5 Lessons Learned From Pitching VCs
Going out to get funding isn’t easy. You have to be a salesperson, dreamer, visionary, technologist, operations manager and relationship guru. And that’s just the beginning.
By the time you’re done pitching VCs for money you’ll be a PowerPoint wizard and an Excel master. And that doesn’t guarantee anyone will write you a check. But at least you’ll be able to outsource your PowerPoint and Excel wizardy to others…
You will get better the more you pitch, because there are plenty of skills and tricks you can learn along the way. A great resource is the recently launched Venture Hacks, which opens the door on tons of information entrepreneurs should know about the world of venture capital.
I’ve learned an absolute ton over the last few weeks going through the funding process. Here are 5 of those lessons learned from pitching VCs:
- Each VC has their own style. You should know what each VC is like before pitching them. Try and get as much inside information as you can. Do they blog? Do they focus more on numbers or higher level vision? What are they really looking for in an entrepreneur? What sort of pitch style do they like? If you can’t get this background information beforehand be prepared to pick up on early signals during your pitch and adjust accordingly.
Over time, you’ll give the same basic pitch to multiple VCs, but it’s going to change significantly for each one.
- Use PowerPoint effectively. PowerPoint won’t sell you or your startup. I doubt any VC has ever watched PowerPoint slides alone and said, “Should I wire you the money or just give it to you in cash right now?” PowerPoint is a tool to help you. The key is to use it as effectively as possible. For starters, make sure you create a very visual presentation.
When Fred and I started developing our first PowerPoint presentation it had lots of text and bullet points; plenty of interesting detail but no visual impact. An image is worth a thousand words, and by using images and being forced to find images that truly represent the concepts you’re pitching, it gets you thinking more seriously about the exact message of your pitch and how you’re going to get it across.
VCs like a little pizzazz as much as the next guy. And a certain amount of “wow” factor makes a presentation look more professional and serious. Just don’t go overboard.
- Don’t take offense. Easier said than done, but don’t take things personally. Don’t get frustrated or angered by questions they ask. Don’t worry about VCs who don’t get, like or believe in your idea. There are plenty of VCs and each one is going to respond differently. And VCs aren’t a special breed of person that’s unique from the rest of us. Some of them are great guys, some are not so great. Some are friendly, some aren’t.
The more you know about them beforehand (see point #1) the better you’ll be at this stage. If you’ve heard that a particular VC is always gruff the first time, so be it.
And even if you’re walking in blind, just don’t worry about it. Not everyone has to love you. And not everyone has to understand you either. The less personal you take it, the easier and more relaxed you’ll be, and the more success you’ll have pitching.
- Pitch with conviction but state your assumptions. Making big, bold statements is fine. You need to show that you believe in your idea, and it’s OK to make blanket statements that you consider fact. Just back those statements up by making your assumptions clear. You don’t have to go through every assumption, but the simple fact that you say, “There are some significant assumptions behind this…” helps. More than anything, VCs want to see where your head is at, and how you’re approaching certain issues, milestones, etc.
- Sell passion, concrete ideas, and then go for the money. My good friend Austin Hill calls this the “Hearts, Minds, Wallets” approach. You should be passionate about your startup (if not, there are other problems) so selling passion is easy. And you want some of that passion fto rub off on the VCs. But you can’t sell passion alone. And you can’t sell a concept by itself. You need to get to people’s minds by giving them concrete ideas: what you’re selling, how, your model for making money, etc. And once a VC can tie your passion and real ideas together in a cohesive way (in their own heads) you’re in a better position to get the funding.
Pitching VCs is hard. It takes a lot of preparation and a combination of skills and experience that few of us have right off the bat. You need great presentation skills, lots of chutzpah, plenty of emotion, and a good, sellable plan with concrete components. A little luck doesn’t hurt either…
This post is submitted to Darren Rowse’s Top 5 Group Writing Project, along with hundreds of other “top 5″ posts. He’s had an amazing response.
I used to work with an investment bank a number of years ago; i.e. we are the middlemen between entrepreneurs and the VC. It is tough selling to VCs.
Point number 1 is so vital and entrepreneurs fall flat on on this point alone. People buy from people - establish relationships. That’s a start. Once you have set that stage, you will find VCs more open and receptive to at least listen to you.
Getting funded is akin to a dance - both the entrepreneur and the VC must match each others step. VCs want the entrepreneurs to lead. And entrepreneurs must first learn the dance.
All the best to you Ben for your fund search.
Good tips. I have one to add:
Know your VC. Most of them have their portfolios on their websites, so you can avoid wasting their time and yours, by approaching only VCs with a previous interest in companies in the same ballpark as yours.
hi there!
you offer very good tips but in my opinion tip number 5 is the most important. it should be engraved in ourselves that we shouldn’t go for the money first! imagine if all of us did such a thing, then this world would really be a very good place!
good luck to us for the problogger project thing. i’m also part of that and if you have time, maybe you’d want to read my post! http://robinsongo.com/2007/05/08/top-5-tips-to-be-the-next-darren-rowse
all the best!
