Why Most Fundraising Pitches Fail Within the First 5 Minutes

I was sitting in my office when one of my entrepreneurship students walked in looking more nervous than usual. He had a fundraising pitch scheduled with a big-name venture capitalist the following week, and he wanted to know if he could practice his pitch with me.

“Sure,” I said, gesturing for him to start whenever he was ready. As he launched into his pitch, I discreetly started my phone’s timer. The student didn’t notice. He was too busy introducing me to the intricacies of his product — how it worked, why it was innovative, and all the features that made it unique.

Three minutes in, he was still explaining the technology behind his product. I could tell he was proud of what he’d built, and for good reason. It actually sounded impressive. However, as the timer on my phone ticked closer to five minutes, I knew what was coming. As soon as it hit five minutes, the alarm buzzed, and I raised my hand to stop him.

“Your pitch has already failed,” I said.

He looked at me, confused and a bit deflated. “But I haven’t even gotten to the best part yet,” he protested.

“And that’s exactly the problem,” I replied.

The 5-Minute Pitching Rule

Venture capitalists are some of the most seasoned professionals in the world when it comes to evaluating business ideas. They’ve been in the industry for years — decades, even — and they’ve seen thousands of pitches. In fact, let’s do a quick “back of the envelope” calculation just to understand how many pitches a typical VC sees in a career.

Let’s assume a VC hears 10 pitches a week (which is a conservative estimate). Over the course of a year, that’s about 500 pitches. Multiply that by a 20-year career, and you’re looking at 10,000 pitches.

Ten. Thousand. Pitches. My ears are bleeding just thinking about it… yikes!

When people see that many pitches, they get really good at filtering out the noise. They develop an instinct — a gut feeling — that tells them within the first five minutes whether a pitch is worth their time. To be clear, I don’t mean they’ll decide to invest in the first five minutes. But they’ll almost certainly decide if they’re not going to invest in the first five minutes. And in 95% of pitches (maybe more), they’ve mentally checked-out by the five-minute mark. Why? Because the founder is still talking about the startup’s product and its features instead of focusing on the business.

The Product vs. The Business

I understand the temptation to wax poetically about your product. As a founder, you’ve likely poured your heart and soul into building it. You’ve spent countless hours perfecting it, testing it, and refining it. Naturally, you want to show it off. You want to make sure the investor understands how great it is and, by association, how amazing you are for having built it.

But the truth is venture capitalists don’t care about your product — at least, not in the way you think they do. What VCs care about is whether your product can be turned into a successful business. And a successful business isn’t built on the back of a product’s features. It’s built on customers, revenue, growth, and market potential.

Because businesses rely on customers, revenue, and growth, when you’re pitching VCs, your goal shouldn’t be to convince them your product is amazing. Your goal should be to convince them your business is amazing. That means you need to spend as little time as possible talking about the product itself and as much time as possible talking about the business.

What to Focus On in the First Five Minutes

When founders like the one from my story above want feedback on their pitches, I try to make sure those pitches are properly oriented as quickly as possible. That’s actually why I originally began using my little five minute timer trick. Having a timer interrupt your pitch is a visceral and memorable moment. Once that’s happened, I use the interruption to explain the five topics founders need to be moving onto in their pitches as quickly as possible:

• Customer Traction: Investors want to know that people are already buying and using your product. How many customers do you have? What’s your user growth rate? Simply put, if you show that people are actively paying for your product in the beginning of your pitch, you’ll have the VC’s attention even if the VC doesn’t know what your product is.
• Revenue: The best way to validate a product’s market fit is through revenue. If you’re generating sales, talk about it. How much revenue have you generated so far? What’s your month-over-month growth? Investors need to see that your business has the potential to make money, not just that it’s a cool idea.
• Market Opportunity: You need to demonstrate the market for your product is large and growing. How big is the market you’re targeting? How fast is it growing? Why is now the right time for your product? VCs want to invest in businesses that have the potential to scale, which means you need to show there’s a big opportunity waiting to be captured.
• Competitive Landscape: Acknowledge the competition and explain why your business is better positioned to win. What’s your competitive advantage? How do you plan to outmaneuver the competition? Whatever you do, don’t be afraid to discuss competitors. In any valuable market investors expect competitors. If you pretend you’re the only player in the game, they won’t trust you. Instead, show investors why you’re the best player.
• Financial Projections: Yes, financial projections are… well… projections. They’re imaginary numbers. But they matter because VCs need to know how you’re thinking about the business. How big do you think it can scale? And what’s your path to profitability? This helps investors understand whether your strategy has the potential to create the kind of business that can produce a meaningful exit.

After explaining these five concepts to founders, I make sure they understand the importance of addressing any of these points within the first five minutes of their pitches. If they don’t