Crafting a winning VC pitch: A guide for scale-up entrepreneurs
Jeremy Werner, Vice President, Beringea U.S. & Mark Shepherd, Investment Associate, Beringea U.K.
The decision-making process of venture capital investment committees may seem opaque from the outside; a roomful of investors making judgements about your company and its future success can be daunting. However, their decisions about which companies to fund typically follow a set of criteria and if you know what they are looking for you can make your company much more attractive.
At Beringea, we invest in businesses that have the potential to become lasting successes. This means we search for growing companies, with business models and innovations that can tackle substantial market opportunities, led by passionate entrepreneurs with the talent and drive to guide a business through its next chapter of growth.
And yet, there are also plenty of intangible factors that impact our decision-making. We want to see that you can build a meaningful culture and manage relationships that inspire success. So how do you craft a pitch that captures key metrics and hard facts while showcasing your passion and personality?
Here’s a few tips we feel could help scale-up entrepreneurs craft a winning VC pitch:
1.Consider the ‘lens’: This is the overarching theme behind your pitch and can be distilled to simply “Why you, and why now?” What problem are you solving, what strategy will you follow to build the business, grow revenue, add to the team and reach your customers? Assume that some VC investors (especially those with a focus on a particular sector or technology) may have seen 15–20+ ideas that are similar to yours, so be ready to articulate why your company is different and why you will succeed:
…with your team. Arguably the most important thing a VC is assessing is the team. What experiences (both negative and positive) do you have? Why did you start the business? Why are you credible? You and your team must be hard-working and passionate entrepreneurs who understand your market and are experts in the field. Being able to demonstrate a track-record of successes, even in adjacent fields, is a major plus.
…in your market. Do you understand how big is it, and if it’s growing or shrinking? Why is this market ripe for change and why is your company able to take advantage of that? Don’t just focus on the total addressable market, but define the serviceable and obtainable market.
An insight from our experience: In 2014, Beringea invested in Watchfinder, a platform for buying, selling and repairing pre-owned luxury watches. The vision of its founders for the market that they sought to address was remarkable — traditionally, the secondary market for luxury watches had been informal and unreliable. Yet, global demand for pre-owned luxury watches has risen significantly in recent years and the market is now estimated to be worth $13 billion. Watchfinder’s platform transformed this dynamic and enabled the business to scale to be acquired by Richemont, one of the world’s largest luxury groups.
…using your value proposition. It needs to be innovative, defensible and differentiated, an idea that customers, whether consumers or companies, are willing to pay for. It might also be something that customers care about but don’t know they need yet. Make sure you also understand your competitors, why you are different, and why your value proposition is better, especially if your plan is to gain market share from incumbents
An insight from our experience: In 2018, Beringea invested in dscout, a leading Software as a Service (“SaaS”) qualitative research platform that captures in-the-moment experiences of products and services. dscout’s value proposition is innovative and allows companies to capture real world product, brand and user experiences at scale, where and when they happen. It is also defensible as they are not only experts, but they have built a large community of research respondents (“Scouts”) that allow global companies in technology, apparel, financial services, healthcare, as well as premier consulting, advertising and research agencies, to use dscout to gather, manage, share and analyze millions of in-context moments from real people around the world.
2. Tell a compelling story. Good stories have context, conflict, climax and closure. These four ‘C’s can be a great way to structure your pitch: creating an emotional connection to your story and your company can be remarkably powerful in making an investment committee buy into your vision and strategy. Furthermore, when writing your narrative, don’t forget to:
…make it personal and illustrative. Maya Angelou, the acclaimed American writer, said “I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.” Pitches need personality. Bring them to life with personal experiences, tangible insights, real artifacts and practical anecdotes to bring the investors into your world.
…be humble and coachable. What got you to this stage in your company’s life cycle may not be as useful in the next. Being a CEO is about continuous improvement and receiving feedback to learn and grow. There is a careful balance of confidence in yourself and your business versus being willing to receive feedback and continue to improve. VCs want to know that you will follow their advice sometimes but push back when needed.
3. Do your due diligence. The key is to understand your audience, especially their investment strategy — the types, size, and location of businesses they typically invest in:
…try to find out as much as you can about their current portfolio; you can even try to contact companies already in their portfolio. Pitching to a life science VC about your new social media platform will be (unsurprisingly) unsuccessful.
…try to uncover the metrics they care about — are they all about growth, profitability or simply product fanatics?
4. Presentation delivery is the final piece of the puzzle, so you must remember to:
…speak clearly, and don’t be afraid to pause or go slow. Lots of entrepreneurs speed up when they are nervous, so keep this in mind.
…explain your numbers and jargon. Unit economics need extra attention, especially monthly recurring revenue (MRR), annual recurring revenue (ARR), expenses, COGS, cash, gross margin, payback period, customer acquisition cost (CAC), lifetime value (LTV) etc. Know them all and prepare to be probed on them.
…keep it as simple as possible. VCs will ask questions if they want to go deeper, so allow them time to do this.
…read the room as you go. Try to make sure you are hitting the points the VC wants to hear. Engage the room through questions — otherwise you are going to be doing a lot of the talking and you risk losing attention.
…be honest. But don’t be disingenuous or too aspirational when crafting your story. Don’t downplay the risks but address them up front and be ready to explain how to mitigate them. Be honest about your team’s abilities and experience. There is no better way to kill a deal than to exaggerate your expertise and then get exposed that you weren’t being truthful.
…be ready for tough questions. Remember not to be offended if VCs probe into you and the business in detail; this is a good thing! It’s easy to feel personally attacked when your “baby” is put under the microscope, but we wouldn’t be doing our jobs if we didn’t closely examine your company and your claims.
For those of you already on the VC pitch journey, good luck. For anyone interested in hearing more about how we work with entrepreneurs to build lasting success stories, visit our website or get in touch at firstname.lastname@example.org if you are based in the U.K. or email@example.com if you are based in the U.S.