What do all start-ups have in common? Exactly—they are all constantly on the hunt to raise money, the elixir that keeps most start-ups running during their early years.
To find new investors, CEOs need to be able to tell the company’s story in a concise yet compelling way, which is a challenging task. As Mark Twain once rightfully said: ‘If I had more time, I would have written a shorter letter.‘
In this episode, we spoke with Carmel Yoeli, the CEO of Atreo, one of Israel’s most successful B2B brand agencies, and Luisa Russwurm, a manager from McKinsey’s Israel office who has spent most of her time helping young start-ups shape their investor stories. Both of them will provide us with an actionable framework on how to effectively structure and convey your investor pitch[es].
Peleg Dekalo: Hi, Luisa. Good morning. It’s a pleasure having you both today. And let’s start from a quick question. Luisa, what is your biggest no-no when it comes to a start-up investor pitch?
Quick tip number one: Have your elevator pitch ready
Luisa Russwurm: That’s an easy one, actually. I think the biggest no-no is when you sit five minutes into the presentation and still have no clue whatsoever what the team is presenting to you. So, not having your 30-second elevator pitch ready.
Peleg Dekalo: Carmel, take the positive side of the same question. What is your biggest yes-yes?
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Quick tip number two: Create and hone your narrative
Carmel Yoeli: Having a narrative, I think. It sounds trivial. But I’ve seen many investor’s decks just start with, ‘Here are facts about this. And here are facts about that. And this is the team. And this is a business plan.‘ And they’re missing out the biggest, I think, the most important part of any investor, any deck, in general, and this is the story, or it is called the strategic narrative.
Ben Horowitz, from Andreessen Horowitz, he’s saying all the time, quote, which I love quoting that, ‘Unless you have a well-articulated story, you don’t have a well-articulated strategy.‘ The story is the strategy. And I think it really comes across when you are talking to investors. The way you’re able to present your story, the clarity, how precise it is, how compelling it is, I think, really affects the level of trust, confidence, and inspiration that you want to create in this situation.
Peleg Dekalo: So, to take a step back, look at your presentation—at your deck from a macro level—and try to give it in three, four sentences; a coherent story.
Carmel Yoeli: Yeah. Basically, just look at it as a different part for the presentation. Four or five slides that take you through the narrative. A good narrative should include both sides—the qualitative side, the inspirational, the emotional part of the story—but also the quantitative side, which means that it’s backed with facts and not just stories.
Peleg Dekalo: A few words on your professional path, or in other words, who are you, Carmel Yoeli?
Carmel Yoeli: Alright, so I grew up in tech, in military, and started my last role in an enterprise. It was in NICE Systems back then. I was running the sales engineering for the cyber-intelligence unit, and we had to tell a very compelling story in a very short [amount of] time, and it was extremely difficult. I remember back then that NICE went through a huge branding process with this fancy firm, and it took more than a year, and I was really looking forward to the result because I said, ‘Alright. Finally, someone will help us tell the story of our super complex products,’ and then a year and something later, they changed the rectangle in the NICE logo from yellow to blue. Basically, that was it. And I said, ‘There’s got to be more in brand building for tech.’ So long story short, this is why we built Atreo. I found out that there isn’t such an agency that does that, so I did.
Peleg Dekalo: So, sum up what Atreo does?
Carmel Yoeli: We help tech B2B start-ups build their strategic narrative and then build the brand on top of the strategic narrative. Basically, the heart of any brand in our philosophy is the narrative, which means the story that is told—the textual story—and the story that is shown, [which is] how you bring it to life with creative. That is, I think, in a nutshell, what we do—and we do it for many tech B2B start-ups from Gong, JFrog, Sisense, [and] Similarweb, just to name a few.
Peleg Dekalo: Luisa, you are the engagement manager of [McKinsey’s] tech hub here in the Tel Aviv office. The tech hub, for those of you who don’t know, is the platform where we leverage McKinsey’s global expertise in order to help Israeli tech companies, tech start-ups, and tech investors thrive in the environment they operate in. Can you introduce yourself and tell us what does it mean to be the engagement manager?
Luisa Russwurm: Yes, so I’ve been with McKinsey since 2015, and I recently transferred to Israel with the vision to build up our presence in the Israeli start-up and scale-up ecosystem. Our vision is to become the number one sparring partner for Israeli start- and scale-ups both to help shape this important part of Israel’s economy and to enjoy.
