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.
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.
