When you’re pitching for startup investment, the tried-and-tested method is to tell your prospective backers why you’re going to be the next big thing.
But, when pitching his fintech Square, Twitter founder Jack Dorsey took the opposite approach, listing a full 140 reasons why the business was likely to fail.
Speaking at a FinTech Australia event in Melbourne earlier this month, Dorsey explained that pitching Square was a very different experience to pitching Twitter.
With Twitter, “a lot of people when we told the idea said ‘why would anyone want to know what I’m having for breakfast? Why would people want to read that?’,” he explained.
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“We didn’t have a good answer for that.”
But, the team built it anyway, “because it was something we wanted to play with”, he said.
Obviously, it took off.
“The people that used it showed us why it was important,” Dorsey said.
When it came to pitching for Square, the entrepreneur ran into a different problem. His background was in social media. Why did he think he could run a fintech?
Along with co-founder Jim McKelvey, Dorsey took two weeks to pitch Square to potential investors.
“We put all the investors we absolutely did not want to work with at the first part of those two weeks, and the ones we did want to work with at the last,” he explained.
“We were able to practice. We would pitch these people we did not want to work with, and we would completely screw it up, but we wouldn’t care.”
The founders learnt from these early pitches, making a note of the questions they were asked.
Eventually, they came up with a way to “disarm this whole conversation” around the fact the founders had no financial experience.
“We sat down … and just wrote out all the reasons why this thing would fail,” Dorsey explained.
“One of them was ‘we know nothing about finance’.”
As part of their pitch, they started to show the investors the full list of 140 reasons Square would fail. They picked out the nine most important ones, and set out to answer each of them.
“It was disarming, because we were vulnerable enough to show these investors that we don’t know what we’re talking about right now, but we’re going to learn,” Dorsey explained.
It was that approach to learning that made Dorsey himself believe the business would be successful.
And, by the time they got to the last few investors, the plan was working. In fact, the very last investor on the list ended up leading Square’s IPO.
“The ones we really wanted to work with, we had the pitch perfect,” Dorsey said.