If you're a startup founder who has created the next big thing, rapidly growing your company into a global category leader is probably on your mind.
The road to growth is long and varied but, somewhere on it, most founders cross paths with venture capitalists (VCs). VCs can add value to startups in a number of ways, from their connections, to their expertise, and of course, with their wallets. While for many founders the VC pitch is an inevitable part of life, a shocking number of these meetings are badly carried out.
In the interest of helping entrepreneurs avoid the usual mistakes, here are seven surefire ways to have your VC pitch rejected:
1) Do no pre-meeting homework One the main reasons entrepreneurs' pitches to VCs fail is a lack research. It is incumbent upon founders to know what a VC fund invests in and when. What's the point of pitching VCs who write $200,000 cheques for seed stage hardware startups if you make a SaaS (sofware-as-a-service) product and are seeking $6-million for a Series A round? VCs often specialize in specific types of companies and stages. In all likelihood there are a only handful of funds that are applicable to your startup. This info is easily uncovered with a little web sleuthing, so there's no excuse for not knowing what is relevant to a VC fund and what's likely to get the partners excited.
2) Lack knowledge about the courtship process Raising capital is a bit like dating in that it tends to follow a set process. The first meeting with a VC is often about building rapport. Because of the economics of the VC business, players in the game have to carefully vet the entrepreneurs they fund and work with. Your first meeting is not likely going to be a pitch with fancy slide decks and spreadsheets. In round one you might not even encounter senior people. Knowing the purpose of a meeting, who is going to present and what their roles are is critical.
3) Turn your pitch into a one-way sermon VCs see hundreds of pitches a year and most have very short attention spans. As a result, to have any chance of succeeding, a pitch can't be a Shakespearean soliloquy. If you've been given a 30-minute time slot to pitch a VC, deliver a (maximum) five- to seven-minute pitch that ends with a clear ask. Show your passion for your venture and turn the pitch into a highly intriguing conversation. Pitches shouldn't be keynotes.
4) Bungle the ask So many pitches die because of the ask. Founders have to be clear about what they want from a VC and where the investor fits in the bigger picture of a capital-raising round. Are they being asked to lead the investment round, if so, why? If not, who is and why have you approached them? In addition to providing context in the ask, it's critical to explain why you're soliciting a particular investor. Are they adding specific value beyond money? If so, state what they bring to the table to show fit and your excitement about the prospect of working with them. Your ask should be clean, create urgency and be memorable.
5) Pretend to know it all Questions abound in pitch meetings. Entrepreneurs don't need to have every answer. Sure, there are key things you need to know about your business, the size of a potential market, etc. However, VCs don't expect you to know everything and it's okay to admit you don't. Ask for time to look into an answer and include getting that answer as part of a list of next steps.
6) Screw up a live demo If you're doing a live demo in your VC pitch, try to lessen your reliance on other parties to make it work. For example, if your product requires web pages to load with reasonable speed, be sure you have ensured there is an adequate Internet connection and have a backup plan if connectivity fails. More than likely, VCs will give you little to no quarter as far as these issues are concerned. Have your demo down tight and ensure you can leave the VC a version of the product to play with and test on their own after you are gone.
7) End badly There is an art to ending a meeting – especially with ADD types like VCs. Follow up with a thank you within 24 hours, be succinct about it and clear on the next steps. Be sure also to have answers to any and all of the questions they asked within this time frame. You want to keep things moving forward and get the investors to make a decision as quickly as you can.
Marcus Daniels is founder and chief executive officer of Highline, a pre-seed fund and accelerator that helps digital startups get VC follow-on capital.
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