Pitch Please
So how do we make a successful VC pitch?
It’s a thought that fills many entrepreneurs with dread. It’s certainly not what they signed up to entrepreneurship for, but for so many, it’s an essential step on the path to scaling your business.
Pitching to venture capitalist firms and angel investors
I’ve been pitching to numerous VCs (early stage), seed syndicates and angels recently. I can’t lie. It’s tough. The pressure is on. These people could be the difference between unbelievable success or tragic failure. You have to get it right, you can’t leave that room with any regrets. It’s one of the ultimate ‘now or never’ situations. I love it!
Here are few things I’ve learned, so if you’re ever in that situation, hopefully, you get the result you desire.
What are VCs looking for?
When VCs meet entrepreneurs with a view to investing they’re looking for answers to a number of questions. According to Sam Amrani from Tamoco, the #1 question they’re looking to answer is ‘Can this business scale?’ However, there are a number of smaller questions that make up this larger one:
- Is this product/service solving a real problem?
- Is the technology behind the business robust? What’s next?
- What’s the total addressable market? How many people are using the product now? How many could use it in the future? How crowded is the market for this product?
Of course, there are other elements too;
- Tell a compelling story
- Quality of the pitch deck
- Simple to understand value proposition
And, be ready to answer the inevitable - these include;
- Where’s the money at?
- What are the risks?
- How much money do you need to remove those risks and how long will this take?
And, one of the most important.
- Why are you and your team the best suited to this and have an unfair advantage over any other competitors?
If you can show your potential investors that you are solving a real problem, that enough people want your offering so that you have enough to sustain a business, with reliable tech and exclusivity in your marketplace, well, you’ll be well on the way!
What VCs aren’t looking for?
I read a brilliant article recently from Chris Corbishley at Forward Partners which really opened my eyes.
Forward Partners offer investment to 0.2% of the startup opportunities they see. That’s an unbelievably small proportion. So what are the reasons they turn down nearly everything?
32.3% of startups were turned down because they could not differentiate their company from their competitors well enough. They may have had 1 or 2 exclusive features to their product, but VCs need to see more than that.
29% of opportunities were refused because the market the startup was operating in was not big enough to offer enough scale.
19.4% of ideas did not fit with Forward Partners’ investment strategy, essentially the rest of their portfolio.
9.7 of companies could not show that their product solved a problem and would actually be used. It’s possible they were solving a problem that didn’t exist.
9.7% were not at the right stage of their business to warrant VC investment. Too early or too late.
How to beat the odds
It’s clear by those figures, that the main hurdle you have to get over when pitching is differentiating your company from the crowd.
The key to this is clarity. Be totally clear on what you are, what you do, what problems you solve for which group of people.
VC’s don’t want to hear ‘Sure, we could do that?’ or ‘We don’t want to exclude anybody.’ They definitely don’t want to hear ‘We’re the Uber of bird tables’ or anything like that. They’ve heard it a million times before.
Tweaking or adding features to something that already exists is unlikely to get VCs excited. It doesn’t set you apart from the crowd.
Finally, do your research on the VCs you’re meeting and the portfolio they run. Know your numbers from back to front. Prove your worth.
EspressGo
For EspressGo, our proposition is clear. We make it easy for consumers to order their coffee from independent coffee shops, we also help coffee shops grow their business.
Our target is large (people who visit coffee shops) and the tech we use is advanced. The concept is proven, Starbucks now fulfil 30% of transactions through their mobile app. Mobile coffee-ordering isn’t the future, it’s the present. We’re offering a slice of this business to independents.
Your turn
If you get a chance to pitch to a VC or angel investor, you’re right to feel the pressure. You’re only human, and the difference between success and failure can be life-changing.
However, be confident that you articulating a clear business case and you’ll give yourself a good chance of beating those odds.
Good luck!
Have you got any more tips for successful pitches when it comes to VCs and angels? Share a success story with the community by leaving a comment below.