Flip the Script

by Oren Klaff

  Wow. My very first mentee had walked in with $1.7 billion in signed contracts. Maybe I should volunteer for stuff more often. After a bit more digging, I learned that a key technology he needed to satisfy these contracts, called BioSequence, was up for sale—and he was first in line to buy it. This is what he wanted the money for. The purchase would let Professor Rosenberg cash in on the contracts, establish his company as the global leader in the genetics industry, and cement his stronghold on the market for genetic tests worldwide.

  The problem was that he was a bit difficult to understand, had a two-hour-long story about his company and its plans, and looked like he might drop dead of natural causes before these complicated plans could be put in motion. There’s no way he would be able to get the money on his own.

  “Oren, you will get this meeting for me that I need very much?” he asked me then, and looked up at me with ancient, wise eyes. I wanted to help Methuselah here, but I had to level with the guy.

  “There’s no way New Icon is going to give you twenty-two million dollars to buy BioSequence,” I said. His brow furrowed and his eyes filled with the sadness of the ages, and he blinked a lot. “But,” I said, and he immediately brightened. “I’m willing to bet they’ll give it to me.” He looked relieved, but you could see his mind working, like a mental abacus adding up my piece of the action, and finally realizing that I would be very expensive. But he understood that without my help the New Icon money was out of reach. And he also knew that without the New Icon money and the BioSequence technology, those fancy contracts of his were almost worthless.

  Two weeks later, Professor Rosenberg and I were walking up the steps to the inner sanctum of New Icon Capital Partners in downtown San Francisco. I’d managed to get a meeting through a contact named Jim, whom I’d worked with on another deal a few years back. This wasn’t an easy meeting to get, for anybody. Their schedule was packed and my request had come out of nowhere.

  “Better late than never,” Jim said, sticking his large hand out and welcoming us into New Icon’s massive reception area. Huh? I glanced at my watch. We were early, not late. This was exactly the kind of upside-down thinking you have to deal with in Silicon Valley where early was late, small was big, money was everywhere, yet impossible to get when you needed it most.

  Jim had an imposing frame, a strong, confident face, and a crushing handshake. You knew from the second you met him he was in charge of things. Yet, he also seemed fair, a man who didn’t price his words cheaply. He was impressive. And I was impressed he’d gotten us the meeting so fast. I owed him big-time.

  “Let’s head to the conference room. The investment committee is ready for your presentation now.” Jim punched a keypad and a glass door whooshed open. Jim stepped through quickly, leaving Professor Rosenberg and me scrambling to keep up. The door slid shut automatically behind us, and just like that, the two of us were inside the top-secret world of New Icon.

  We followed Jim through what seemed like a mile of glass hallway. Every entrepreneur dreams of passing through these hallowed halls, because a “yes” from New Icon means your chances of becoming a huge business success go up a hundredfold. We were walking into the financial stratosphere, our footsteps echoing down the same corridors that had greeted the founders of companies such as Pandora, Ancestry.com, Casper mattresses, Postmates, Bleacher Report—all of whom were now billionaires. We walked past two thirtysomethings whom I recognized from the front pages of the Wall Street Journal, each worth over $1 billion. Today we were in the midst of people who could buy the New York Jets with a check.

  There was no question about it. This was serious business, and I’d spent the past two weeks translating Professor Rosenberg’s obtuse and highly technical presentation into a simple pitch that investors would quickly understand and buy into. I glanced at Rosenberg, who seemed overwhelmed by the spectacle around him. I had to admit, I was feeling the pressure myself. After all, the stakes couldn’t possibly have been higher. It would be known around the world in an instant if New Icon said no. Our deal would become too toxic to touch. Today, right now, we had one bite at the apple, with no second chances. I needed to calm him down—he looked so nervous he might pass out or drop dead before we got our shot at the $22 million.

  “Sometimes the best thing you can do is not think, not create scenarios, not imagine, not obsess. Just breathe, and have faith that everything will work out for the best,” I whispered to him. “If anything goes wrong, think, ‘We’ll turn lemons into lemonade.’”

  “Lemons?” said Jim, who did not miss a trick. “Life has never given me lemons. It has given me stress issues, a love of alcohol and a short temper,” he said, and for some reason he looked right at me.

  “That didn’t help,” I told him, pointing at Rosenberg.

  We heard only the echo of our own footsteps as we passed through on our way to the executive floor. The glass hallways gave way to a maze of cubicles. Everywhere we looked, young men and women were trading stocks across five time zones, looking for the slightest edge and chance to make a few million. We heard four loud beeps and a ding that meant $10 million had been scored with one tap of the enter key. Along the way we were joined by an analyst who asked if I’d like a cup of Panda Dung Tea, which, he informed me, is an artisanal brew cultivated in the mountains of Ya’an, Sichuan, and fertilized with the excrement of wild pandas under the direction of celibate monks and sells for twenty thousand dollars per pound.

  “Can I get a Diet Coke?” I asked. “How much for a pound of that?”

