Founder Playbook: The Dos & Don’ts of VC Pitching 2022

Alpaca VC

December 10, 2020

The pitch process is one of the most discussed and dissected parts of the journey for founders seeking venture capital funding. And for good reason: a successful pitch can make the difference between securing the backing you need to build a billion-dollar company that changes the world and an idea that never gets off the ground.

But over the last two years, we’ve watched the art of the pitch change in significant ways. While many of the classic Dos & Don’ts of VC pitching we outlined in our original Founder Playbook still stand, the pandemic has ushered in the era of virtual meetings and digital communication that are here to stay even as in-person gatherings and events return.

This new normal brings shifts in how VCs are likely to interact with founders seeking investment. Below, we’ll give you the rundown of what we have observed working well — and not so well — for founders navigating today’s venture capital landscape.

But first, as intimidating as pitching can be, VCs truly want to understand how your business will become the next billion-dollar company in their portfolio. Your job is to not only capture prospective investors’ attention but also to welcome them into your company’s world and entice them to grab a seat on the rocket ship you’re building — seriously, no pressure.

With that in mind, many founders spend a great deal of time perfecting their pitch. Yet despite how important pitching can be, there often isn’t clear guidance around what VCs are looking for and which best practices founders should employ. In reflecting on investments that we’ve made and passed on over the last two years, we can point to a number of common dos and don’ts that ultimately influenced our decisions:

The DOs:

Do tailor your meeting to make a good first virtual impression

In today’s landscape, remote work and virtual meetings have greatly changed the in-person pitch scenario that was once upon a time the norm for many VCs. Rather than making sure you’ve got your route to the meeting location mapped out so you can show up early, the first impressions you’ll make now are likely to be virtual.

But here’s the thing: whether you’re pitching from home, a coworking spot, or somewhere in between, the impression you make is still vitally important. Do create appropriate lighting and a background that speaks to your personal brand. Involve relevant team members for the pitch and be sure to have visual aids like your deck and other supporting materials (financials, demos) cued up and readily at hand for screen sharing. Nothing kills the meeting buzz like a participant fumbling for open tabs and materials.

Do Focus on the ‘wow’ factor and make it easy to understand

There is nothing worse than being 15 minutes into a call and still not having a clear understanding of what a company does and how it makes money. While it’s important to sell the sizzle of your long-term vision, start with what the business actually does today or will do soon in basic, tangible terms.

Remember, you’re the expert — not the investor — so make your pitch easily understandable to someone without your experience. The last thing you want is for an investor to spend half the call trying to piece together the mystery of what you’re selling.

Do know your audience and pitch accordingly

Do your research before you get introduced to an investor. What types of companies do they invest in (stage, sector, etc.)? What type of LPs does the firm have (strategic vs. financial)? What value are they likely to add to your company? Understanding a VC’s investment criteria and value-add will help you highlight how your company aligns with what they’re looking for and tell you if this is in fact a good match for your business in the first place.

This same logic continues as you get further along in the investment process. Just as we invest in founders who we believe were put on the planet to run the businesses they’re building, it’s important for founders to partner with VCs they believe are the best fit for their team, stage of business, and long-term roadmap.

Before you pitch a VC team, it’s helpful to do even deeper research to get to know your audience. What do the investors you’ll be meeting Tweet about, write about on Medium, share via Substack, or post on LinkedIn? Understanding the bigger picture at play not only puts you in a better position to build a connection but will also help you identify the VC team members who can create value for your startup.

Do use visuals that support your case

You don’t want an investor to be reading dense slides in favor of listening to what you have to say. The pitch deck should be used as a valuable supplement to what you’re telling them but does not need to repeat every detail. Leverage the pitch deck to visually show your product/service and convey key ideas.

Do be open to and track feedback

Being open to feedback from investors will not only help you understand their key concerns and improve your pitch over time, but it will also signal to investors that you are coachable and willing to take feedback in and use it to improve. For founders we find impressive feedback makes them better, not bitter. Feedback can also give you some indication of how useful an investor might be to work with — a pitch shouldn’t be completely one-sided after all. Devise a method for capturing and tracking the feedback you receive during pitches. It can become one of your most valuable assets going forward.

