VC Pitching

Pitching venture capitalists is not easy and is a skill developed by most founders over time. Many startups intentionally practice their pitches in pitching contests or with VCs that are not prime investors because they know that their pitch will take time to perfect. Even a founder, such as Josh James, practiced his pitches for Domo first with investors which were not his ideal targets even though he had successfully raised capital for his prior startup, Omniture.

There are many theories on VC pitching and no one theory is correct. Here is our view.

What the Startup Does

• The VC needs to quickly understand what the startup does, its value proposition. To put it simply, The startup is X for Y. Startups often finish their pitches and it is not clear what their core strategies are because the founders ramble and highlight multiple potential business models and paths to success. A startup cannot be everything for everyone. VCs know startups fail unless they are focused. That does not mean a startup cannot pivot, but it must pivot from defined and clear strategies.

Team

• The startup needs to provide a short background, highlighting relevant experiences or information. Knowing the pain, such as being a diabetic and having a startup focused on diabetics, is something to highlight. Prior successful exits or startup experience is also important. Prior successful work experience together is helpful. Passion matters to investors. Teams should demonstrate confidence and also the ability to take director and pivot.

Market

• The market must be big enough to interest the VC, and the total addressable market (TAM) is the key. The transportation industry as a trillion dollar market is not relevant to an electric scooter company. The more the founders grasp the market and are able to explain the nuances, the more VCs will take notice.

Competitive Advantage

• How the startup is different from competitors is important, particularly if competitors are 800 pound gorillas like Google or Microsoft.

Go to Market Plan

• How does the startup get customers or users. Viral growth may be how a startup gets most of its users, but that cannot be the startup’s assumption. There has to be different strategies for getting customers and users.

Demo

• There is no better way to show a product than through a demo. VCs are geeks and show and tell helps.

Financials

• The financials are speculative in most cases, but a startup still needs to be thinking about its financials. The startup should be able to show a hockey stick financials and credibly back them up.

The Raise

• The startup should know its target investment amount, desired valuation and how it will use the proceeds.

We have a few general tips.

No Spin Zone

• Startups are trying to put their businesses in the best light; however, that does not mean misrepresentations. VCs are investing in the team, and any perceived lack of integrity will kill a potential investment quickly.

Engage the VC

• The goal is to have the VC involved in the discussion and engaged. If the pitch becomes a lecture, the VC will zone out and pass. Venture capital firms are partnerships, which usually means one VC has to pitch his proposed investments to his or her partners. It helps to have advocates.

Don’t get Defensive

• There are nice VCs and most VCs. VCs have big egos, and startups should expect to be challenged. VCs are wrong more often than they are right, so rejection is the price of playing the game. Startups should learn from every pitch and then improve. It is not personal and VCs are seeking founders who are adaptable.