Top VCs reveal what they want to hear in a pitch that will convince them to fund your startup — and what you should avoid saying

  • Successful entrepreneurship often starts with a compelling investor pitch.
  • We compiled insights from venture capitalists on what they're hoping to hear from you.
  • For example: Hold your ground on important issues and demonstrate your path to execution.
  • Visit BusinessInsider.com for more stories.

 

Venture capitalists want to be convinced.

Ask David Rose, and he'll tell you VCs wouldn't be hearing your pitch in the first place if they weren't interested in investing. Rose runs Gust, a digital platform for early-stage entrepreneurs and investors, and Rose Tech Ventures, an angel investment fund and incubator.

He said investors are just hoping you'll give them a compelling argument for why they should partner with you.

We asked Rose, plus a series of other successful investors (listed below), what persuades them to sign on — and what leaves them skeptical. Below, we've compiled their best advice, on everything from building a pitch deck to writing a thank-you note.

  • Patrick McGinnis is the managing director of the investment and advisory firm Dirigo Advisors.
  • David Selverian is an investor at Bessamer Venture Partners.
  • Laura Sachar is a cofounder and managing partner of StarVest Partners.
  • Dan Estes is a partner at Frazier Healthcare Partners.
  • Dave Munichiello is a general partner at GV.
  • Anu Duggal is the founding partner at Female Founders Fund.
  • Ashton Kutcher is cofounder of Sound Ventures.
  • Vanessa Dawson is founder and CEO of the Vinetta Project. 

Show how your product will benefit people

Estes previously told Business Insider's Lydia Ramsey that biotech investors want to know how a new tool will fit into the current standard of care. "The biggest mistake I see is when someone spends more time talking about how a product would affect the market than they do talking about how it would affect the disease it's designed to treat," Estes said.

The same is true for any investor, who wants to know how your business will make people's lives easier.

Don't be cocky

In an interview with Business Insider's Becky Peterson, Munichiello pointed to Stewart Butterfield, founder and CEO of Slack, as an example of an entrepreneur who didn't pretend he had all the answers. (GV invested in Slack in 2014 as part of a $120 million round that valued the company at $1.12 billion, Peterson reported.)

"Stewart's conversation with me wasn't about all of the reasons why Slack was awesome," Munichiello said. "It was, 'Here's how I think about the business. And you may think about it in a different way.' And 'Here are the metrics that I use to measure the business. How do you think about the business?'"

Hold your ground on the issues that matter most

"Entrepreneurs can, and should, articulate deal breakers to their prospective investors," Selverian wrote on Business Insider. "If there's something that's important to you and your business, don't compromise. As long as the entrepreneur's reasoning is justified, many investors will be impressed by the vision and leadership conveyed through deal breakers."

Read more: A CEO who launched her company 14 years ago says too many founders have it all backward

Show that you can sell your idea

"One of the critical tests that I try to run when I'm sitting across from a founder is: Can you sell me your idea?" Kutcher said at TechCrunch Disrupt in 2018. If not, he worries about the company's future.

"If you can't sell me, how are you going to sell your first hire, your second hire, your third hire?" Kutcher said.

Demonstrate your path to execution

At Business Insider's Startup 2012 conference, Sachar said she needs to believe the entrepreneur can turn their idea into a successful business.

"If you can't execute, you don't have a company," she said. "A lot of people have ideas."

Read more: The glitz of 'entrepreneurship porn' leads startup founders to make fatal business mistakes. Here's how to avoid them

Tell investors how you plan to expand

Duggal previously told Business Insider every pitch deck should include a five-year growth plan.

Duggal added that she wants to see the costs of building your product or service, the potential profit "on a unit basis," and how that changes at scale. In other words, she said, "As your business grows, do the margins get better?"

Prepare a detailed appendix in addition to the deck

Your deck should be simple and straightforward. During the pitch meeting, Selverian recommends having a detailed appendix that will answer any questions that come up.

Address the potential competition

One common mistake Duggal sees in pitch decks is "not addressing competition or figuring out the market landscape."

She added, "When we think about investing in a company, we want to understand — that's great that you have an interesting idea or you spotted something that has the potential to be an exciting business — but we also want to understand what is already in the market."

