HOW TO MAKE VC INVESTOR SAY “YES” TO YOUR STARTUP
Most tech entrepreneurs consider pitching to VC investors a tough job, but (surprisingly) it’s always as hard for the opposite side — investors. In most cases, investors have to evaluate the startup within under an hour and moreover without having domain expertise or enough knowledge about specific area of a startup. Furthermore, an average investor receives at least 10–20 startup pitches weekly on top of other day-to-day duties such as portfolio and LP management, travelling, deals closing etc — which clutters up an impression that even best startup founders can make. Apparently, there’s no perfect way to present a company and opportunity to a potential investor, but a proper framework can help a lot.
Having listened to hundreds of startup pitches, I have listed below some practical tips for startup founders on how to successfully manage an intro pitch meeting with the investor:
1. DO ONLINE RESEARCH ABOUT A PERSON YOU ARE MEETING
It will take you 10 min but the impact is massive. Flattery will get you everywhere, so at least you’ll get a pleasant conversation and at most, you’ll secure another investor lined up to give you cash.
Tip: google person’s name and skim carefully through at least top 10–20 results (likely blog posts), look for video interviews/pitches of a person on YouTube, check his/her Facebook and Twitter accounts. In order to save time and efforts when searching always use Boolean search, e.g. type in browser’s search bar: site:.ru Alexander AND Chachava; site:youtube.com Sergey AND Toporov; site:linkedin.com/in Leta Capital
2. HAVE A CASUAL OPENING AND DON’T OPEN THE DECK UNTIL TRACTION SLIDE
Your business isn’t your deck. You are not your deck either. Don’t let the deck represent you. As it’s an intro meeting, you should be the host and not your pdf. Also, person-to-person engagement is much more powerful, than presenter-to-presentee.
Tip: Make sure you send your deck or one-pager to an investor prior to the meeting — which is also a great excuse to get investor’s email and follow-up to this email after the meeting. Another good way to get investor’s email (if you cold-reached to him or her in LinkedIn or FB) is to ask for email to send a calendar invite to book the slot for a meeting.
3. WHEN PITCHING MAKE SURE THAT YOU ACTUALLY DON’T PITCH
An investor is potentially your long-term partner, thus do your best to build a personal relationship first via being transparent and openly communicating.
Tip: in Leta Capital we like to get acquainted with the founders at least a few months before discussing an investment deal, we’d like to monitor the company’s dynamics during some time, therefore entrepreneurs should ideally reach out to us well in advance before they need to raise their next late Seed or Series A round.
4. DON’T WASTE TIME DURING THE PITCH
You should own the agenda, be laser-focused on what you’re saying and try to avoid interruptions. Allow enough time for Q&A after the pitch
Tip 1: here’s a good list of 123 key questions top tier VC funds ask entrepreneurs during or after the pitch for you to get a sense of.
Tip 2: based on my experience as an investor, questions about competitive advantage and growth are among the most challenging to address and eventually persuade an investor.
5. ALWAYS CONTEXTUALIZE
Remember that your listener is not as good in photonic circuits as you are? Please spend a few minutes to give a proper background about your business area and always relate to a listener depending on his or her expertise and background.
Tip: the other day I was pitched by a few medical hardware startups at the Imperial College London investor pitch event and while the teams’ expertise and background looked plain as day, as well as value proposition of their products — one thing which ruined the pitch of every second startup was lack of proper introduction into their respective areas and lack of proper dive into the area’s problems, thus while listening I was always asking myself “do doctors actually require this new type of catheters?” or “how can this wearable device replace existing cardiac stimulators?” etc — making me getting to the bottom of the matter myself non-expertly and missing the point as a result.
6. PITCH IS ALWAYS A DIALOG
The more you care about the listener, the higher probability of success you’ll get. Even though you don’t want to be constantly interrupted (especially with questions that you’re going to cover later in your pitch), pay attention to investor’s involvement and understanding via periodic short breaks or check-ins.
Tip: imagine you are visiting a GP doctor for a 10-min appointment and after doctor’s “how can I help you today?”, you are talking nonstop for consecutive 9 min without letting doctor make relevant clarifications and ask questions. Do you think this doctor will be able to make a fair judgement about the required treatment in your case? Highly likely the answer is “no”. Same thing when you pitch your startup to an investor. Make sure an investor is properly involved in your pitch. Otherwise, you risk to get another rejection.
7. NEVER ASK FOR IMMEDIATE FEEDBACK
Let the investor absorb the information and follow-up in a few days.