Peleg Dekalo: And hopefully, we will also enjoy today’s interesting discussion around investor-pitch excellence. Carmel, you have developed a framework to structure an effective investor pitch. Do you mind introducing it to our audience?
Investor-pitch excellence—framework’s overview
Carmel Yoeli: [The framework] is made out of four parts; four different steps.
So, it starts with the macro level: ‘a changed world.’ Always talk not about yourself, but about a world that was changed. Think about global warming. The talk was there for two decades, but only now when the fire started, we noticed, right? So, a changed world.
Second: ‘that creates a problem or an opportunity.’ It’s not always a problem. Sometimes it’s just an opportunity that is a result of this changed world.
Then third: ‘solved with a new approach.’
And then end with: ‘that is changing the world.’ How your approach is going to change the world. By the way, this is the most relevant part for investors, at least in our point of view. Let’s give you a couple of examples for the full four stages.
Carmel Yoeli: Let’s do it. Let’s take JFrog, one of our clients. So, a changed world—we’re talking about how software is eating the world; any company is a software company today. A CEO told us once that the fight between Domino’s Pizza and Pizza Hut is not about who has better pizza; it’s who has a better app. Nobody cares about the pizza.
Peleg Dekalo: Which is very true in a sense.
Carmel Yoeli: Yeah, you can’t argue with that, right? It’s almost cliché to say today that software is eating the world. So that is the changed world—how it creates a problem for companies. A software is only as good as it’s updated. You have to keep releasing software all the time to all different devices. You have iPhone, I have Android, and there are endless versions, and it becomes a pain to release software, a pain for the organization, and a pain for the actual developers—[that’s the] problem.
Solved with a new approach—continuous software release. That’s their new category, the new category that JFrog is creating, and it allows you to release software fast.
Tagline: release fast or die approach.
Vision: imagine there is no [software] ‘version.’
They’re imagining a world where software is liquid. The updates flow through the pipes of the internet so seamlessly, there’s no ‘version’ in your phone, for example.
There is always the latest version, hence, imagine there is no version.
Luisa Russwurm: That’s beautiful.
Peleg Dekalo: It is. I’m coinvesting in whatever you’re presenting to us, for sure.
Carmel Yoeli: JFrog is fine, don’t worry.
Peleg Dekalo: Yeah, yeah. They definitely don’t need me.
Carmel Yoeli: But this kind of framework works, I think, for almost every compelling narrative we know. Take salesforce. Changed world: enterprise software is getting bigger and bigger, like on a huge, tremendous scale. That creates a problem. It becomes too big to maintain and too expensive to buy. It becomes this huge headache. A new approach would be SAAS [software as a service]. Think about it. They didn’t invent CRM [customer relationship management], but it was the approach of providing software as a service, which later on became SAAS. Vision: the end of software.
Luisa Russwurm: And what I really would recommend our listeners do if they are struggling with their strategic narrative is to just write this out. It may seem like a schoolkid exercise, but it’s very, very powerful. Just write out the four dimensions and what your story is.
By the way, that can also become your elevator pitch, right? If you’re meeting someone in the elevator and really just have 30 seconds to convey what you’re doing, tell them your strategic narrative along those four pillars.
Peleg Dekalo: I think it’s the responsibility of every CEO to have his investor pitch memorized. Really memorize it. It’s 30 to 40 seconds. It takes a long, long time and a lot of iterations ‘til you get that investor pitch. But once you have it, have it memorized. Write it down. I’m a true believer in that practice.
Peleg Dekalo: Now following the four stages: a changed world; creates a new opportunity or problem; solved with a new approach; and changing the world, there is a fifth chapter. Luisa, what is this fifth chapter all about?
Lastly, walk your investor through how you plan to achieve your strategic narrative
Luisa Russwurm: Yeah, I think the fifth stage really is all about how you’ll achieve that strategic narrative you’ve outlined in the first four chapters. So, how will you get to reach your goal?
I think in the essence, the first four chapters are there to hook the interest of the audience—to really appeal to their emotional side—and to get them interested in what you want to tell them. The fifth chapter outlines the competencies that prove you will actually achieve your great vision.
