Know yourself cold: Preparing to pitch to venture capitalists
In a solid follow-up to the previous week’s lecture on raising money from venture capitalists by Shirley Speakman, the panellists shared their wisdom about what VCs look for and how to be better prepared for pitching to them. The panel also included Benton Leong, founding member of Golden Triangle Angel Network; Duncan Hill, general partner of Mantella Venture Partners; and Mike Silagadze, CEO of Top Hat.
What are VCs looking for in a startup?
“Oftentimes it’s the people we’re investing in, not so much the product.” —Benton Leong
According to the panellists, VCs look for:
- a good, strong product skillset from the founding team;
- persistence and a sense of urgency (that is, world-class jiu-jitsu champion or experienced mountain climber persistence);
- a strong product-market strategic vision;
- the ability to attract money and great people; and
- good story-telling abilities.
How to prepare for pitching to VCs
“The idea in and of itself is worthless—99% of the value is in the execution.” —Mike Silagadze
- Don’t jump head-first into seeking funding. A company needs a significant runway (about 12 months) to build up its valuation. This is only fair for both the investor and the company.
- Don’t pursue too high of a valuation for your company in the first round. It may make your second round valuation less reasonable (and attractive).
- Entrepreneurs often over-communicate. Focus on the benefits of your product rather than the details.
- Your first few pitches should be to friendly or low-priority people because you’ll likely mess up the first 10 pitches. Your pitches should also be staggered and well spaced to allow time to iterate not only the pitch, but also your vision.
- Watch presentations by entrepreneurs who are good presenters.
- Practice over and over again.
- Test the waters to see if you can have a casual conversation with an investor before going straight to a pitch deck.
- Learn how to recognize a “no.” Anything less than a term sheet is effectively a no.
- Take advantage of accelerators. According to Benton, accelerators do a lot of the heavy lifting for angel investors who don’t have the capacity and time to work with companies directly. Accelerators will help prep companies for interactions with investors.
- Don’t look for a VC to help you run your company or a VC who wants to mentor you daily. Nobody knows your company and your vision better than you.
That said, much of this advice is much easier to carry out if you follow the first point and “know yourself cold.” For more of the panel’s advice watch the lecture video.
Produced by MaRS.
Next lecture: “The Pitch” on Wednesday, May 7, 2014
- Article: What is venture capital or private equity?
- Video: Raising Capital as a Social Venture: Four Hot Tips for Startups
- Blog: What do venture capitalists want? An insider’s perspective
- Article: High-tech startups and the venture capital investment model
Want to connect?
- Join the Entrepreneurship 101 LinkedIn Group.
- Follow the conversation on Twitter: #ent101.
- Get updates on Vimeo.
- Download the schedule.
- Download the course syllabus.
Gina was the interim manager of MaRS’ Entrepreneurship & Innovation Series. Prior to joining MaRS, Gina worked in the small business and startup space in a variety of roles, with a focus on business development, project management and communications. She recently completed her MBA at the Rotman School of Management. See more…