Note: The full article on this topic first appeared on Mashable. You can read it here.
If you are the founder of a tech startup, it’s likely that at some point you will need to pitch a venture capital firm to raise money. I’ve seen a wide array of pitches over the years, ranging from the downright bad to outstandingly good.
A few simple tips to help you prepare for and improve your pitch to venture capitalists:
- Do your homework
Learn as much as possible about a VC before you pitch to them. When done right, you will have secured a warm introduction, evaluated their portfolio for stage and fit, and loosely determined whether your startup is the right match for the firm. That is to say, don’t waste time qualifying the firm during your meeting — do that all ahead of time and use the meeting to tell your story.
- Don’t confuse courtesy with true interest
Unfortunately, many VCs will take meetings with founders solely as a courtesy to a colleague or to learn more about a particular market. Often I speak with entrepreneurs who thought they hit their pitch out of the park, only to learn that the fund had no real intention of investing. VCs are experts at saying a soft “no”, so your responsibility is to carefully read between the lines. Approach your first meeting as an opportunity to educate and excite the partner, and to secure a time for follow-up.
- Don’t ask for advice on strategy
Never ask (or expect) a VC to advise you on strategy or help to flesh out your business plan during your pitch. A pitch meeting is never the right time or place for that. The sole purpose of this meeting is for the VC to evaluate you and determine whether you have a strong business strategy and the ability to execute on it.
I recommend avoiding open-ended questions such as, “Do you agree with our approach” or, “What would you suggest we do?” Instead, speak confidently and demonstrate your intelligent perspective on the company and market. This is certainly not the time to be wishy-washy.
- Don’t use buzzwords
Entrepreneurs feel compelled to use industry terms in their presentations. I’ve seen many presentations become completely incomprehensible because they were loaded with buzzwords, such as, “Our (insert product/service) is highly disruptive and represents out-of-the-box thinking and a paradigm shift in the massively growing (insert sector) marketplace.” That’s a lot of big words that essentially mean nothing.
Cut out the jargon and instead explain what you do like you would to a friend who wasn’t in the industry.
One of my biggest annoyances is the standard presentation format, which most accelerators use on demo day. Because they all look the same, they lose their edge and uniqueness that drives life into a story. When crafting your pitch, tell your story simply, directly, and with as little slides as possible. Make it personal. Successful entrepreneurs are great storytellers. You too have a story, so tell it.
- Don’t expect an immediate answer
A common mistake entrepreneurs make is to try to close too fast.
If the answer is no, the VC has already determined that in the first few critical minutes of the meeting. If that is the case, you can expect (and deserve) a quick answer. It is important to keep in mind that VCs say “no” to 95% or more of the deals they see, and do so for a variety of reasons — related and unrelated to your company.
In most cases, getting to the “yes” is much more complicated.
Getting a “yes” requires:
- Checking for conflicts in investments
- Gaining partner support
- Defining the terms of the investment
- Consulting with trusted advisors
- Completing due diligence on you, the company, and the market
- And many other steps
Similar to a job offer, if you have other options on the table, it’s recommended to be upfront about it, but also careful not to overplay your hand.
A quick “no” is a good thing in the sense that it allows you to move onto the next opportunity quickly. Don’t be discouraged if it takes five, 10, or 25 meetings before you get a “yes”. This is very normal. In fact, you may only need one “yes”. If you truly believe in your idea, don’t be discouraged when you get a “no”. Keep at it.
Most big ideas are not completely obvious from the start and don’t fit neatly into a short elevator pitch or an episode of Shark Tank. It will take time to develop your vision and convince a VC that you and your team are well positioned to execute. As Sam Altman recently stated, “Great companies often look like bad ideas at the beginning.” On the other hand, many “hot” investments that VCs compete for a piece of don’t even end up working out. In other words, just because VCs aren’t lined up outside your door now doesn’t mean your idea isn’t good.
If you have passion for your idea, it’s worth talking to as many VCs as you need to before someone “gets it.” If you can use those meetings wisely and persevere even when you get a few “no’s”, you will be well on your way to success.