Peleg Dekalo: Thank you both for this great overview of our five little pitch-document chapters. What I would like to do now is to go one level deeper into each of the five chapters and get your sense on which kind of messages and slides a good pitch deck should contain.
Part number one: Show an objective, undebatable change in the world
Carmel Yoeli: First part is the changed world. and the reason for that: A, it’s more objective. It’s not a story about you. It’s a story about a world that was changed, and you happen to be there. Second, it puts your audience in a more acceptive mode. They have to agree that It’s something you can’t object to. It’s also important, because the first part should basically answer the ‘why now?’ question.
Investors, specifically, are an audience that are very FOMO [fear of missing out]-driven. You need, in a way, to generate the feeling there’s a train that’s already going, and you need to hop on the train, and this is the purpose of the first part. The world has changed. Do something.
Luisa Russwurm: Maybe, just adding to that, let others talk in that chapter. What I mean by that is, don’t make this chapter about your opinion, but make it about what others have to say about the trend.
Carmel Yoeli: Exactly. It’s not about you. It’s about the world. Not just the entire world, but the specific world of your buyer. Once again, something that 100 percent of the audience will agree to, something you can’t argue with, and is backed up with facts.
Part number two: Explain the new opportunity or problem that’s been created
Luisa Russwurm: Yeah. So, then I think that floats nicely into the second chapter which is, ‘creates a new opportunity or problem,’ as Carmel mentioned. I think in the first chapter on the first page when you talk about the world, you’ve hooked your investor. They believe that trend. They see that trend and now you just outline how it creates a new opportunity or problem for the world.
If you’re describing a problem, then make sure you are also appealing to the emotional side of the cake. A lot of pitches I’ve seen are very good in quantifying the problem, and it’s always easier if people can actually relate to the problem you’re solving. And then, of course, for a problem or opportunity presentation, you always need to size the prize. So, make sure you can size how big the pain or how big the opportunity is in US dollars.
For example, what I always really like is if you can show the system costs for a problem you’re presenting, or how much money is spent on this problem right now throughout the entire value chain.
Carmel Yoeli: I would add to that, I think the purpose of the second part, the problem or opportunity, is if the first part is ‘why now for the entire world,’ the second part is ‘why now for your buyer?’[Whether it’s measured] in pain today, or what the opportunity is. Once again it’s I think important to distinguish between problem and opportunity. It’s not always problem.
Peleg Dekalo: Now to our third stage. Luisa, this new problem is solved—or as Carmel just said—this new opportunity is being seized by using a new approach. So, how should we show our new approach?
Part number three: Demonstrate how do you plan to address this new opportunity or problem
Luisa Russwurm: Yeah. This is an important chapter, obviously, so by now you have established the problem and determined what new opportunity it created in the market for you. And you have captured the excitement of the investor. So, he is really hooked at this stage. The third chapter now is all about introducing your new solution or product you’re selling. So, just a couple of thoughts on how to do that effectively.
I think the first important advice I would give is go visual in this chapter—how they say ‘a picture describes 1000 words.’ And I think that’s really true. Please also make sure that everyone at this stage really understands your product.
Just imagine you’re talking to an 18-year-old person when explaining. Don’t use any fancy language. Just assume the investors don’t know much about the technology you’re using. I mean, don’t pretend they’re stupid, right? Just make sure people can understand.
Also, one important [piece of] advice I see a lot of people not adhering to is talk business. What I mean by that is, don’t focus on the technology itself. Focus on what you can actually do with the technology. A lot of CEOs coming from the tech space get really lost and passionate in explaining their technology. And investors, I mean, they care what you do with it, right?
Peleg Dekalo: Show benefits and not features?
Luisa Russwurm: Yes. I think one obvious, but important point is quantify the value of your solutions. So, you could go back to the system costs I mentioned earlier. Now you can show how much of these system costs can you save with your new solution. That’s a really elegant way, I think. Then of course, what every CEO nowadays gets headaches over is the big question of the TAM, [or] ‘total addressable market.’ That also belongs into this chapter. And maybe just a couple of thoughts on that.
I think the total addressable market—it’s more than a number, right? In the end, it’s really your strategy. Because in order to come up with your TAM, you need to decide what markets you’re entering and what the pricing of your product is. So, there’s a lot of underlying questions, and you need to really spend time on coming up with a good number.
