Pitches That Get My Attention Answer These Questions on Slide 1
Mr. Wonderful here –
I’ve sat through hundreds, if not thousands of pitches. And 100% of the time, every company that winds up in my portfolio does the same three things: 1) they articulate the opportunity in 90 seconds or less; 2) they explain what it is about their team that can execute on this great idea; and 3) they know their numbers.
If you can’t do these three things well, I’ll put you in hell in perpetuity – and smart investors will too. But they’re just the start. The founders that really get my attention answer these questions on slide one of their pitch.
- What are your customer acquisition costs (CAC)?
- What is the lifetime value of your customers (LTV)?
Step back for a moment and ask yourself: what is the primary mission of any business? I don’t care if you’re launching the next Facebook or if you’re running a mortuary – eventually every company must be sustainable. That means, as a founder, you have to prove to me that you’ve found a roadmap for keeping this thing alive. And the way you do that is through your customer acquisition costs (CAC) and your lifetime value (LTV).
If you can show me as the investor that you know something I don’t about acquiring customers cheaply or squeezing money out of them – that tells me you’re ready to pour gas on the fire. If you can’t, it’s probably time to take your idea behind the barn and shoot it.
Now, companies with a strong CAC / LTV ratio generally have significant brand equity. Does Colgate spend $200 per person to get you to buy their toothpaste? Of course not. People already know and love the brand. But that kind of following can take years to build, and as a founder, odds are you don’t have years to spend.
So how do you hack CAC / LTV and brand equity?
Turn your customers into shareholders and vice-versa. I’ve been talking about equity crowdfunding for years, and if you’ve read my recent article, you know that one of the key features is that it allows you to align your customers and your shareholders in a way that was never before possible.
Why? Well, when you raise through the crowd, two things happen:
- You give early adopters an avenue to become even more invested in your business. This has a tendency to boost your lifetime value because now these backers have a financial interest in seeing your company succeed, which makes them very sticky customers.
- You build brand ambassadors. Ask yourself: why invest in a business? Because you believe in the product and the mission – and usually you want to talk about it. I’ve seen time and again with companies in my own portfolio that their new investors from the crowd become some of their most vocal supporters. And that word-of-mouth is key for building brand equity and lowering acquisition costs.
So, if you want to stand out the next time you’re pitching to a Shark like me, know your numbers and be ready to wow them with your CAC / LTV – and don’t be afraid to lean on the crowd to get you there.
Kevin O’Leary is a paid spokesperson for StartEngine. View the details here.
