you are *already doing it*
Magical user experience: High fidelity > breadth. Keep this to a single slide. Sorry founders, but no one funds you based on your product roadmap; instead focus on the customers you have won and your competitive positioning.
Demonstrate Deep Market Knowledge
We don’t fund products, we fund use cases. A critical component of a strong use case are the market dynamics in a given industry. To be successful, founders need to have a strong handle on:
Market Size: For many VCs, size of market is a prequalifying question — many product founders don’t understand this, or dismiss it too quickly. You can’t afford to do this and still find external funding. The size of the market you’re addressing will preclude some investors completely, while making investing in you a very attractive proposition for others. The answer is NOT to have a vague $10B TAM. Show specifics around spend in the specific part of a market that you’re targeting.
Market dimensions and sales cycles: If the sales cycle is long or there are structural reasons it is tough to sell into the market (e.g. government, edtech) you will have a tougher road raising money. If these are true and you don’t know it, that’s a warning sign for a potential investor.
Competitiveness: Most investors select for the fiercest competitors to invest in, because most attractive markets are competitive, so you have to succeed as a competitor, not just within a vacuum. Remember: raising money is competitive, winning in a market is competitive, and staying on top of that market over time is competitive. Are you proving your ability to win over competitors? Also, investors will be looking for your mindsets as a competitor. Are you growing quickly and aggressively? Are you tracking yourself and your team? Product managers may dismiss salespeople, but when you become a CEO chutzpah matters as much as your ability to code a prototype for a new feature. As a founder, you should be more obsessed with your MRR than new mockups. Many entrepreneurs with PM backgrounds falter because they are not focused on the right things.
Customers’ behavior patterns, not just users: In some markets (edtech is a great example, but HR tech is another) the buyers/decision-makers are distinct from the users, and this complicates many startups’ path to monetization. User proof points are important to the long-term health of your company, but until you have customer proof points, know that you still have work to do before you’ll get funded.
Remember, VCs Back Businesses, Not Products
Founders, remember that you are not pitching in isolation. Every early stage investor is looking at least 100 companies a month, and writing 2–3 checks. For institutional investors, your competition matters a lot. You need to stand out among those 100 startups in your imaginary “cohort” and if you’re in a tough or too small market, you may not be able to easily raise money. In a scenario where investors simply can’t place bets on everything, they’ll place bets on the most competitive companies. It’s very easy to be dismissed as a “feature, not a company” or that you’re “too early” when competing with a startup that has a product, a full sales funnel, and measurable metrics.
Making the leap from effective product manager to effective CEO is totally doable, as long as you are can keep your macro-focus on your business, as well as your micro-focus on an incredible customer experience. Not always easy, but if you can swing it, you’ll be in good company with the most legendary CEOs of our time.