Thursday, September 13, 2012

Lessons Learned From Pitching Venture Capitalists

Raising money is as much a part of business as the goal of making money. As the old adage goes, “You’ve got to spend money to make money.” There’s an even older adage which posits, “Never use your own money.” One of the most popular sources of funds – especially for startups - is venture capitalists (VC), those who provide money in exchange for large ownership stakes.

Due to their popularity, VCs are extremely busy and hear thousands of pitches in a month. Out of that many, they invest in only in handful, hoping for a very lucrative exit in a short amount of time. To pitch a VC for financing requires the founders of a startup to not only be well versed in their own companies, but also do extremely detailed research on their potential investors. Not doing your research will make the difference in getting funded millions of dollars or being delegated to the black hole of has-beens. The following tips are some valuable lessons to learn about pitching VC’s and getting your startup funded.  

            Do Your Homework

Every venture capitalist you’ll be pitching to has their own distinct personality. You need to get as much background information on that potential investor as possible. Don’t just Google them but ask around – especially other investors. Do they have a short attention span? Would they prefer to see the bottom line numbers first and then the “sizzle?” What other successful businesses have they invested in? Why did they make those investments? In many ways, you’ll be giving the same basic pitch to every venture capitalist but if you can adjust to their investment criterias and individual personalities you’ll be ahead of the game.

Be Smart With Your PowerPoint

One of the most popular (and easy to use) skills for any business owner to have is the use of the PowerPoint presentation. This is not something you should be slapping together the night before the big pitch. Instead, it’s something you should be developing since the inception of your business plan. An effective PowerPoint presentation can’t stand alone. You’ll still need to “narrate” to fill in the gaps from your bullet points but you shouldn’t become top heavy with data. If you can make your point with a strong visual then go for it. Before building your PowerPoint, go online and view other presentations. Take note of what you like and “borrow” the idea.

Have a Thick Skin

Every entrepreneur walks into a VC pitch with dreams of walking back out with a check. That’s not going to happen. What will happen is you’ll be grilled aboutyour business. This is a good thing. The more you can engage that investor the better off you’ll be. Make sure you listen clearly to any question and think through the answer before blurting out something you think they want to hear. You’re not going to get the same reaction twice. Don’t let that throw you. Remain confident in your proposal and if they don’t bite move on to the next investor.

 Pitch the Facts

It’s great that you have conviction about your business idea but you can’t let that passion become pie-in-the-sky thinking. Over-valuing your company is the quickest way to turn off an investor. If you’ve got grand assumptions to make about business projections you better back it up with more than sweeping generalities. Just because the dog food industry is a multi-billion dollar business doesn’t mean your brand of dog food is guaranteed success. Sell your passion but back it up with the facts.