How to Pitch to a VC?
May 5 2008 | 2 comment(s)
Having spent a lot of time with leading venture capitalists as part of our competitions, we put together a few tips for how to effectively pitch to a VC:
1. Get "Screened"
Every VC has his own screening tool to source deals. Many rely on their networks of colleagues and portfolio companies - so only ideas referred from trusted sources make it to them. Others judge at business plan competitions to see ideas that already have been vetted. While the methods vary, every VC has a screening mechanism to save time and pick the diamonds from the rest.2. Do You Really Fit the Fund?
Obviously, as a good entrepreneur you already researched the web to make sure the 462,834 VCs you decided to approach play in your technology sector, but here are two details that most startups don't think of researching
3. Think like a VC
- Fund Life - A VC fund typically runs for 6-8 years before it closes and gives the investors their money & returns back. If a fund is already in its last few years, a VC only looks for mature startups he can exit in the next 1-2 years and no seed-rounds
- Existing Portfolio - Investing is all about diversifying your risk. If a fund already invested in a facial recognition technology, they are probably looking for different areas to hedge their bets.
Entrepreneurs often make critical mistakes in fundraising because they don't understand the VC's perspective. A VC wants to get rich by investing in your company. So you have to explain to him how he can exit your business again in a few years with hefty profits. If you are a security startup, demonstrate that your technology also has commercial applications as selling your gadget only to the Pentagon wont excite a VC. Rather give him a big vision that has potential for an IPO or to be bought by Google! (well if that doesn't work, Microsoft might be an option =))
4. Fundraising Takes Forever
Time spent on fundraising is the most cited hindrance to growth when we surveyed "our" GSC startups. So budget in enough time BEFORE you run out of money -- from our experience you should plan for at least six months lead-time.
5. What Elements to Put in Your Pitch?
David Hornik - a VC at August Capital and blogger - put a good list together of eight elements that constitute a good presentation, elevator pitch or executive summary - make sure you can run through this in various time scales - even have a version you can pitch in just a couple minutes:
1. Introduction
2. Team
3. Product
4. Market
5. Business Model
6. Competition
7. Financials
8. Conclusion
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Comments
May 5 2008 11:29AM by fundraiscandies
Wow!
You have given very useful methods for how to Pitch to a VC? it's very interesting.
May 7 2008 11:45PM by Wonnentannarp
well done, guy
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