Ultimately, you are assessing whether the investor is the right fit for you and your company just as much as they are assessing whether you and your company are the right fit for them.

They’re busy, so do follow-up

Even though an investor passed on an initial pitch doesn’t mean that couldn’t change. Maybe the business isn’t far enough along for them or maybe they want to see a particular concern addressed before they feel comfortable investing. First, ask for concrete indicators the investor is looking for. Then, drop a note to the investor after some material updates to the business. There is an upside to keeping an investor informed of your progress, and it will keep you on top of your mind if an investment or other opportunity makes sense in the future. If you don’t follow up, then you’ll never know.

The DON’Ts

Don’t forget to do your homework

In the last two years, the rapid influx of capital into the venture space has gone hand-in-hand with the creation of many new firms and funds. Looking at the landscape today versus just a few years ago, you as the founder have a lot of options for funding. Take the time to research what you can to understand your potential investors’ unique points of view, their investment thesis, their areas of focus, and what kinds of teams they tend to back. Doing so will not only put you in a better position to find the right match, but it will also save you lots of wasted time reaching out to and pitching the wrong people.

Don’t overlook alternative investment vehicles

In recent years, we’ve seen a number of alternative investment strategies gain popularity. For example, equity crowdfunding has transitioned from something of a last resort to becoming a viable — and even preferred — funding option for startup founders seeking to expand and diversify their cap tables. In fact, our team has been interested enough in this phenomenon to put together the Founder Playbook: When & Why to Raise from Equity Crowdfunding Platforms to help founders navigate this alternative investment strategy as they raise.

The takeaway: whether or not equity crowdfunding or another alternative investment strategy is right for you, be open to the possibilities out there. Especially with the rise of web3, we expect to see more and more diversity in the kinds of investment vehicles and funding options out there to build companies.

Don’t get bogged down in buzzwords

It sounds obvious, but you would be surprised at the amount of buzzwords we hear. Investors are going to be impressed by your passion for the business — not your knowledge of Silicon Valley slang. It will be obvious if you’re speaking out of your depth. Using acronyms, for example, can sometimes come off as presumptuous if they are not well-known and not explained. Likewise, misusing buzzwords or tech jargon happens often and this will only signal disingenuousness. Speak in terms you know and be yourself.

Don’t be vague or avoid details

Vague pitches are not only less clear but less memorable. Including anecdotes and customer stories will bring life to your pitch and help the company stand out. A common mistake is being overly vague when it’s time to talk about money, which is ironic since that’s really the purpose of the meeting. Investors want to see that you’re being thoughtful about how much money you’re raising and are working backward to that number based on the business’s needs. Being specific will save time, avoid signaling distrust, and demonstrate thoughtfulness.

Don’t ignore weaknesses

Failing to address weaknesses will only raise more concern around them. While you shouldn’t lead with weaknesses, proactively pointing them out and demonstrating that you have thought about these and are in a good position to address them will earn points. Ignoring weaknesses will only cause the investor to spend more time digging in on those points and prompt them to draw their own conclusions. This is your opportunity to control that narrative so don’t pass it up!

Don’t deny the competition

It is a rare occasion when a founder will share their actual competitors, so when that happens, it immediately increases trust. Investors will uncover the competition whether you share it with them or not so why not earn some easy brownie points by being forthcoming? This means not just highlighting the household name players in the space, but also new entrants. A common argument founders try to make is “there is no competition.” We know this is never the case — even greenfield opportunities have some competitors. Pointing to indirect competitors or substitutions will demonstrate a deeper understanding of the market than suggesting that none exist.

Don’t fumble your KPIs

Not knowing basic KPIs is an easy way to reduce credibility right out of the gate. Investors want to know that you are living and breathing the business. Metrics that founders are expected to know include things like run rate, customer count, gross margin %, burn, and retention rate. These metrics don’t need to be up to the minute, but you should know the topline metrics, such as run rate and customer count, from recent months as opposed to last year since they are (hopefully) growing from month to month.

Even though the process can seem daunting, pitching can result in more than just financing for your company. This is an opportunity to broaden your network and bounce ideas off a bunch of smart people.

One last thing: remember to have fun with it! Even if a VC passes on your company now, a good first impression could lead to introductions, advice and maybe even financing down the road.