Why accelerators focus so much on “Pitch Preparation” than operating plans

Josh at First round capital is usually attributed to the quote:

As I always say, there’s nothing like numbers to f*** up a good story.

Here’s the rub though, the story is not as simple as that. That’s not the reality.

Here’s a better way to think about numbers and funding, actually.

Story and Numbers
Story and Numbers

See the 2X2 Matrix above. The easy cases are when you have good numbers and story (funded) or if you have poor numbers and story (not going to be able to raise money).

If you have good numbers (traction, growth, revenues, users, etc.) but have a poor story, you are much likely to not get funded.

If however, you tell a good story and have poor numbers you are more likely to get funded than the person with good numbers.

That’s not just a hypothesis, that’s the truth outside the valley.

If you go to Chicago, Bangalore, Boston or Berlin, the entrepreneurs show great numbers – likely in revenue, but their funding prospects in the valley and locally are slim.

The reason for this is that as investors most of us are fooled by slick, great PowerPoint slides more than we are jazzed by 3 layer Excel spreadsheets.

So, if you want to raise money, even if investors tell you to master your numbers, I’d first master your story more than your spreadsheet.

Which is the biggest reason most accelerators focus on “Pitch preparation”, more than “Operating plans”.

That’s not the case with what I advocate at our accelerator, but I have tried that for 3 years and failed constantly to help great companies with good strong numbers to get funded.

The problem is that in the absence of funding, most entrepreneurs judge accelerators by “connections to investors”, knowing that they cannot force and investor to put money, but they can give the entrepreneur more “at-bats”.

If, as an accelerator, you want to give strong introductions to investors, you are going to likely send an email with a short pitch or at best a deck. You wont send a spreadsheet with numbers.

So, getting the story is more important than showing strong traction, but all else being equal, I’d recommend doing both.

That’s also the reason why you hear stories of “entrepreneurs from Google or Facebook” raising “seed funding just on napkin drawings”.

My advice to entrepreneurs, is that you have to master both to guarantee funding, but if you have to make a choice (a poor one, but that happens), focus on getting you story right.

That’s poor advice, actually and dangerous, for some entrepreneurs, but that’s the truth.


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