MAKING A PITCH TO A VENTURE CAPITALIST

Let’s discuss the challenges of making a pitch to a Venture Capital firm. Here I am talking about a group of founders of a start up or early stage company, who are looking to raise equity funding for their venture. Typically a start will get going with some seed capital from themselves and what is sometimes referred to as the three Fs; family, friends and foolish strangers. After this, there comes a point where the start up, if it is developing and growing, will need more money to grow. The founders will now need to raise so-called series A funding, which means funding from a more institutional type investor like a VC fund. Typically, after the first approach and introduction to the VC firm, the founders will be invited to make a presentation of their company, typically in a conference room at the VC firm’s offices. There will usually be a handful of people from their side and they will allocate 45 to 60 minutes for the whole meeting.

This is the key moment in the fundraising, when you sell your proposition to the venture capitalist. You need to make your presentation compelling enough to keep the VC’s attention. My rule of thumb is twenty minutes, if you have lost their interest and attention before that, you are done. No funding.

Let’s look at how this objective can be achieved. Succeeding in this is a question of the successful combination of form and substance. If you have a great proposition, but you cannot communicate this effectively, your pitch will fail. If you are a slick talker, but your business proposition is full of holes, you will also fail.

Let’s then look at a few does and don’ts for a successful pitch of an investment opportunity to a venture capitalist.

DON’T HAVE THE WRONG POSTURE WHEN PRESENTING

If you are seated wrong, all the energy will be sucked out of your presentation. Make sure you are sitting in the centre of the table; with a larger group consider standing up so that you can project better your message. Here it is about projecting your physical presence, so that it reinforces the message you want to get across. If you can, find out about the room layout ahead of time.

DON’T GIVE EVASIVE ANSWERS

You need to build trust by giving direct and candid answers. If you are asked a direct question, give a direct answer. If all your answers are cagey you will soon begin to irritate the VC. If you can’t disclose some details you are being asked for, say clearly why that is the case and try to suggest a solution, for example that you will revert once you have cleared the restriction.

DON’T BRING THE WRONG PEOPLE

Don’t bring consultants to the pitch, bring your core full time team. Sometimes you may bring the senior members, its also possible the VC will like to see some of the second line members to observe the team dynamics. But only bring the key members; leave others at the door.

SEND MATERIALS AHEAD OF THE MEETING IF ASKED

Your powerpoint deck is designed for your pitch, so you may well be very reluctant to send it. Sometimes VCs will ask to see something in advance, in order to get familiar with the business and to be able to prepare questions. One solution is for you to specifically prepare a pre-deck presentation designed to be sent ahead, which does not steal the thunder of your presentation. But if you are asked to specifically send your actual pitch deck, then you must do so.

DO YOUR HOMEWORK ON THE VENTURE CAPITAL FIRM

People will appreciate that you have made some effort to get to know who they are. You can find out more about the VC firm even if in a simple way. You can find out how much they manage, who their investors are, who the management team are, what their portfolio looks like. Most VC firms will have a website and nowadays most of the team will have LinkedIn profiles. If you know something about them, you can develop an idea about what kinds of investments they are interested in and how they manage their portfolio.

DON’T HAVE TOO MANY SLIDES ON THE INDUSTRY OR THE MACRO ENVIRONMENT

The VC is interested in your company and your team, not in a long dissertation about your industry environment. He knows this already. Have at the most a couple of slides on this and try to make them specific to your company, like giving your take on the sector.

DON’T BE TOO ARROGANT AND DON’T BE TOO MEEK

Being too forceful or arrogant will tend to put people’s backs up, and may even make some think you are overcompensating for a weakness. Being far too meek or begging may make people think you are underconfident. In this area, we should also be careful to allow for cultural differences, which can be significant. For example Americans are used to a very direct and forceful style whereas Europeans can have a softer approach. There are differences within Europeans such as the British understated style, the German blunt and direct approach and the Mediterranean more indirect style. There will also be similar differences with Middle Eastern culture as well as Far Asian. Calibrating pitches in cross cultural settings is definitely an area of some complication with no easy formula for success, unless all the participants have all had exposure to the Anglo American education system, in which case you can find that all participants will share a kind of proto American business manner.

