The most useful book for an entrepreneur preparing their investor pitch might not be in the business section. Robert McKee’s classic screen-writing tome, Story, contains a valuable truth about people’s ability to understand complex information.
“The successful Hollywood story consists of a three-act formula: Setup, Conflict, and Resolution. If you want investors or customers to remember you, tell them yours”
Over millennia of interaction with the natural world and through communication with our peers, the human brain has become wired to remember information in vignettes. When we remember things, our brain strips out the complexity and remembers the core narrative of the message.
Think about the popularity of fairy tales, or Aesop’s fables, in translating complex moral decisions to children. Or the ubiquity of Jung’s archetypes, in which literature and film can be categorized into a few buckets of similar story-lines.
The successful Hollywood screenplay, as McKee points out, consists of a tried-and-tested formula of three acts: 1. The setup; 2. The conflict, and 3. The resolution. These three acts form a “narrative arc” that is at the heart of any good story.
Introduce the main characters (i.e. you and your team), and then introduce a point of conflict or an “inciting incident”. This is where you talk about the big, pressing customer problem you solve. Be sure to outline the consequences this problem has for your target audience. This act shouldn’t take too long.
Now you’re ready to do battle with the problem. Outline your value proposition and your plan of attack. In a movie, the protagonist encounters complications and barriers on their hero’s journey. As an entrepreneur, you need to outline the barriers (competition, switching costs, market forces) and your plan for conquest (marketing, financials, milestones etc.)
The transition from the second to the third act is known as the climax: this is the point of maximum action. If all goes well, in Hollywood the protagonist then claims victory and walks into the sunset. As an entrepreneur, the climax occurs when you ask for money. You are asking the investor’s help to tackle this problem and to join you on your path to victory and wealth. For customers, be prepared to offer them clear next steps if they want to join you in resolving their problem.
Keep this structure in mind when you’re preparing your next pitch, or even the next time someone asks you what you do at a cocktail party. Tell them a story: they’ll remember it.