I personally hate pitches that come up with this ‘100 billion TAM.’ That is super high-level—it’s just not credible, so I would advise against that. [I’d also suggest] having the CEO spend a couple of weeks thinking really, really hard about that TAM question. Because it will raise a whole new level of different underlying and strategic questions.
Lastly, of course, if you’re introducing a product, investors will always ask, ‘What’s already out there in the market?’ Or, ‘What’s the competitive landscape like?’ I mean, we’ve all seen these crazily packed pages, with harvey balls, or tick marks that compare your product against the 500 competitors in the field.
Please, make this chart simple and really focus on comparing your technology to competitors along the key-success factors. Don’t do a random comparison of 20 features, but really take three steps back and think, ‘What does it take for me to become market leader—to succeed in the market?’ And along with those five criteria, you compare yourself and your capabilities against your competition.
Peleg Dekalo: A more high-level criteria that touches what we talked about: the benefits. Be it speed, quality, or those kind of things that are true levers of success.
Luisa Russwurm: Exactly. True levers of success, I think that’s a good description.
Carmel Yoeli: I’ll add to that. First of all, this is by far the most important part. Because this part is about you. But the trick is not making it about you. It’s making it about your approach. You should never start it with, ‘All right, introducing my amazing company.’ Just introduce your approach. There’s a huge difference between saying, ‘Introducing Gong!’ Or ‘Introducing revenue intelligence.’ Once again, it makes it more objective, it makes it more believable. Our philosophy about it is that basically in tech, you should always sell an approach. Not like a benefit or positioning.
Like Volvo is taking ‘safe,’ and Toyota is taking ‘reliable.’ I’m taking speed, they’re taking quality, no. It’s a completely different approach. It’s a different type of positioning. In this type of positioning, what you want to do is to frame all the competition, and sometimes the competition is not direct competitors, by the way. You want to frame them under one category, and then you want to frame yourself under a different category [with] a different approach.
Apple didn’t have to do attack Nokia. They just had to frame everyone as not smartphone, which means dumb phone, right? So that’s basically the move you want to do.
Peleg Dekalo: Our fourth stage, Carmel, is ‘our start-up will change the world.’ How should this be conveyed?
Part number four: Show how you are about to change the world
Carmel Yoeli: How are we changing the world? Yes. So, the part is really like the grand ‘why’ if you think about Simon Sinek’s framework, or the purpose or the vision, and it’s really how you imagine the world when your work is done. This is perhaps the most important part in the investor pitch because investors, in most cases, care about that. They don’t even care about your specific approach, or how [you] frame the problem.
They want to be part of a world-changing event, even on the emotional and personal level. They want to be part of a big story, or at least tell their friends they’re taking part of a big story. What do I mean by ‘big story?’ Take the last employer brand campaign that we created together with Overwolf and Shahar Sorek, their CMO [chief marketing officer]. We didn’t talk about the fact that they are building API [application programming interfaces] for gaming. We talked about the fact that they’re freeing game creation, and they allow anyone with basic coding ability to build in-game apps and modes and to basically become a game creator like the huge gaming studios. This is a world-changing event.
Peleg Dekalo: Our fifth stage, and a very interesting one: How will we get there?
Part number five: Describe how you will turn your idea into reality
Luisa Russwurm: Yeah. That’s an important question that every investor will ask, right? If you stop after the strategic narrative, after those four chapters we’ve outlined, they will ask you, ‘Okay, that’s a nice vision, that’s a nice story, but what entitles you to actually get there?‘
So, I think by now, you have really hooked the investor. You have shown him there’s a market for the solution you’re offering, and you’ve also shown him what your great product or solution is. This chapter then, is around convincing the investor that you, or your team, really has what it takes to make this vision fly.
A couple of super tactical points to include in this chapter: first is your business model. Answer the question on how you’re going to earn money. Make this easy and make this the first page of this chapter so investors understand how you will earn money. Then derived from that, the top line, of course. What’s your revenue forecast for the next three to five years? A very important question to answer.
My advice for early-stage investors is: focus on the top line, and investors until series A, since you know they’ll have their own assumptions to get to the bottom line. So, none of your concern at this point. Really make sure that your revenue is supported by concrete initiatives.