  “That’s a Nicholas Schöffer,” the analyst told me helpfully a moment later, gesturing toward a sculpture at the base of the stairs. It was a simple hunk of half-polished metal that cost twenty trillion dollars. “Did you happen to see the unveiling of his Chronos XVII?” he continued. “Massive steel, forty-nine light projectors, and sixty-five movable disks that create a ballet of light and movement. It was a true happening.”

  “Wow, no, I was out of town, but I was super bummed to miss it,” I said.

  No question about it, this place was a money circus . . . and we were about to meet the ring master, the legendary Grant Goodman. Grant and his partner, Ross Fogelsong, founded New Icon Capital Partners back in 1989 with a small bit of money they’d pooled together. The two of them proceeded to make one savvy deal after the next, steadily growing in size and influence. Today, they run one of the most successful and widely respected venture capital funds in Silicon Valley.

  “Grant’s in no mood for your personal brand of humor today, Oren,” Jim said to me under his breath as we neared the entrance to the central conference room. “Just stay on topic, and stick to the plan.” I punched Jim lightly on the shoulder, as if to say, “No worries, bud, I got this.”

  “Don’t do that,” Jim said.

  A moment later, he ushered us into a large room with a perfect view of the San Francisco Bay.

  In the center of the room was a large table. It was the size of a dozen air hockey tables. Professor Rosenberg and I found ourselves seated in front of about fifteen New Icon analysts grouped around the far end of the table. They were mostly young men wearing khakis and t-shirts with logos from companies I’d never heard of, like switcheroo.net. I did the math and realized this one-hour meeting represented some very expensive man-hours for the firm. “Good,” I thought. “They may not know who we are, but at least they’re taking the deal seriously.”

  The New Icon team is the best and the brightest that the entire world has to offer. These guys are valedictorians all the way back to kindergarten, with master’s degrees in computer science from Stanford, MBAs from Harvard, and for fun, a BA in ancient Greek philosophy from Yale. And most of them had not yet broken thirty.

  “Here is Oren Klaff to tell you more about Gennacode,” I heard a voice saying. Someone was dimming the lights and all eyes were turning toward me. It was time to say something that would help these analysts immediately
understand our company’s complex technology, business model, revenue projections, and deal terms. And I’d need to instill complete confidence that Professor Rosenberg could be trusted to lead the company.

  Most people at this juncture would begin to list the specific features and benefits of their technology, giving these analysts all kinds of fodder to tear apart. After all, that’s what they’re here for. Tearing you apart is how they earn the salaries that pay for the houses and the cars and the vacations in Cap d’Antibes. I looked briefly at Grant Goodman at the far end of the table. He didn’t look too happy. What could I say to change the look of mild displeasure on the wizard’s face?

  It was time to hit his idea receptors and begin the process of Inception.

  HOW IDEA RECEPTORS WORK

  Information doesn’t just magically move from the outside world into your brain. There’s a process. You have to perceive something in your environment using your senses (input the data), make sense of what you are seeing (process the data), and remember it for later (save the data). And before your brain can perceive, process, and save a new idea, you need to have the right type of idea receptor waiting for that information, or it will pass through you, completely unremembered or quickly disregarded.

  For instance, Nikon makes a camera called the D5. Don’t be scared by the $10,000 price tag. This thing is a bargain when you consider its incredible features. The D5 is equipped with an impressive native ISO sensitivity of 30,000, an insane 400,000-cycle shutter durability, and a drool-inducing lossless 14-bit buffering capacity of 12 images per second.

  Woah. If those stats don’t leave you dying to get your hands on one of these then nothing will . . . and that’s exactly why Nikon doesn’t market this camera to you. If these numbers don’t already mean something to you, then it’ll be hard to sell you a D5. In fact, in order to sell you one, Nikon has to give you weeks of photography training first—just to get you to a level where you could even understand why these features are good. This isn’t just a photography problem, it’s a biology problem: If your brain doesn’t have receptors for information, the information is meaningless.

  Where do idea receptors come from? They must be built, and this process takes time. The receptors needed to fully understand the technical components of the D5 can take years of photography training to build. Nikon’s solution? Don’t even attempt to market the D5 to anybody who doesn’t already have the necessary idea receptors. Only sell these cameras to professional photographers. It’s just too difficult to talk to regular consumers about this product. But what if you specifically need to influence somebody who doesn’t already have receptors for the ideas you want to communicate? How do you start from scratch and get someone quickly up to speed on a technical, complex, or obscure big idea?

  I’ve found there are a few receptors that everyone has that you can use when you don’t have the time to construct your own unique receptor. These receptors come pre-wired in humans at birth. Think about slot machines, drugs, alcohol, pornography, and refined sugar. These things take advantage of preexisting brain circuitry and easily activate it. The same is true of a gripping movie, a book you can’t put down, a reality show, or neighborhood gossip. The reason we feel instantly hooked is because these things take advantage of pre-wired idea receptors that exist in all our brains.

  A few years back I went on a quest to identify the deepest, strongest, most ancient idea receptor in the human brain, the “godfather” of all attention-grabbing ideas. I called up a few prominent psychologists at various universities and asked them where I should start looking for this receptor and their response was surprisingly unanimous. They said I should look at three areas, in order of importance: threats, rewards, and fairness.

