Follow Airbnb’s Example With a Simple Problem and Solution
A pitch begins with a description of the problem and solution. It’s the most difficult part of the pitch to get right and the most critical. You either hook the audience immediately or leave them lost and confused from the beginning.
As a venture investor and startup mentor, I see a lot of pitches and pitch decks. The most common mistake, by far, is an overly detailed description of the problem and solution that investors can’t understand. As a founder myself, I know coming up with a simple explanation of a complex product is one of the hardest things to do. But also one of the most important.
I can usually tell how far along a startup is by the problem and solution slides. Early-stage startups cover multiple slides with text to explain the situation and then a bunch more slides with more text and diagrams to describe their product. Later-stage startups get the problem and solution down to 2 simple slides with only a few words on each.
Ditch the Customer Presentation Slides
We spend all day talking to customers about how our product can solve their problems. We have a presentation we’ve iterated a million times until it’s perfect.
We’re tempted to use the same slides when we talk to investors. After all, we’re pitching the same product, right?
Nope. When we’re talking to customers, we’re pitching a product. They’re users — they live with the problem every day and want to know exactly how our product works. They need to know the features. They need to know how it integrates with everything else in their system.
But when we’re talking to investors, we’re not pitching a product — we’re selling stock in our business. The problem and solution are important, of course, but so is market size, team, competition, intellectual property, and the rest of the 11 topics that have to be covered in a ten-minute pitch.
So throw away the customer slides and start fresh with the investor pitch deck. It’s a different audience that requires a different message.
Investors aren’t stupid, but they’re not customers or industry experts. This is especially true for early-stage investors, usually angel groups or small generalist seed-stage VCs.
So the pitch needs to be simple. Investors are focused on the business, not the product itself. What they need is a broad description of the problem and an overview of our solution.
In a 10-minute pitch, there’s only time for 2 slides and 3 minutes for the problem and solution. The goal is to give an introduction to what the company does and why. If they’re interested, there’ll be plenty of time in later meetings to dive into the details.
Follow the AirBnB Example
My favorite example of great problem and solution slides is AirBnB (pitch deck slides here).
2-sided marketplaces like Airbnb are notoriously difficult to describe, with 2 sets of customers (hosts and guests) and a chicken+egg problem to overcome. Nevertheless, Airbnb achieved it in 2 slides with 35 words for the problem and only 24 words for the solution.
- Price is an important concern for customers booking travel online
- Hotels leave you disconnected from the city and its culture
- No easy way exists to book a room with a local or become a host.
A web platform where users can rent out their space to host travels to:
- Save money when traveling
- Make money when hosting
- Share culture
There’s no discussion of platforms or different classes of customers for luxury vacation rentals vs. cheap room shares. There is no talk of offering experiences, though this future direction can be inferred from their goal of sharing culture. There are no screenshots of the interface and no product demo or explainer animation.
Just 2 slides, 59 words, 6 bullets.
That’s easy for Airbnb, you’re thinking; everyone understands hotels. What do you do if you’ve built a complex machine learning system for software quality testing?
Complex B2B Software
My last startup makes a QA software optimization tool to sell to big software companies. It took me a year to figure out a simple explanation for investors.
The product works for automated and manual testing, which are completely different worlds. It can be used to reduce testing to save money, or find bugs faster to make development more efficient, or eliminate the flaky failures that drive everyone crazy. It works by applying machine learning to map individual tests to separate sections of code. Unlike other solutions, our product works for unit tests, integration tests, even performance tests. It can even be used to generate metrics for which developers are creating the best and buggiest code and identify potential problems like high failure rates for code submitted on Friday afternoons.
If your eyes are glazing over and you only skimmed the last paragraph, I’ve made my point. Investors were tuning out, too. I’d lost their interest in the first 2 slides. They didn’t feel the urgency in what we were building.
For customers, I needed to explain the details, but I had to make it much simpler for investors. Eventually, I narrowed it down to this:
Problem: Software testing takes days to run before every release.
Solution: We run only the tests relevant to the code changes. This cuts testing by 90% to save time and money.
This description glosses over the many use cases that don’t fit this description. This ignores all our wonderful features for manual testing and how we fix flaky tests. It doesn’t even mention machine learning — investors don’t care how it works so long as customers buy it.
The key was to realize I didn’t have to describe everything the product does or every category. Or how it works. Once I focused on our 1 most important use case, the rest of the description became easy. The simplified messaging resonated, and the company is off to the races.
Pick the Most Important Use Case
Especially at the earliest stages, founders are often unsure which use case to focus on. Until we have customers, it can be difficult to know where the traction will come, especially for a product with many potential uses.
We’re tempted to list them all to show how many opportunities we have. However, what investors see is a lack of strategy or technology in search of a problem.
Instead of listing all the possible uses, we need to pick one. Pick the one we think will be the most important or the beachhead market we plan to focus on first. We don’t have to be right.
The pitch deck is an iterative process, as is the product and company itself. We’re expected to change and pivot as we evolve.
Today I pitch about how we speed up automated testing. If we find most customers use it for manual testing instead, the product features and company focus will evolve in that direction. I’ll change the pitch at that time, but for now, I completely skip that side of the product when pitching to investors.
The Parent Test
Here is the best trick I’ve come up with: before talking to investors, try explaining what you do to friends and family. Sound simple? It turns out it’s not.
Can you get Aunt Margaret to understand what your product does and why in under 2 minutes? Like everything else in building a startup, try different approaches and see what resonates. If you can’t get Uncle Bob to understand your product in 30 seconds, neither will investors.
When you think you’ve got it, test out your problem and solution slides on your parents. If they say, “You’re so smart, honey, we’re so proud of you,” throw it away and start over. If they think you’re smart, you’ve lost.
When they ask, “That seems easy. Why isn’t everyone else doing it already?” you’re on the right track.
When you get to the point where they say, “Wow, what a can’t miss idea. How do we give you our life savings?” you’re getting close.
Then move on to your grandparents. If they get it, you’re ready to pitch to investors.
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