VCs invest in less than 1% of the companies they meet. Here’s how to beat the odds.
I originally wrote this list as a checklist for a friend who is raising her first seed round. Fundraising is not easy, and I don’t want to give the impression the process can be gamed. But the fundraising process is also very constrained — the speed dating version of relationship building — for a business relationship that can last years, if not a decade.
Most VCs I know meet hundreds of founders each year, but only end up making 4–8 investments per year. At our fund Founder Collective, each partner commits to between 6–8 new companies in a given year.
Out of the companies that any given investor will meet, how are you going to stand out — and be one of their handful of funded startups?
After watching several thousand pitches at Founder Collective over the last three years, I’ve met many founders who could add to their credibility by aggregating specific types of proof, or avoiding some simple mistakes.
So, without further ado here is a list of some common elements of effective pitches that I’ve witnessed. Some of these elements are clever, others may be obvious, but the more elements you can cover in your pitch, the better your odds are of getting funding. (The tips will apply to first time founders as well — so don’t worry if you haven’t exited a major company.)
Surround yourself with the best
👫 Come with cofounders: it’s simply not believable you’ll build a billion dollar company on your own. The risk that you can’t identify, attract and hire the best teammates is a real one that investors worry about.
👵🏻 Work at a successful startup before taking the solo leap: imagine you were judging ski racers. Who would you have more faith in — someone who was headed down the slope for the first time, or someone who had done some runs before? There is a very real learning curve for first time founders. Even if you haven’t had a successful outcome in the past, you can gain incredibly compelling experience as one of the first 30 hires at a rapidly scaling company (we call it “learning on someone else’s dime”).
🤴🏻 Recruit relevant, highly credible advisors: If well-known industry experts throw their reputation behind you (ideally in a meaningful way, with time or as angel investors) that credibility glow rubs off on you.
👏🏽 Get former bosses to endorse you (and ideally invest): Do those who know you very well endorse you? I sure hope so!
⛹🏽♂️ Double down on strengths, hire for weaknesses: Make sure you are taking on the role you’re the strongest for, and are hiring for those you’re not. A well-rounded team is more credible than the “lone genius.” If you’re truly aiming for hypergrowth, pick your best sport. If you were hoping to go to the Olympics, you’d play your strength, not a new sport you were always curious to try out. If you’re not the best possible team, you can guarantee that your competition will be better.
Prove that you’re a competitor
📰 Get early press attention: Someone more famous than me once said that more startups die from lack of attention than a lack of funding. Getting attention is a survival skill, so it doesn’t hurt to show you can get it.
🤼♀️ Be demonstrably better than your competitors: A lot of markets are winner-take-all, customer bake-offs and later stage funding rounds certainly are, so be able to articulate how you can consistently be better AND convince customers of this (these are two completely separate things and this is not just you saying you have a better feature set). Radical simplification: most investors would prefer to invest in the best company in an industry, so be able to convey this.
Target what + who you’re pitching
👯♂️ Get to know investors (long) before you raise: The speed dating process can be stretched out if you start it way early. Investors want to build these relationships too, at least the hungry ones.
🤝 Introductions and endorsements help you stand out: My full-time job could be responding to cold email, which is sad but true for many investors. (I still do respond to many, but often this is when I have time to spare.) Remember the best introductions may come from other founders in that investor’s portfolio.
🦄 Pitch your bull case & big vision: I find myself coaching women founders on this. Identify your conservative case, as well as your best case and big vision. Pitch the latter, as investors are doing some form of “reality discounting” in their head: if the startup only accomplished half or a quarter of what they propose, how excited would I be?
💸 Make money before you go on a mission (if both, bring receipts): You do need to have a business model that stands together, irrespective of your vision. This is even true for most impact investors I know.
🧞♂️ Bring proof if you plan to reinvent business models / markets: You can claim that you will reinvent an industry, current business practices or revolutionize a market. And folks have done it before. But bring proof — early evidence that your hypothesis is working is best.
Know your space inside-and-out
📊 Be conversant on key metrics: sales, growth, adoption, retention, etc: Pretty self explanatory. Knowing what specific metrics matter most for you and why is important, and if you know how to affect them — that’s a bonus.
🤹♀️ Practice your pitch as much as possible: It really helps to work through objections and questions with others. HT to Kendall Tucker @Polis for this great post on how helpful other founders can be here.
🔮Don’t ignore your market (but do ignore pure naysayers): The distinction is not to dismiss market feedback and the cliches about a market, but to have a strategy for addressing them. Every business worth building has challenges, and your caliber as a founder is directly related to your ability to grapple with those challenges. That said, know that incumbents will sometimes oversee opportunities that are there — this is a cliche as well! Remember to focus on the problems and how you will address them (which can be an ongoing process, or just acknowledging that this will be hard).
Be scrappy + sales-focused
💰Show off what you have done before raising: I look here for evidence of scrappiness, capital efficiency, and just pure speed of execution. As my colleague David Frankel says, if you can’t show that you can create $10 out of $1, why will I believe you’ll create $10M out of $1M?
📜 Bring signed LOIs to prove customer interest: This is the proverbial “sell before you build” approach. I don’t know why everyone doesn’t utilize Letters of Interest (LOIs) from potential customers. They are typically non-binding, but it is still meaningful to me as an investor, as it shows that you can get to that customer and have them commit to something. The beauty of this is that sometimes you can sell with a pitch alone, so you can be at the earliest possible stage and still validate customer excitement.
🔢 Quantify your growth metrics (or develop some early hypotheses): Just as you would be irresponsible to build a manufacturing business without factoring in your unit costs versus profit, in a hypergrowth world, you’re similarly irresponsible to overlook the costs and time variables of growth. (I have a whole post on this here.)
🙀 Consider bringing cash flow / profit to your pitch. It’s unfashionable in some circles, but you have no idea how far this can go. Entrepreneurs seriously underestimate how much more leverage they have if they don’t need the money. There are some nuances to this: there are cases where you want to leverage external capital, and not all cash flow is accretive to a venture fundable company, but if you can start generating revenue on the business model you plan to scale, more power to you.
🙈 PLEASE don’t pitch that you’ll be hiring sales folks who will come up with your go-to-market (GTM) plan: Honestly, if you haven’t road-tested your GTM at all, I’ll treat everything you say as a hypothesis / elevated guess. And where are these mystery sales folks you speak of anyway? At the least, bring them along. If we’re investing money in you, I’d like a rough plan, at least so we can have an honest discussion about the options and tradeoffs you’re considering.
Channel world champions
😻Be relationship focused, not transactional: This is always the long game. Your reputation is everything.
📌Sweat the small stuff: Execution matters so much. Be Jobs-ian here: it’s not just launching the smart phone, it’s every pixel on every logo. Or what impresses me most these days, a crazy thoughtful software sales deck.
🏎Move fast: Startups are resource and time constrained (if not the latter, it would just be grad school 😸). Show that you can get stuff done with as much velocity as possible. Most investors are literally just drawing a straight line from your historical performance to assess your potential future trajectory. Give them great stuff to work with.
👑Demonstrate traction: I put this one last, because velocity + traction can overcome a host of other questions about a business.
Did I leave out anything? Stay thoughtful, and pick folks with integrity whom you are excited to work with. Good luck building! If you’d like to get my next blog post via email, please sign up for my new email list.