how to explain your startup simply to investors: the eleven year old test

today i taped with a venture fund manager in the midwest who's had four careers. he ran construction crews. he built a shop local startup. he produced big investor events and festivals. now he runs funds.

you can hear every one of those careers in how he invests. he once ran a twenty one city bus tour across the midwest, nineteen events, and it grew into an annual house at sxsw. his funds measure social return alongside the financial one. one of them was raised in fifty thousand dollar checks from twenty lps.

he's built his whole career on getting people in a room and getting them to talk. so he cares a lot about whether your story travels.

he has three rules for every investment.

one... the investor has to add value beyond the capital. founders who say just give me the money aren't a fit for him. he wants to help, and he wants founders who want help.

two... the company has to be venture scalable. not a good small business. a pilates studio might be a great life, he said, but it isn't a venture bet.

three... he has to be able to explain it to an eleven year old.

that's the one founders fail most.

his test is concrete. if he can't explain what you do in terms simple enough that an eleven year old can say it back to him, he won't be able to walk down the street and tell twenty people about it.

think about what that means for your raise.

the pitch you give in the room is never the one that matters. the one that matters is the version the investor gives to their partners on monday. to their lps. to their friend at another fund who might co-invest. you're not in any of those rooms.

if your company only makes sense when you're the one explaining it, it doesn't make sense.

most founders asking how to explain their startup simply to investors try to compress the deck. fewer words, smaller font, a cleaner diagram.

that's not simple. that's short.

simple is a sentence a kid could repeat. we help small restaurants stop throwing away food. we tell grandparents when someone's stealing from their bank account. we make robots that clean hospital floors at night.

no platform, no leverage, no ecosystem. a who, a what, a why.

here's the test i'd run this week. explain your company to someone outside your industry in one or two sentences. then ask them to explain it back to you. not to repeat your words. to tell you what you do.

if what comes back is wrong, or vague, or full of your jargon, you've found the problem. keep going until a stranger can say it right without help.

i do this on the show without meaning to. i ask a guest what they do, and the good ones answer like they're talking to a friend at a barbecue. the ones who reach for their slides lose the room, even when the business underneath is great.

one more thing. simple doesn't mean small. the biggest companies in the world can be explained in a sentence. simple means you've done the hard work of deciding what matters, so the listener doesn't have to. that's a gift to the investor, and it's a signal that you understand your own business.

long term, the simplest story compounds. every person who can repeat it becomes a little distribution channel. every person who can't is a dead end.

the founder's fundraising checklist starts with your one sentence for a reason.

so what's yours... and could an eleven year old tell it to twenty people?