Silicon Valley venture capitalists are hard to impress. In 2009, Jim McKelvey and his business partner, Twitter co-founder Jack Dorsey, won over the VC crowd with their pitch for Square and its signature tiny, white credit-card reader.
I recently talked to McKelvey about his new book, The Innovation Stack, and the original pitch for Square that top VC’s said was the best pitch they’d ever seen.
McKelvey’s presentation strategies will help anyone pitch their ideas to impress even the toughest audiences.
1. Grab attention early and often.
McKelvey says communicators should focus on “moments of attention.”
In a one-hour pitch McKelvey says VC’s might remember one or two key moments. “Attention is fleeting,” he says. Capturing those fleeting moments is the key to making a memorable presentation.
Remarkably, McKelvey created the original Square credit-card reader around a moment of attention.
McKelvey was obsessed with making the device small and simple to use. There was only one problem which, in hindsight, turned out to be a brilliant side effect. McKelvey made the reader so small that it would wobble when a user slid their card through it.
MORE FOR YOU
McKelvey solved the problem by making a wider device, but focus-group tests revealed a surprise finding. While people said they would prefer the larger unit, it wasn’t as breathtaking as the tiny device which “mesmerized” users. Square released a unit that didn’t work as well as the larger reader (the tiny one worked about 80% of the time), but it sparked conversation.
“We sacrified function for attention,” McKelvey says.
The surprises didn’t stop there.
McKelvey and Dorsey opened their pitch meetings by asking VCs for their credit cards which they would swipe through the small reader. They withdrew anwhere from $1 to $40 from the investors’ bank accounts.
Venture capitalists handed the two entrepreneurs their credit cards and gave them money. They were hooked to the company—literally.
2. Admit what others won’t.
Once McKelvey and Dorsey had grabbed the attention of their audience, their made a confession. They admitted that the idea could fail.
A slide listed 140 potential problems the company might face: fraud, bank regulations, marketing costs, etc.
Since Dorsey had co-founded Twitter, they had some fun with the presentation and listed “140 reasons” why Square might fail. But since they couldn’t come up with that many pitfalls, they made up some funny ones like “Robot uprising.”
The slide didn’t turn away investors. In fact, it had a “miraculous effect” on the VC meetings.
“It showed we are thoroughly thinking through all the angles and were unafraid to confront potential problems like future robot overloads,” McKelvey says.
3. Share an origin story.
Square solved a real problem for a real person—McKelvey himself.
In addition to starting companies, McKelvey is an artist. He lives in St. Louis and has a glassblowing studio in town.
When McKelvey and Dorsey were brainstorming startup ideas, McKelvey lost a $2,000 sale because he didn’t accept American Express. It was just one of an endless series of frustrations McKelvey and millions of small merchants had with credit cards: expensive programs, indecipherable contacts, random charges, etc.
McKelvey, an engineer, looked down at his iPhone. It could do everything else, why not process credit cards? he wondered. Although he knew nothing about the world of payments, he dove into the research and worked out solutions to the staggering complexity and arcane regulations the company would have to overcome.
McKelvey delivered an irresistible founder’s story.
“It was compelling because it was honest,” McKelvey told me. “We didn’t spin it or embellish it. It also gave us a very clear idea of what had to be done because I, as a small business person, wanted a product that didn’t exist.”
McKelvey calls an Innovation Stack a collection of interlocking and independent innovations that together build a strong product and company. Square’s innovation stack includes: simple design, free sign-up, cheap hardware, no contracts, elegant software, low price and more. The ‘stack’ is a cascade of innovations that give a company its competitive advantage.
The way McKelvey and Dorsey presented the stack won over Silicon Valley investors. The pitch set off a bidding war for the mobile payments company that set a valuation record.
Square went public in 2015. Today McKelvey and Dorsey are both on the Forbes billionaires list. Dorsey is Square’s CEO (along with running Twitter) while McKelvey sits on the board of Square Inc.
McKelvey has this final advice for anyone who pitches an idea, especially to venture capitalists or investors:
“Respect the other person’s time, entertain if you can, inform if you must, get to the point, and then shut up.”