There are plenty of articles and books advising you on how to start up your start up, on how to prepare a perfect business plan, the ideal deck, your invincible elevator pitch. Probably what you’ll find below is neither original neither new to your ears. The aim of this post is to report what 5 Venture Capitalists shared during a training session for entrepreneurs. I hope that reading some investors’ perspective will boost your confidence and will help you to raise faster and more money than expected!
#1 Quoting almost literally an investor: “Get rid of the mindset that is hard to get money. You must believe in yourself. The more you can have the confidence in yourself and in your business, the more you can convince the person on the other side of the table”.
#2 Look for the VC strategically valuable for you. Not all investors are alike. Check Crunchbase, visit VCs’ websites and blogs, be focused and targeted. If you can get referenced is even better: VC world is a small community. Pay attention to the size of the fund, where their portfolio is located, when the fund was raised: if they are the end of a lifecycle, they will probably be less prone to investment. Before pitching do your own portfolio of investors.
#3 The place where you are located counts. To get funded is also a relationship game, if your company is located in the middle of nowhere, it could be difficult to meet the right VC and to engage them. If you can’t be based in the same area where your targeted investors are, be sure you build a strong bridge to where they are located.
#4 Investors want to hear that your business will be a big business. Many founders are uncomfortable on having a big vision and it could be, unluckily, a self-fulfilling prophecy. Maybe your are extremely risk averse and your aim is to provide a 100% accurate business plan and roadmap. Maybe you are scared to over promise and then underdeliver…ok, fair enough. Anyway be sure to assess the risks without falling in the trap to compromise your pitch cutting the power of dreaming. Too much realism could kill the enthusiasm. When you go to pitch you must have a big vision. Dream big, don’t be conservative, feel what success looks like, picture your company as the dominant player in the industry. Shoot for the moon! If you are not shooting for the moon people (= investors) can think that your business is not a big business and so not worth investing on.
#5 Do the primary research and put together the numbers before pitching. I saw a couple of investors becoming pretty nervous when confronted with a guy who didn’t present a primary research for his new business. Quite easy to grab the reason why the investors get irritated: a primary research usually don’t require a big investment and you can do it in-house, by yourself. The fact of not taking advantage of interviews or online surveys to deep understand your target audience, your competitors, your opportunity in the market, could be perceived as being a naive amateur. Would you buy a car without knowing how much petrol it consumes or how much fast you can drive it?
#6 The ideal deck for your pitch? For many investors, especially if we are talking about consumers products, the ideal deck/pitch is experiencing the product. Or at least a prototype. If you can show already some numbers or traction is even better. Maybe you have only 300 users, but they are checking the apps at least 6 times per day: good for you, it means high engagement level. Having traction could be a key factor to win the investment. As Guy Kawasaki would say: “prove the dogs are already eating the food”. Don’t forget you are telling a story and that your pitching deck should be like an appetizer, you should tease to learn more, don’t give anything away (yet). Remember that people are there to listen to you, to be astonished by your energy and passion…they are not there to read a bunch of slides. Your slides are a support to your story, they are not the story. It’s not the number of slides that will make the difference, what makes the difference is the way are presented, the dreaming power, the curiosity you are able to unleash, the passion and energy you are able to emanate. Be focused on the story, get the minimum number of slides needed and put the slides with detailed numbers and info in the appendix. You can flip to them, if required, in case of specific questions, without messing up your story. What about a deck sent via email? A deck of 60 pages is not going to be read, try to stick to 10 or 12 pages. Many VC firms have a really tight screening process. The must have informations they are looking for, especially in case of tech companies, are: details about who is the team, what’s their background, are they qualified enough, what’s the competitive space of the company, how far is the company in the curve, which level of maturity. Other informations like why you launched the company, what makes you up in the night …in sum the rest of the story it’s something investors prefer hearing during a conversation.
#7 A common mistake investors noticed in pitch: your voice. The texture of your voice can affect people opinion: avoid your voice fading away when you’re talking, avoid laughing nervously. Be confident, be serious, be relaxed, be extremely coincise, provide only informations business critical and relevant to the storytelling. How you should be dressed? Adapt to your audience. If they are extremely formal you should as well be dressed formally.
#8 Raising angel fund is a sprint, raising VC is a marathon. The process of raising venture capital can be extremely long and stressful. The process can move as fast as few days for very hot deals, even if it’s not to be recommended: it doesn’t give you the time to evaluate deeply what you are offered. Generally speaking the process can last from 6 to 9 months. The ideal time would be from 3 to 5 weeks. Looking for funding could become a full time job. You can pitch simultaneously multiple investors: try to obtain several feedback, it’s a good way to improve your pitch and your business model (if 3 people provide you the same insight, well, maybe it’s the case to incorporate it in your pitch/business model). Remember to communicate to all the investors you are pitching the process you are following, don’t lie, it’s a small community. A frequent communication can help you as well to keep the momentum, investors are opportunistic, they don’t have a defined process for themselves.
#9 “Money is green” only works if you really understand the terms of what you are signing. You can try to push the boundaries, but first you really need to understand deeply what the boundaries are. Many investors claimed to apply a vanilla approach and to be entrepreneurs’ friendly. All of them agreed that they would never touch or invest on uncapped notes.
#10 Lawyers…well, several investors reported that they do often encounter entrepreneurs advised by corporate lawyers, not familiar with startups. Corporate lawyers could extremely expensive and sometimes not being the best match for startups. Investors’ advise: you can find several informations about terms online, google it and do your homework, before selecting a lawyer…maybe you even don’t need one!
Investopedia could be a good tool for learning investments basic terminology.
“The perfect pitch” infographic below:
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