Explain why you could fail

In 2009, when entrepreneur Jim McKelvey began raising money to launch Square, McKelvey did something very few founders do when trying to secure funding: he listed all the reasons his company would fail, 140 in total. 

"We had robot uprising, Amazon attacks — we had all this stuff — and we made a serious examination of all the things that can kill a startup, and it turns out that nobody does that," McKelvey said in a webinar address.

VCs loved McKelvey's candor. They loved being presented with problems to solve, rather than watching yet another founder try to paste over their startup's weak spots. And they loved how different the pitch felt.

Propose an action plan in a thank-you note

In your follow-up note after the pitch meeting, McGinnis said, "propose concrete next steps for them to react to — amorphous communication conveys amorphous management." Reiterate specifically what you're asking for, and ask whether there are other people you should meet who the investors can introduce you to.

You can also create FOMO by letting them know when another VC has already agreed to invest.

Determine whether you need to raise capital in the first place

If you're bringing in a maximum of $1 million a year in revenue, "it may be a great, wonderful, much-needed business," Rose said. "You may enjoy it and support your family." But he emphasized, "the economics are just such that there is no way that you can get an investment from me at any reasonable number for that to make economic sense."

This is because outside investors expect outsize returns on their money, often a large multiple of what they put in. And if there's a low-millions ceiling on the revenue your startup can generate or eventual exit price, there's not much incentive for a venture capitalist to write you a check.

In other words, your company may be a "lifestyle startup," which doesn't require venture capital and probably won't ever be worth $1 billion.

Wait to raise capital until you have proof of concept

An entrepreneur's pitch is a "combination of science and faith," said McGinnis — but you want to stay more on the side of science than faith.

McGinnis often sees founders who don't have any proof their idea is viable. You'd be wise to keep your day job and acquire customers and data before you ask a VC for money.

Read more: Keep your day job, move slowly, and don't worry about building a unicorn: A New York 'startup school' eschews everything Silicon Valley ever preached

Meet your 'B list' investors first

Start with the "B team," McGinnis said, i.e., the VCs who would be nice to have but aren't your first choice. Get feedback from them so you're more than prepared when you meet the VCs you're really targeting.

Show why you — not just your business — are worth investing in

Remember that you're pitching yourself, Rose said — not just your business plan. "You bet on the jockey, not the horse."

Show why your's is a "no trade off" product

Vanessa Dawson, founder and CEO of the Vinetta Project, is looking for businesses with "no trade off," meaning customers get your service or product without having to sacrifice something in return. For example, consumers want to clean their home but don't want to use chemicals that can do harm, such as adding to the increase in antibiotic-resistant bugs. 

"How are you producing opportunities and products that service the customer without a trade off?" Dawson asked. "I call it a triple bottom line: What's positive for the environment, health, and all other things?"

What to do when you're turned down

One failed pitch doesn't mean investors are uninterested in your business. It may just indicate that you're pitching to the wrong people or at the wrong time. Take it from founders who have been rejected by numerous VCs.

One of those founders, Kathryn Minshew, who is the cofounder and CEO of job-search platform The Muse, said in a podcast that she was rejected 148 times during the company's seed round.

She took any meetings she could get, but in her Series A round, she was more deliberate and gave investors a specific timeframe to meet. She found that the investors who fit her into their schedules were really interested in her company, whereas the investors who didn't make the time were probably not going to back her anyway. 

Jon Werner is the cofounder and CEO of a gift payment app Koya Innovations. One of his previous ventures was an app that pioneered using GPS in mobile phones before it was built into cell phones. He told Business Insider that investor rejection didn't deter him, rather, it gave him time to refine his technology and connect with customers.

"We stuck to our guns, we talked to our customers, we did our research, and we kept going," he said. Once customers were sold on the idea, investors began approaching him. 

Steve Martocci is the CEO of the music-creation platform Splice and the cofounder of GroupMe, which he sold for $85 million. In an interview with Business Insider, Martocci said timing is a major factor to meeting the right people.

He met one of his first lead investors at the same conference where he met his Splice cofounder and VP of engineering. "Timing and luck is at least one third of anyone's success in entrepreneurship," Martocci said. 

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