Then, once you’ve shown them how you earn money and derived your revenue for custom from that, talk about your go-to-market strategy. What are the partnerships you have in mind? What channels are you going to use? What geographies will you focus on? Then, of course, the team page. Not going to lose a lot of words on it, because everyone has their team page at this stage covered.
Just one [piece of] advice: I’m really just interested in the relevant aspects of your curricular vitae [CV] that respond to the job you’re doing at the start-up, so be precise.
Peleg Dekalo: And according to the smile, it looks like you’ve seen CVs on that page.
Luisa Russwurm: Of course. Long CVs, font size eight—and nobody will read them. They also signal to investors that you’re not really sure what capabilities are required to fulfill your role. On the last page, just outline your ask, how much money are you raising? Why are you raising that amount of money? A lot of people haven’t yet figured it out, and they just, you know, see what they can get.
I don’t think that’s a good strategy. It would signal to me that you’re not clear on what the next big steps would be or milestones where you are. And also, don’t forget to leave your contact details on the last page. Make sure you’re not losing investors because they don’t have your WhatsApp number. So, make sure to include that.
Peleg Dekalo: Any closing thoughts?
Describe your vision in a concise fashion and make sure it’s appealing
Carmel Yoeli: At the end, there is a test we call the ‘cafeteria test.’ At the end, when the investor finishes meeting with you, she or he is going to the cafeteria and talk to their friend and tell them, ‘Oh, I met this company, they are doing ____’ What? So, investors don’t want to invest in, ‘Oh, they’re doing a platform or something.’
[You should aim for] ‘I invested in the company that ends software updates,’ or, ‘frees game creation,’ as opposed to ‘I don’t know. They’re doing a tool for cloud security or something.‘ This is exactly the difference between talking about your tool and talking about your vision, I think.
There are two points that are worth talking about, and the first is: be concise. The quote I like in this regard is Mark Twain’s, ‘I apologize for such a long letter—I didn't have time to write a short one.’ It takes time to make things concise, but unless you are able to explain each of these four parts in one or two sentences, you don’t understand it well enough. It’s not well articulated enough. It’s really a test, right, to write it down in this framework and sum everything up to one sentence.
The other thing you said that’s also important is regarding the role of the CEO. In one of the workshops we did with McKinsey, I think the first one, one of the investors said if the CEO doesn’t deliver the pitch in a good way, let [someone else] deliver the pitch for him. I don’t believe in that. I think today, more than ever, the role of the CEO is to be the leader, the guardian—
Luisa Russwurm: The visionary.
Carmel Yoeli: —of the narrative. He or she needs to be the first one and the last one that guards the narrative and tells it to the world, to employees, to investors, to anyone else. And also guards it because a lot of hijackers will try to change it when time goes by. Your investor will try to tell you, ‘Oh, maybe talk about this,’ and the CMO will tell you, ‘Let’s change this part.‘ You really have to guard it because what makes it stick eventually is consistency.
Peleg Dekalo: Yes. Luisa?
Make sure your message is clear and compelling
Luisa Russwurm: Yeah, I think a bit more tactical now if you’ve drafted your ten, 15-page deck. Just go through it and make sure your 18-year-old self could understand what you’re writing on these pages. Does an outsider understand these pages? The teenage check, I call it.
Then, also super tactical, but not followed a lot of times—just do one message per slide. Don’t overload slides. And in your investor pitch, there shouldn’t be more than 15 important messages. Again, addressing what Carmel said earlier, it takes time to really condense. So often in the first stage, when you draft your deck, you will have a smaller font size, a lot of facts. And then with each iteration, you need to—
Peleg Dekalo: Clean up the message.
Luisa Russwurm: Exactly. Clean the deck up, make it even easier. Make it even more compelling. So, in the end, you know, you have sharp messaging on each of the slides.
Peleg Dekalo: Guys, it was great having you here. Thank you so much.
Luisa Russwurm: I’m so excited now, I want to write a pitch deck.
Peleg Dekalo: Let’s do it. We have Carmel here, so he’ll bring the emotional side we probably don’t have.
Luisa Russwurm: I thought I was pretty emotional.
Carmel Yoeli: Peleg, thank you.
Luisa Russwurm: Thank you.
Comments and opinions expressed by interviewees are their own and do not represent or reflect the opinions, policies, or positions of McKinsey & Company or have its endorsement.