The process for entrepreneurs and inventors pitching their business ideas and companies to potential investors for validation and money is like dating. It's time-intensive, incredibly stressful, and an emotional roller coaster.
These tips will help prepare you to effectively present your case to potential investors and increase your chance for success.
Look for a partner with value.
While potential investors might put you through the ringer to ensure you can clearly and concisely articulate and define your valuation proposition, your financial needs, and the market need for your product, I recommend you start the process by setting realistic expectations. Presupposing you nail the above, you should fully expect to be rejected, and often. The reality of getting venture capital money is that, unless you’re perceived as the next Facebook, you’ll likely have to speak with many venture firms before you happen upon the one or two for whom your idea really resonates. The bottom line is that raising venture capital, for most startups, is difficult.
If you can, try to identify potential venture partners who match your value system, have deep domain experience in your sector, and can help you fill in you and your company’s management experience gaps. Most venture firms still have money to invest (but just to be sure, you should ask them point blank) and money is indeed a commodity. But what you’d much prefer is a partnership with a venture team who can, and are willing to, truly help you realize your potential. Start the process by investing time in carefully researching the companies you want to invite in to talk about your business. Develop a list of criteria for selecting them, look at their portfolio and investment themes, and make sure you understand who you're going to be sharing your opportunity with. Don’t waste your time or theirs by approaching firms that don’t invest in your space. Make a point of understanding the value they might bring to your venture in terms of the following, and give them a ranking based on your criteria:
- How do they describe their values as a partnership?
- What do they look for in partnering with startup or early-stage companies?
- What experience and expertise do the partners you might work with have in your business sector or industry?
- Have they themselves actually run a startup company? A venture-backed startup?
- What is their track record of success with other companies in your space?
By all means, speak with the CEOs of the other companies in which they've invested to understand if they practice what they preach. All VCs (and entrepreneurs for that matter) have great things to say when things are going well, so make sure to ask specific questions about how the VCs conducted themselves and handled the situation when circumstances were going off the rails. Difficult events tend to reveal true character and capabilities, and those are the times you'll most need a true partner--someone who will help solve the problem, not assign blame.
Get your head in the right place.
Make no mistake: This dance is a bit like a blind date. It's highly nuanced, and you need to be mentally prepared for the emotional ups and downs that this process necessarily requires. It most likely will be a long journey and require kissing of a lot of frogs. By selecting your ideal investment partners first, however, rather than meeting with everyone who calls, approaches, or flatters you, you'll save valuable time and remove some of the pain from the process. But no matter the people you meet with, the good or bad attitude they give you, don't lose faith in your idea and your vision. You (should) know this business better than anyone else on the planet and be absolutely resolute in the market’s need for it. Don't let anyone take the wind out of your sails with their critique or disinterest. Have thick skin and a questioning mind.
Listen and ask lots of questions.
For the most part, you’ll be speaking with very smart, sometimes hardnosed, professional investors who see hundreds of opportunities each year. Listen closely to what they have to say, even (or perhaps especially) if their comments are negative. They may see holes in your strategy that you’re too close to the problem to see. Take it all in and make sure you process it correctly. You're likely to get 100 opinions that are different. Listen to them all, but take heed of the patterns, the themes, and the brilliance; you'll know it when you hear it.
Substance over style.
One way to save everyone time is to develop your prospective business plans, your presentation decks, and your financials as an integrated set of materials. Ensure you review your story from the perspective of someone who has no idea what you do, what your product is, or the credentials you have. Look at it with the lens of simplicity and substance when you develop the actual content. If you can clearly articulate your opportunity in less than two minutes, you’re ready to take a meeting. Refine and practice your presentation. You’ll be amazed at how difficult it can sometimes be to really define what it is that you’re doing. Make your story simple to follow and straightforward in flow using these tips:
- Be specific and get straight to the point when it comes to the business you're in, why you have the talent, track record, and tools to actually bring it to market.
- Special sauce sells, so be clear and compelling about your competitive points of difference, patented technologies, team, and your points of differentiation.
- Choose your content strategically so that everything you include makes a very clear point and isn't there to fill space.
- Take the time to ensure you tell a very clear and concise story and ensure the information and the opportunity is both visually and verbally commanding.
- Be very clear on the execution plan to get to market, including what resources and how long it will take to get there.
- Less is more. You can differentiate your presentation and yourself by ensuring you have really thought through and designed your entire plan.
No matter what anyone tells you, size does matter.
VCs like big markets with cheaply (that’s a relevant term) and quickly scalable products. If you’re not addressing a $1 billion market, forget getting top-tier venture money. Make sure you have supporting data to reflect the size of the opportunity and how quickly you think you can get there. Above all, be able to clearly explain why the market needs and will buy your product. Additionally, be realistic in calculating the size of the investment you're looking for before you start the conversations and understand just how much of the company you are likely to trade for the investment. Don’t take more than you need, but, by all means, don’t take less.
Shawn Parr is the CEO of Bulldog Drummond, an innovation and design consultancy headquartered in San Diego whose clients and partners have included Starbucks, Diageo, Jack in the Box, Adidas, MTV, Nestle, Pinkberry, American Eagle Outfitters, IDEO, Virgin, Disney, Nike, Mattel, CleanWell, The Honest Kitchen and World Vision.