-rob
This is your best post yet. It really comes through that you have learned some lessons about VC.
Thanks for the comments so far folks, much appreciated.
Ben - it sounds like I paid you to make that comment! *laugh* I appreciate it…
One of the best resources available for designing your pitch presentation is Presenting to Win by Jerry Weissman.
I’ve know a few people who said following his advice made their pitch more successful.
Thanks for the kind words about Venture Hacks!
We have a ‘cheat sheet’ of all our term sheet hacks here: http://www.venturehacks.com/term-sheet-hacks/
Hey great post.
I found this post by seth godin to work wonders with powerpoint
http://sethgodin.typepad.com/seths_blog/2007/01/really_bad_powe.html
Brett - I think we kept under Seth’s 6 word limit on most slides, but now I’m preparing my presentation for SOBCon and well…it’s not going to happen. Hopefully it won’t suck though!
yeah lets hope not
good luck
I’d add one thing: understand your sales cycle.
I’ve worked with more than one company who tripped on these questions:
* How many customers do you have to win to make “that” number?
* What do you expect your close ratio to be?
* Given your close ratio and sale cycle, how many prospects do you need to be engaged with at any give time?
* How will you attract that many prospects in that time period?
Jim - That’s my next post on the submit of venture capital…you’re racing ahead! *smile*
My biggest problem is the assumptions.
“Dear Mr VC, we are making a minor assumption that Matt Cutts won’t ban our a$$ from Google for gaming their algorithms” cough…
Nice list
I might link to this for my readers soon.
Andy - I know what you mean, but if you can show the logic behind the assumptions you’ve got a fighting chance. And thankfully, Standout Jobs isn’t at the whim of Google’s algorithms.
Lists - Go for it, I appreciate the support!
Jim’s hitting the nail on the head with the sales cycle. VCs aren’t idiots: they hate risking as much as anyone else.
The more you’ll want to spend, the more they’ll expect you to sell… and will want to know how you will achieve your numbers.
Unfortunately, too many entrepreneurs are going for VC money without a sound story to start with. They merely fudge a magic number into the “Sales†column that offsets losses and generates a nice profit…
My advice: Limit your spending. Prepare your budget as if the money you are about to spend was yours. Be conservative on your expenses… and on your sales. Don’t promise what you can’t deliver. Above all, avoid falling in the “Let the world know and they will buy!” trap. Too many entrepreneurs believe that “advertising†will sell for them. As such, they end-up budgeting lots of money for marketing. Big mistake! It doesn’t work that way and experienced VCs know better. You need to be innovative on your marketing approaches.
Great tips. thx
[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
I just want to say - great post!
Being a young entrepreneur I’ve found myself guilty of a few things you mentioned. I haven’t had the opportunity to pitch to VCs yet, but have attended several business competitions.
I particularly like your statement about powerpoints. Too many times they are used incorrectly.
Additionally, I sometimes find it very difficult to not take offense to comments because of the amount of time that’s been invested into the business.
Well stated and looking for more insights!
Andrew
http://www.monolithmc.com (my business)
[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
Bernard - thanks for the comments. Lots of great info. I agree with the bulk of what you’re saying. Spend cautiously, don’t expect advertising to work…but at the same time “build it and they will come” is a risky road too.
The one sentence that stood out for me though was this, “Don’t promise what you can’t deliver.”
That makes sense, but of course it’s very hard to know what you can and can’t deliver at an early stage. And at the same time you do want to shoot for the stars. Being too conservative doesn’t have the same oomph effect. And you want a bit of oomph, it’s just a question of balance and being reasonable but also having the guts to say, “We can do this. And we can do it big…here’s our thinking…”
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[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
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[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
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Great submission for the ProBlogger Group Writing Project. I think this is what I like best about projects like this, discovering all the blogs you might not ever visit otherwise. If you are interested here is a link to my submission, Top 5 Sins. It isn’t what you think
but take a look you might like it.
Thanks and hope to see you in future group writing projects!
[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
[…] Pitching VC’s- Good advice for us budding Entrepreneurs on how to best sell your idea to a VC. […]
Ben – I do believe your post is excellent and provides great tips for pitching the “opportunityâ€. And for sure, without a good dose of optimism and insanity there would be none of us around here!!
However, at the end of the day, VCs must evaluate this “opportunity†against “risksâ€. And arguably one of the greater risks (in their eyes) remains one’s track record. This is why I believe it is silly to ask for the moon without first building trust. What I was really trying to convey is that one should avoid inflating or pitching sales numbers *they* don’t believe in, just to make their proposal more appealing. If your expenses are kept to a minimum and you can meet your modest quarterly objectives, you’ll earn more respect and VCs will be all more willing to continue investing in your company, and take bigger risks with you… I don’t believe this should prevent anyone from shooting for the stars!
[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
[…] 5 Lessons Learned From Pitching VCs by Benjamin Yoskovitz […]
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