DON’T HAVE A COFFEE SHOP APPROACH

The pitch to VC is the key moment to sell the investment proposition. This is standard all over the world in this sector. In this case, there is no doing the deal in the café before with the pitch being just a formality. Business is often done this way in many cultures, but forget it here, wherever the pitch takes place.

DON’T TALK ABOUT COUSINS

You may have some kind of personal connection with one of the VC people. Maybe you went to the same school or your cousin used to be his colleague; or some other kind of personal connection. This may have helped to get through the door but now is not the time to mention it. It is embarrassing for those without the connection and it may even make the other VCs think their colleague had a personal bias is setting up the meeting. Do not bring it up unless the VC does.

BACK UP YOUR ASSERTIONS AND OPINIONS

When you are making a point or expressing an opinion which is significant, back it up with data. Its even better if the data is from an objective third party. If you are weak on data, at least develop a good logical argument. Shooting out unsubstantiated opinions will irritate your VC audience and make the wonder how prepared you really are.

PRESENTING PROTOTYPES OR FREE USERS AS CUSTOMERS

Ultimately there is no business without customers. A customer means someone willing to pay you for the product or the service. Otherwise it is not a customer. Do not claim as a customer someone who is not; it will destroy your credibility.

HIDING SOMETHING

You can put your best foot forward and emphasise the positives, but do not hide significant material issues that will always come out later. You need to get them out there and be candid. If they come out later all that will have happened is that you will have wasted the VCs time and they will never give you another shot and word will get around in the community that you are less than transparent.

KNOW YOUR COMPETITION

If you thought of it, so has someone else. Being unaware of competition is a fatal mistake, which puts into question your whole business judgement. You should have at least one slide specifically about your competition and why you can still thrive. Be respectful of your competitors when you discuss them, dismissing them out of hand will convince no one and make you look foolish. If a competitos is obviously doing something better than you, acknowledge it and talk about your plans to remedy your weakness.

HAVE A STRONG FIRST SLIDE

The first slide should be your best. It should summarise everything. The objective of your first slide is to let the VC know ehat this is all about and make them interested in hearing the rest of your slides. You need to really put the work into this slide. Get help from a graphics expert; keep working at it.

ANTICIPATE QUESTIONS

I hope you will be preparing your pitch with your team ahead of time. If you think you can just wing it, you are a fool. As part of your preparation, anticipate all the possible questions they may ask you. It is not good when you are asked a question which you should have been able to answer, or when your team contradicts each other in front of the VC. Make a list and write out the answers.

REHEARSE

You should rehearse the pitch. You can rehearse in front of a group of friends, other colleagues or partners and advisers. Let them critique you. The more you rehearse, the better you will be on the day. It may be worth you filming your mock pitch and then studying the footage, looking for things to improve. You can even do this with just a smartphone. Look at for odd personal habits that may be off putting. I remember one pitch where I was on the VC side where a member of the team sitting at the end of the table was picking his nose and studying the result. Definitely off putting!

SHARE THE PRESENTATION

Don’t make the presentation a one man band. The VC will think the same about the way the company is managed and that’s not good. You can agree among team members beforehand who presents which slide.

CORONA PITCH

How can we do a pitch during a lockdown? One idea people suggest is a pitch on Zoom. This is risky because all the extra dimensions which are so part of a pitch, the interaction among the team members, the body language, the small talk, the to and fro; are all missing. So while it may be tempting in theory, postpone your real pitch until you can be face to face, unless you cannot avoid it. I will discuss making a "Zoom Pitch" in a future article. The market is not moving much right now anyway. You could also, if you are feeling ambitious, make a short film of your pitch which you could share, but make sure it is properly produced and edited. Do not post your pitchbook online, whatever you do.

I hope you have found these tips helpful and wish you best of luck! Remember, practise, practise, practise!