Entrepreneurs ask me all the time about the secrets of a successful pitch as well as the biggest gaffs to avoid in pitching an early stage VC. You are all smart enough to know that there is not a secret formula, but there ARE key elements that every entrepreneur should look to include so let’s talk about them.
Format: Whether you feel more comfortable structuring the discussion based off of a pitch deck or as a free flowing conversation, it does not matter very much. But should you chose the latter, please make sure that you leave the VCs with a set of slides. As a partnership, we like to email the deck around to the partners not in attendance after an impressive initial meeting. If there is no deck, it makes it harder to share our excitement with the other partners in the firm. The best pitches tend to be the ones where the entrepreneur demonstrates flexibility in the flow of the talking points. Sometimes something interesting sparks a series of questions and those who can roll with the punches and speak in the moment (as opposed to in the order of a slide set) make me feel more satisfied in the discussion. I am able to address all the questions that I have in a “feel good” flow, leaving me with a positive impression.
Team: We want to get to know your team. Who are your industry experts? Are they part of the team? Do they sit on the board? Do you have the right set of skills amongst the group to take this business to market? Have you worked together before? Have you started a company before (it is okay if you haven’t!)? Where are your holes and do you have a hiring plan that addresses them? Before you approach VCs, you should think long and hard about team composition. It will be far easier to raise money with the right key players. At the end of the day, early stage investors are betting on the team, the people. We want to see that you have put some thought into why this is the right crew to accomplish your goal.
Product: First, ground me in the problem. I need to understand what problem this product is solving and why the market needs this solution before I can even begin to be impressed by what you have built. In your mind, you should be very clear on exactly what are you selling and to whom. I also am a sucker for demos! Like the old adage says, “Tell me, I forget. Show me, I remember. Involve me, I understand.” Demos help the product come alive and stand out. VCs see tons of pitches every week. It is hard to keep them all straight; however, I always more vividly remember the companies who presented a demo.
Market: Now that you have spent all this time as well as blood, sweat, and tears building this incredible product, who the heck is going to buy it? Have a plan for how you are going to take this to market and why your customers will gobble it up. At the beginning, it can sometimes be difficult to understand which demographics will emerge as the key customers…I get it. All I am asking is for you to have a thesis, a hypothesis, so that when I ask you in the meeting about your go-to-market strategy, you can discuss your plan, the A/B testing that you have done or plan to do, and your thought process. Also, ask yourself if your business really needs venture money (bootstrapping is impressive as hell!). We see a lot of entrepreneurs who are on track to building nice, little businesses. You know, the types of businesses that will cap out around $10-20M. In that case, why do you want our money? Save the equity for yourself!
Competitors: Are you David or Goliath? Are you trying to take on the 800lb gorilla? If so, what do you know or have that they don’t? What do you do better? If you are the first to market, why is now the right time to be solving this problem and how will you defend yourself against competitors? Do you have patents or just IP? Are you replicable? Most entrepreneurs do not realize the importance of this question. It is a topic that oft times I have to force a discussion around and a conversation that most entrepreneurs want to be very brief. I view this question in a totally different light. This is your opportunity to put your product on a pedestal in my eyes and point out the deficiencies in your competition. This is where you can show me how thoughtful you have been about your business and impress me with the strategies that you have thought through to ensure success and defensibility of your business. Be honest as well. If a competitor does something slightly better than you, let me know and then tell me how you will supersede them! Don’t try to hide from this question…own your competitive landscape and tell me exactly what differentiates you in the marketplace. The entrepreneur who answer this question well and with vigor is guaranteed to be viewed as more competent, confident, and fundable in my eyes.
Financials: Yes, you are in the early stages of building your business. Yes, you are gaining traction in the marketplace. I am a reasonable individual. I totally understand that you have to start somewhere with revenues and you will certainly be scaling the business over the next several weeks, months, and years, but I still want to see your business’ financials. I do not just want to see this year’s or quarter’s performance and then your projections. I want to see every month since you launched your product. I want to track your progress and traction. It can tell me a lot about your business, but it is not the only factor I will use to determine if I should invest. In fact, it isn’t even the most important factor that I will use (remember the note on team/people from above!). At the end of the day, financials are all about getting a baseline for where you are today, understanding if you will be under/over capitalizing your business based on your targeted raise, and seeing if you are moving in the right direction.
About that Elephant in the Room: I have never been more impressed by an entrepreneur than when he/she confronts the enormous issue that is staring everyone straight in the face before I bring it up. No business is perfect, especially during the early days. Having the gall to bring up an issue and then discuss your plan of attack shows me maturity and leadership. Problems will be sniffed out during the diligence phase so don’t be shy about raising awareness of an issue and sharing your team’s resolution strategy…it will win you massive points!
Your Ask: Finally, what you came to discuss in the first place….YOUR RAISE. Know your target amount and approximate post-money valuation. These things are important for me to understand so I can figure out if you are in my firm’s strike zone, if we want to do a syndicated deal, or if we won’t be able to achieve the ownership percentage that we target. I once had an entrepreneur who was unwilling to share his targeted post-money valuation…why? I have no clue. All it did was cast a shadow over the entire conversation…it made the entrepreneur seem a bit dodgy. Also, giving a number is better than no number at all. No number at all makes you seem unprepared. A number gives us a starting point. There will be negotiations with each raise…there is just no way around it. So tell us that number loud and proud, but know that it will move before the deal is signed, sealed, and delivered!
Lastly…Be yourself! It can be completely nerve-wracking to seek validation on your baby after spending hours/weeks/months pouring your heart and soul into getting your dream off the ground. But remember, investors are people too. We get dressed everyday just like you. We like jokes and a good pun…don’t let your nerves stand in the way of your personality shining through.
Now go out there and pitch like you have never pitched before!
PS- GOOD LUCK!
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