DISRUPT HQ: What every startup founder should know about explaining their technology to investors

Disrupt HQ is a comprehensive ten-part series designed to give Australia’s new generation of innovators the advice and guidance they need to successfully grow their business. Proudly sponsored by Braintree, which has been powering payments and helping thousands of next gen businesses like Uber, Airbnb, and Github grow from their first dollar.
Braintree’s Tyson Hackwood.

When you’ve come up with an ingenious solution, it can be easy to get carried away. Your technology idea may be what makes the startup viable and worth doing in the first place. But a typical startup goes through several rounds of funding, and they won’t all be lead by technically literate investors. In early rounds, for example, it’s common to seek funding from friends and family. Even later, as you come to the attention of professional investors, they may not be on top of your particular solution.

Which means you need to know how to talk to investors about the solution you’ve built. We spoke to our panel of leading Australian entrepreneurs and investors to pick up a couple of tips on talking to investors about technology. The key is arming yourself against a whole series of expectations and responses — communicating the problem you are solving, the impacts on the business, and proving that you have the character and expertise to see it through.

Right Click Capital’s Ben Chong has the perfect encapsulation of explaining an idea without going into it. You can brush up against your idea, using a good example, but you don’t need to go deep into the inner workings of the technology. If investors ask probing questions then that’s the time to get into the details.

Ben Chong

“I could explain that I’m developing a new tool that better matches job candidates with hiring companies by using a psychometric test,” says Chong. “It’s clear that the psychometric test is part of my secret sauce but I haven’t told them exactly how the psychometric test is customised to the hiring company and what measures are used for the matching process.”

“When it comes to explaining complex processes or solutions, it’s important for founders to simplify their message.”

Elaine Stead from Blue Sky Ventures also advises to talk around the tech, encouraging founders to instead talk about the problem they’re solving. This is important not just when talking to investors, but customers as well — what are you doing for them? “Just distill it to its fundamentals – what is the problem you are solving and how does your product solve it?” says Stead.

“Even with highly complex technical businesses founders should be able to show focus and a clear value proposition for the market. That is super important because it’s the same simple pitch you need to have locked down when selling to potential customers.”

Having said that, it’s important to know what your competitors are up to. Will technology be part of your moat, locking in an advantage your competitors will have trouble surmounting? The way Google has with search. Or are you ripe for someone smarter to come along later and pinch your lunch?

“Most investors don’t really need to know how you achieve this from a technical perspective, but they will need to understand what the barriers to entry for competitors will be,” says Stead. “I often ask technology companies to explain the ways in which a competitor could achieve the same outcome to understand whether the tech itself is part of the moat they have built. Tech doesn’t need to be part of the barrier to entry if the company has other competitive advantages.”

Tyson Hackwood, head of Asia for Braintree Payments, encourages founders to talk about tech from two different angles — how it benefits the customer, and how it affects the bottom line. This is about proving you know why the technology is necessary, but also its impact. But there’s one more important thing to Hackwood: can you implement your solution?

“Investors don’t always want to know the inner details of how something works. A good mentor or leader understands that’s why you hire experts who specialise. But they do want to be reassured. Provide evidence of other well known companies that have benefited from similar technologies to add credibility to your recommendation.”

Muru-D co-founder Annie Parker

Ability to execute is also foremost in mind for Muru-D’s Annie Parker. Anyone approaching Parker with a technological solution needs to prove they have the chops to see it through, or are ready to hire someone who can.

“Most investors will also want to ensure that your CTO has the capability to continue developing this IP in house going forward – so if you haven’t got a member of staff with the right tech skills – be prepared to hire them ASAP!”

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