Investor Pitch 101
As a VC and growth equity fund, we meet with many entrepreneurs and hear numerous pitches throughout the week. To effectively manage all these startup pitches, our team religiously meets weekly to discuss these opportunities and make go-forward decisions. Recently, we realized how some meetings were crystal clear in our minds – instances when the entire team could easily recall all the elements needed to fully evaluate the opportunity. Yet other pitches felt like distant memories with significant gaps and we struggled to piece together enough information for a proper assessment. Intuitively, we know certain pitches were memorable in part because the technology caught our attention and the founders knew their market, did their homework, presented flawlessly, and deeply engaged us. Their playbook and a collection of our “best of” observations should provide a straightforward approach for how entrepreneurs can make their best pitch.
We see as many as 20 pitches a day during a typical partnering event - the tips below are sure to make you stand out
Before the Pitch
There are numerous different types of VCs and funds out there. It’s important that you take the time to find the firms that are the best fit for your company. When choosing investors to reach out to, don’t hesitate to be tactical in your approach. And, for this tactical approach to work, a bit of soul searching is required. Founders must understand what it is they really need from VCs. Are you simply looking for working capital or do you require additional support? Are you a team of seasoned ex-CEOs and serial startup pros who simply need to raise cash to do it all again, or are you a team of innovators with great ideas but limited operational experience? Are you looking to hit a near-term commercial milestone then quickly exit, or are you building for the long term? These considerations will influence the type of investor you should be working with.
Once you’ve figured out what you really need, do your homework to understand the fund you will be speaking to. What is their investment focus and investing pattern? What stage do they typically invest at? What companies have they invested in before? Next, it’s helpful to learn more about the partnership and who you’ll be speaking with. Were they serial entrepreneurs or do they have corporate experience acquiring companies like yours? Are they entrepreneurs themselves? Do they have a technical background, or do they have deep operational expertise? These factors will shape the questions they will ask and how they will work with you down the road.
Lastly, it is always a good idea to prep the VC team you’ll be pitching to by sending materials ahead of the meeting. This enables the team to familiarize themselves with what you are building and prepare any potential questions.
Showtime
For the actual pitch, there are two parts: what you say and how you say it. We want energy, enthusiasm and passion! It’s OK if you’re not the sales type, but you should convey excitement about your technology and the commercial potential. Help us understand why you believe this company is worth your career investment and why we should be excited too. Ahead, give some thought to who from your team should participate in the pitch, we often see the CEO attending with 1 or 2 other team members. Make sure you construct the pitch’s storyline in advance – each person should know their role, who covers which aspects of the pitch and who addresses what types of questions. Try to do such hand-offs seamlessly as it conveys clear responsibilities for each team member and a sense of teamwork.
What you say should be a balance of storytelling and financials. Show us how your company is not only a great idea but has the potential to be a big idea as well. We’ve heard many pitches dive straight into the market landscape, trends, competitors, growth drivers, without ever explaining how the company will generate revenue. This leads to the next critical piece of advice: this is an investor pitch, not a product pitch. The product overview should be just enough for anyone to grasp what it does and understand its benefits. Just as importantly, we want to see clear rationale for how the funds you’re asking for will be used to get you to your next inflection point. By the end of the pitch, everyone should have a strong understanding of:
The problem you are solving
How your product or service is differentiated
How this is valuable to your customers
Market size and competition
How you intend to make money, and when
Traction to date and pipeline
Amount you are raising, what you need from the investor and how you will leverage it
The most memorable pitches do a great job of creating engagement through discussion. It is important to manage your time appropriately and leave room for questions at the end. The best entrepreneurs will often predict the type of questions their pitch may prompt and prepare backup slides to address them. Such forethought allows you to keep the main section of your pitch as a coherent and tight narrative, while showing investors that you’ve thought about what their concerns might be.
Remember – transparency is critical. If there are any issues that a VC may be prompted to think about, such as a founder who has already left the team, or the CEO is not present on the call, be up front about such concerns. Admit them at the appropriate time and speak to how you are addressing them in your business.
Finally, be prepared to discuss valuation. It’s not uncommon for a VC to ask how much you’ve raised and what the post-money valuation was. VCs will often also ask about your price expectations in this fundraising process. They usually assume you will take a 20-25% dilution and want to ensure that you are in their valuation range.
Mistakes we’ve seen
From the points outlined above, it should be clear that a good pitch, while significant work, is not an impossible goal. There are, however, some things we see far too often that can push a great pitch into a tailspin. The following “Do Not” list is a critical summary of what not to do.
Do Not:
Inflate your sales: For example, grants are not sales. Using received grants for your year 1 sales and future projections is not realistic and VCs will see through it
Be vague about your addressable market: The healthcare sector is a $3.6 trillion industry. We often see top-down market assessments that overestimate their addressable market (if we capture 1% of this sector). We prefer a more realistic bottom-up approach that accounts for the per unit revenue and total number of buyers
State sales or operational milestones you can’t hit: These might sound good during the pitch, but most deals take several months or quarters to close. If you fall short of your stated plan by then, it can reflect poorly on your ability to execute
Inflate your talent pool: Do not include any critical players who are not full-time employees in your pitch. Consultants, advisors, etc. who are temporary should not be presented as part of the core team
Finally, avoid comments that undermine credibility such as “no one can compete with our IP”, “we have no competition”, or anything else that screams overconfidence or blind optimism.
Wrap Up
Meeting new founders and working towards deals is the most exciting and rewarding part of our business. Ultimately, the company or technology might not be a perfect fit for our fund, but we don’t want entrepreneurs to fall flat due to their pitch alone. Using the examples and recommendations we have offered will surely help keep your pitch fresh in the minds of potential investors.
Winning Pitch Essentials:
Energy and enthusiasm
Balancing financials with a good story
Providing an investor pitch not a product pitch
Engage team in discussion
Know your ask and what you plan to do with it
Be candid and transparent