  Over the course of thousands of generations, evolution has taught us to be constantly on the lookout for these specific types of information:

  APPROACHING DOOM: We automatically pay close attention to weather patterns, food shortages, political unrest, new types of weapons technology, and never-before-seen predators. It’s absolutely critical to be the first to know about any kind of doomsday scenario. This is different from the threat of a lion leaping out of the bush (a deadly threat that only has one response: Run!). Approaching doom refers to a threat that can take you by surprise because it moves too slowly for you to see it coming. A stock market crash. A new kind of predator. A food shortage. The first person to detect slow-moving but catastrophic threats survives; others suffer and die. The rule? Humans always give their attention to new information about big environmental threats.

  A BIG PAYOFF: We are always looking for a huge reward for just a small amount of effort. Since there are always costs for adopting any kind of new behavior, we aren’t going to switch to something new for a puny little reward. A reward has to be nice and big before it’s really worth it for us to switch to a new behavior. The rule? Humans move quickly toward large paydays that are easy to measure and value.

  A FAIR DEAL: No one likes to be taken advantage of, and we are very sensitive to integrity, equality, and fairness. To make any kind of deal work, both parties should feel like they’re getting a fair shake. The rule? Other humans always want to be sure you have skin in the game and offer a fair deal before they say yes.

  Our receptors for these specific pieces of information are so deeply wired that we cannot evaluate details of an offer until the “big three” are satisfied. Buyers, therefore, come with the desire to know three things above all else:

  WHY SHOULD I CARE? (What new threats and dangers are out there?)

  WHAT’S IN IT FOR ME? (How can I get a better-than-average reward?)

  WHY YOU? (How can I trust you to give me a fair deal?)

  Once you answer these questions satisfactorily, the buyer will feel like they completely “get” your deal. Only then should you provide them the detailed information you have prepared. Most presentations either don’t ever answer these questions satisfactorily or they take way too long to get there. My team and I have found a simple way to get your buyers feeling like they fully understand the answers to these questions for your deal in just a few seconds. The key is to specially format the information you have so that it fits perfectly into these pre-wired idea receptors—like a key fitting a lock.

  That’s exactly what I was about to do in the New Icon conference room, standing in front of Grant Goodman and his crack team of boy geniuses. But first, I needed to align my status with theirs.

  PITCHING NEW ICON CAPITAL PARTNERS

  The first problem Professor Rosenberg and I faced in that room should be obvious by this point in the book. Most of the people in the room were forced to be here; this was not elective. There was some mild interest in our topic, but we were nobodies and easily forgettable. And Rosenberg was wearing a black suit, which nobody had seen outside a Bogart film retrospective in fifty years.

  The problem: We were going to have to quickly align ourselves or we’d strike out before we ever got up to bat. The fifteen analysts in the room had seen hundreds of ideas come and go along the way. It was their job to rip apart the plan, find the flaws, and in the process kill the deal. I had to become one of them, an insider, not an outside entrepreneur trying to finesse my way in.

  Consider for a moment what analysts are used to seeing:

  A charismatic and bold entrepreneur with a great story to tell

  Colorful charts and graphs that all point one way: upward

  Dramatic data projections to show how one plus one is actually three

  Reassurance that all these stratospheric projections are actually “conservative” and “easy to achieve”

  That’s how an entrepreneur would pitch the deal. But I wasn’t pitching to a room full of entrepreneurs. I was pitching to a room full of analysts. I needed to present the deal exactly the way an analyst would. I needed to use their own insider language to tip them
off to my status as one of them and as a reliable source of information.

  But how would an analyst present a deal to another analyst? Well, let’s start with what I know he wouldn’t do.

  He wouldn’t tell them it was a “really good deal”; instead he would show them. He would demonstrate the truth of his statements.

  He wouldn’t present a bunch of complicated facts; instead he would summarize it all in fewer than a hundred words.

  He wouldn’t waste time saying please, thank you, and “How about this weather”; he would make use of every available second.

  An analyst talking to another analyst wouldn’t be in selling mode at all. He would strip out all the fluff, emotion, and optimism, leaving only the cold hard facts. He would show, not tell, and that’s exactly how I prepared our Status Tip-Off. But first, a critical statement to signal that I was their equal.

  “Good morning, gentlemen, glad we could find time to get on each other’s calendars. There’s a lot to get to today, and not much time to do it, so let’s begin.” This was an introduction showing that we were equal in status to the investors—that our time was as valuable as theirs, and we weren’t there groveling for a deal. “I’ll get to the story of Gennacode and our financial plan in a moment,” I began. “But first let me catch you up to the present moment: First, I have already put our financial model through the Dodd-Frank Part 325 Stress Test [this is the equivalent of running over a child’s toy fifty times with a truck to make sure it’s safe to play with]. So, the 12-month revenue projections will show actual cash-to-be-collected. At the same time, I have also assumed that we hire 50 percent slower than our competition. And I’ve assumed we will have to pay 25 percent more for everything than they do. And I’ve assumed our customers will stretch their dollars and pay slow.”