Words From a Champion Investor

Lux Future Lab » Words From a Champion Investor

After Thursday’s FinTech pitching event, Julian Costley, active entrepreneur and E*TRADE UK co-founder, sat down with lux future lab to share with us his goldmine of pitching insight and takeaways from the day’s presentations.

lux future lab: What’s the number one pitching mistake you see?

Justin Costley: The thing that nearly everybody doesn’t get right is that they don’t think about the specific objective of that piece of communication at the time. What’s the objective of a pitch? They always say to raise money and I say no, it isn’t. It’s just to get another meeting. What they [pitchers] really should be thinking is that this person is not going to write me a check at the end of this meeting, so I need to find an excuse to spend some time with them. For investors, it’s all about building trust – and that can’t be built in a 30 minute pitch.

“Achieve the objectives rather than trying to run all over the place and do everything.”

LFL: Can you remember some of the best pitches you’ve ever witnessed?

JC: There are so many, hard to remember a single example. But I know the characteristics: it usually has a bit of humor in it or it’s presented in an unusual way…In really good communication you should reach out and carry people on a journey from ‘not understanding’ all the way to ‘understanding’.

LFL: What stood out to you today during the pitching?

JC: A couple of them were giving me some sense that they really understood about branding – that’s to say matching a unique customer proposition with a personality or ‘engagement.’  Others gave me confidence they understood that there was a massive gulf and therefore an unexploited market opportunity in bridging the gap between the complex, regulated, technical facilities required in FinTech to deliver super-efficient services…with the reality of people’s lives, the customers’ lives and the percentage of time they’re prepared to devote to financial wellbeing – which is increasingly minimal.

LFL: What do you think makes you a strong investor?

JC: I’m very empathetic. I’m really good at spotting management talent and getting on with them well.  I’m also quick at getting the gist of why an idea might be a winner. In the old days it was just, yes, that looks interesting. But I’ve started to try and emulate some of the disciplines of the venture capitalists. I’ve gone back to looking at a macro level. My favorite analogy is likening markets to a river. Fast-flowing (growing) markets are attractive. There’s a center of the river, often in markets like telecoms, that is really fast flowing and yet within the same overall market some sectors are in decline. Basically, if you pick something that’s flowing well in the center of the river, it doesn’t even need to be a market winner, because the industry is going to do well.

LFL: Do you have any suggestions for our pitchers?

JC: Rehearse. Ask themselves what the objective is. Throw out half the slides. Make them simple, and time themselves. Achieve the objectives rather than trying to run all over the place and do everything.

And the other thing is the effectiveness of making it interactive. There’s no reason why they couldn’t say, alright, I’ve got five minutes. I’m going to use my first two minutes to get you excited about what my company is doing, then I’m gonna start asking you questions, to create a bit of drama with the room. They should then ask…how many of you actually understand what my business does and how we make money.

“I think the thing that nearly everybody doesn’t get right is that they don’t think about the specific objective of that piece of communication at the time.”

LFL: What are some deal breakers for you?

JC: I’ve got two deal breakers. One is trust. For example, if in the campaign process they’ve been saying all along — and this did happen with one company and I didn’t invest — that John Smith, or whoever, was going to be the Chief Technical Officer, and then we got fairly close to closing the round and it transpired that he wasn’t going to join the company. They’d been using his name to give credibility. I just thought, wow, if you weren’t straight about that, what else have you lied about?

The other one is when you express an interest in investing and they want a certain amount of money. Then the campaign doesn’t go so well and they come back and say they’re not going to raise 500,000, they’re going to raise 300,000. This is a risk thing. They’re not raising enough money. Coming back and telling me they’re going to close the round with less money than they needed obviously means that the company is now an even higher risk investment.

LFL: What have you learned from past failures?

JC: I’m much more inclined now to ask: what are the factors of success, and what are the conditions or events that would sink this company, and then I try harder to get evidence. Nothing happens so fast that you don’t get the chance to ask sensible questions, and sometimes, if I don’t know the answer myself, I’ll take more time now to ask other people.

Leave a Reply

Your email address will not be published. Required fields are marked *