Tip: never bombard an investor with multiple direct follow-ups across all available channels (email, FB, LinkedIn, etc). Don’t be aggressive either. Best follow-up technique which I’ve seen was when an entrepreneur a week after the meeting found an excuse to talk to me again (asked for an intro to a person I’m connected in LinkedIn with or asked for a very specific advice related to her startup), after which politely asked to provide feedback on the pitch and next steps.
8. PRESENT TRACTION EARLY ON
Many founders mistakenly prioritize vision over traction during an intro pitch to investor, while these are equally important. If an investor doesn’t believe in a vision, impressive traction results can turn over investor’s opinion and rescue your pitch and vice versa.
Tip: this happens frequently to me when I receive the pitch of let’s say another “CRM for…” (a very niche market segment) and I’m ready to pass on it right away until I learn about some very impressive metrics of this startup (e.g. $4M net new ARR in the previous 12 months from $200k last year with negative ARR & customer churn and 2x YoY increased average months paid upfront) — which makes me feel serious about this opportunity and I regret about not listening attentively to the pitch prior to that aha moment.
9. SELL THE VISION, NOT USE-CASES
No need to dig into details about very specific use-cases or other technicalities during an intro pitch, but rather focus on the broader picture of what’s the current status of your startup, where you want it to be in the future and what you need to achieve the goal.
Tip: recently I was pitched by a company which is developing a Big Data platform, aimed at replacing data engineers in large corporations with its fully automated SaaS helping non-technical specialists develop real-time big data applications. While the statement above is an example of a “vision” (which I arrived at myself after some digging in), the founders of this startup instead of the vision were pitching in detail their use-cases such as “we can migrate data feeds and their logic from Spark into Databricks”, and “we can take 200 data pipelines, set up the streams and run the whole environment automatically” — which are great use-case examples, but should always follow the vision and not replace it.
10. TELLING STORIES IS BETTER THAN TELLING FACTS
Stories are easier to remember, more likely to be retold and capture attention. Facts shall be used to support the story, but never make facts the main thing.
Tip: compare 2 variants of one pitch and decide whichever is best. Storytelling pitch: “We created our Big data SaaS platform as a response to prohibitively high development costs of big data applications, inefficiency of manual maintenance of data pipelines and long-hours of coordination between data analysts and data engineers”. Fact-telling pitch: “Our Big data SaaS platform allows an average of 40% decrease in development time, 75% increase in maintenance efficiency and 33% data engineering payroll decrease”. And now imagine you need to retell this pitch, which one you’d choose? I’d rather go with the storytelling one, as it’s more memorable and easier to digest.
11. BE CLEAR, SIMPLE, TRUSTWORTHY, CONSISTENT AND MEMORABLE
These are the top character traits that any startup founder should be working hard on polishing in order to get proper attention from VC investors.
12. MONEY AS THE MAIN MOTIVATION
Money is the ultimate drug, but money isn’t the only motivation that investors expect the founders to have when they start and run the business. Any company should have a very strong but clear mission, which will captivate customers, partners, and eventually investors.
Tip: most VC investors hate it when entrepreneurs claim to be satisfied to sell the company quickly for low 7 figures, thereby you should always present the opportunity as something potentially worth “hundreds of millions” and you’re ready to drive it there
13. SHOW RESULTS FIRST
A classical startup vicious circle: you need VC money to get customers, but you need customers to get VC money. It’s worth making an effort to acquire customers or users before you approach an investor, rather than seeking funds first and customers second. Investors want proof that your idea is going to work, and nothing proves this better than having real, paying customers.
Tip: here’s a good list of 19 customer acquisition channels every startup founder shall use in order to gain (more) traction published by DuckDuckGo co-founder Gabriel Weinberg. Don’t forget to constantly carry out internal audit of your existing channels for efficiency and revise them using this framework.
14. DON’T SHARE EVERYTHING IN A FIRST MEETING
As a startup founder, your 2 main jobs in a first meeting with the investor is to i) incite excitement and ii) show that you’re a normal human being, all the details can and should be left for the follow-up meetings.
15. INSTEAD OF CONCLUSION
On one hand, you (as an entrepreneur) should appreciate every single connection with prospective investor, given that the latter has accumulated a lot of valuable knowledge and connections, from which you can learn and apply to your venture. On the other, most investors appreciate a certain level of independence and critical thinking in entrepreneurs, as it’s you who’s running the company and not your investors (ideally).
Tip: take into account everything you are being told by investors seriously, but rationally.
