Why “But Wait, There’s More!” is a Bad Way to Pitch VCs

We’ve been trained by infomercials that “But wait, there’s more!” is a powerful sales pitch. Not surprisingly, this approach is used frequently by entrepreneurs pitching their startups. Somewhere between slides 12 and 15, the passionate founders take a breath, clear their throats and declare “But the real opportunity in this business is …”

I often query the founder on why he/she isn’t focusing on the longer-term, but larger, opportunity from the start? It’s often more compelling than the initial pitch, but the founder is postponing it for thoughtful and coherent reasons related to risk or cost. I remember doing this myself, meeting after meeting, until I learned better—If the initial business sounds modest, the bigger future opportunity isn’t going to sell investors.

I’m weary of phrases like “Trojan Horse” — if you’re successful, you’ll never get past building the horse.

In 2003 I was pitching my dental hardware/software start-up and told investors that in the short run the device could be used for dental applications, but down the road it could be a tool for all sorts of medical applications from custom foot orthotics to surgery planning. The product launched to dentists in 2006 and in 2009 we kicked off a project to customize the system for orthodontists, a simple line extension. That product didn’t launch until 2013 — 10 years after the initial product pitch! What seemed like a small tweak became a massive effort.

Data is Not a Deus Ex Machina

Many founders argue that there will be huge value in “the data” once they reach scale. Data has become a deus ex machina for founders. Maybe there will be value in the info “exhaust” your product generates, but unless you’re a data company from the get-go, it will likely only be useful internally. If a company has consumer goods DNA, they’ll probably struggle to smoothly transition into a data analytics business.

Path Dependence is Probable

Startups tend to be path dependent. You have to pick the right path from the outset. If you choose path B, you won’t get the chance to get to path A. Just as a carpenter with a hammer sees every problem as a nail, startups tend to grow around their competencies.

Investors will pressure you to ramp revenue on a successful formula, rather than double down on capital intensive product development to move into a new market. Your customers probably have a list of improvements they want to see in your product and will complain, or quit, if you’re not attentive.

But What About Netflix?

Netflix was able to switch from being a logistically intensive, permissionless ecommerce business (Netflix could just go out and buy DVDs to mail) into an entirely digital organization that required scoring contentious deals with content holders. Retrospectively, it’s a miracle that it worked, but Reed Hastings had a big vision, a proven track record, and a desire to swing for the fences. If you don’t have a similar background, be careful about trying to follow in his footsteps.

The more common story is Apple, who dominates hardware, but famously struggles when trying to sell software and services. Google’s story is the inverse. Microsoft struggles moving from enterprise to consumer while Dropbox has had some trouble going from consumer to enterprise. If huge brands and enviable cash positions can’t nimbly move into new markets, don’t think your startup can.

It’s good to think a few moves ahead, but be realistic about the game you’re playing. Not everything has to be a chess game with strategies planned years in advance. Plenty of great businesses have been built on a checkers like focus on incremental advances along a simple path.

The evolution of a start-up is so unpredictable that virtually all business plans prove wrong. Figure out which business you want to be in, how big that business can really be, and design your strategies around those realities. Don’t bet your business on the Magic Bullet’s sales pitch.