The first 8 things that Venture Capitalists notice when a team of founders starts pitching to them

First Things VCs Notice (Source: Campaign Creators)

Pitching a VC is not only the most challenging but also the most essential part of a Startup’s success. A Startup can have a great product, but there are no rewards if the greatness can’t be expressed.

“Normally, A Venture Capitalist will have 500 face-to-face meetings per year, and less than 10% of startups will make it beyond the initial meeting.”

In such a time crunch, VCs are only looking for a reason to take you off the list and get to the most appealing pitches.

In spite of some brilliant ideas, there are startups that get turned down by the investors, just because of their flawed pitches. It’s all about making the VCs believe in you and your product.

“An investor will spend, on average, 3 minutes and 44 secondsreviewing a pitch deck. So what’s that mean for an entrepreneur? Make sure that the content of your presentation is short, sweet, and to the point.”

Here are the first things that VCs notice, that may the founding team’s chances of making it to the next stage.

1. Value Proposition

Your value proposition is the core of your competitive advantage. It clearly explains why the investors would want to invest in your company instead of others.

VCs are taking a huge risk when they invest in your startup after rejecting several others. The first thing that they see is if your product is worth their investment and time. Is your product just good to have or does it solve some important problems in a 10x better way than the competitors?

First Things VCs Notice (Source: Pixabay)

Eg: If your product is just another Router, then it’s in a highly competitive and saturated market. As the IT Hardware industry has become challenging, there are chances your product may not achieve the expected results.

However, if your product is a Cloud-Based Solution, with unique functionalities, your chances of being successful are much higher. Cloud-Based solutions are trending and fairly new to the market.

2. Are the Founders Great Entrepreneurs?

VCs notice if the Founders are insightful, passionate and outstanding storytellers. They prefer that the team has some solid credentials and experience that aligns with the startup.

The pitch is a medium for the VCs to evaluate, briefly if the team has the attributes and background to be successful. They see if the team members have solid credentials and experience, that would make them successful in their startup.

3. Are the Founders Confident about their product and the team?

First Things VCs Notice (Source: MD Duran)

VCs see if the Founders are confident, yet not overconfident about their progress. It is essential for them to judge if all the team members complete each other and if they are on the same page.

“Work with people you genuinely like and respect, and that you have known long enough to be sure.” — Paul Graham, Y Combinator

4. Is the Pitch Well Made?

• Is it well structured?
• Is it well designed?
• Is it Authentic? (Quantification and Numbers have a strong impact)
• Is it concise, yet covers all the key points such as Business Metrics?

“Make every detail perfect and limit the number of details to perfect.” — Jack Dorsey, co-founder of Twitter

5. Why will your business be a great investment for them?

Doing some due diligence on the VC and their past deals can help you understand their interests. The idea is to convince them if your business is investable and what they will gain out of it. The investors should be made aware if their ROI would be short term or long term.

Doing Research on the VC’s Portfolio may help you understand their investing patterns and success rates. Eg: XYZ ventures had great success with their investment in a similar product last year. Your product is from the same sector with better functionality and a unique advantage. In such a situation, it may be easier to win the VCs trust and attention.

6. Are the Founders Aware of the key factors and have Data to support it?

• Market Problem
• Market Fit and Target Audience
• Existing Competition and the Changing Market Conditions
• Limitations ( What their company is not capable of doing?)
• Why is their product unique and Why Now?

7. Do they have a Growth Strategy?

• TAM (market sizing/why this will be valuable) Relevant Insights and Financial Plan
• Future Vision
• How will their product solve a problem?
• How will they deal with the current and upcoming competition?
• How will they handle the changing customer needs and market conditions?
• How will they build their team, and whom will they hire?
• Where the company is heading and What Next?
• Milestones to be achieved next year

8. Can they convince the VCs with the Current Progress and Traction?

• Social Proof (Building brand awareness is one of the most important aspects of early-age startups. Generating online traction demonstrates popularity and engagement).
• Financial Statements
• Funding
• Current Team and their Credentials
• Customer Response and Engagement
• Revenue
• Leads

To Conclude

To summarize it, pitching VCs is an unavoidable part of growing a tech startup. The founders have to focus on targeting the right audience with the right pitch. If you can chase quality, and you can find the right fit in the most targeted and engaged investors, the rewards are going to be great.