What are the gotta-have factors for a successful VC pitch?….but wait…
One important question to ask before you begin pitching: Are you really ready?
Venture investors will have an equity stake in your business, have representatives on your board and influence company direction. VC investors also look to the ‘exit’ and drive the company toward either a sale or initial public offering by year 5 (typically).
Bearing that in mind, and you’re happy with the expectations, then you’d better understand what VC investors look for.
1. An Experienced Team
Experience counts for a lot. VCs consider a successful track record with at least one previous startup essential. If you have no entrepreneurial experience, consider recruiting an executive to your team who would lend you some startup credibility. Good judgment in business comes from experience and that includes those who’ve already made their mistakes and struggled. Moreover people who can get VCs excited and have an infectious enthusiasm for what they’re doing.
2. A Problem-Solving Product or Service
Be clear about the problem your company solves; Do you save customers money? Time? Be specific about why customers will switch from whatever they’re using now to your offering. VCs refer to this as solving a “pain point” or difficulty in the marketplace. Many people fall in love with their technology and fail to apply the ‘So What!’ principal.
3. Assets
What does your company offer an investor in return for their cash? More often VCs are looking for companies with assets of some kind. If not tangibles with an existing product, patent, manufacturing process, piece of software or service perhaps intangibles with an established customer base or a proven, high-powered management team. Your company also knows what your assets are and can properly describe and create excitement around them. VCs don’t invest in companies that are just ideas.
4. Customers
Oh yeah!! Customers… Geez these VCs want it all Uh! Lets be honest the development of technologies is sometimes cheaper than the trials/approvals or marketing and creating awareness, so you shouldn’t need funding just to create a product prototype. VCs want to hear from happy customers…and they will call them to find out. If you don’t have customers yet, scoring funding may be tough.
5. Metrics
VCs expect you to know the hard numbers of the business. One of the most important figures to know: customer acquisition cost. How much does your company spend to bring in a new customer? This figure is needed because VC funding commonly is used to acquire more customers, so know the growth the investment will deliver. VCs are also keen to understand the value proposition to the customer; how does your product or service improves customers’ return on investment.
6. A Demo
To extrapolate on an old saying, a demo can be worth a thousand words…and will beat a static PowerPoint slide any day. It also proves its not all hot-air.
7. A Plan
Shock-horror but you do have to present a clear plan outlining what they would do with the money you’re seeking. It doesn’t inspire confidence if you have only a fuzzy idea of how they would use more money to build the business.
Adapted from an article in Entrepreneur magazine.
