December 8, 2020
A successful pitch can mean the difference between a billion-dollar company that changes the world and an idea that never gets off the ground. But as intimidating as the pitch can be, remember that VCs want to understand how your business will become the next billion-dollar company in their portfolio. Your job is to not only capture the attention of prospective investors but also entice them to grab a seat on the rocket ship you’re building — no pressure.
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 pitches that have stood out to us as the best and the worst, here are the common dos and don’ts:
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.
Tailor your pitch to the audience
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.
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.
Always ask for and track feedback
Soliciting 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 open to feedback. For founders, we find that 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.
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 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. Dropping a note to an investor after some material updates to the business is all upside and will keep you top of mind if an investment or other opportunity makes sense in the future. If you don’t follow up then you’ll never know.
Get bogged down in buzzwords
It sounds obvious, but you would be surprised at the amount of buzzwords we here. 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.
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.
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!
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.
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.
And 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.
To keep up with the latest from Alpaca, connect with us on Twitter, Instagram, and LinkedIn @alpacavc, subscribe to our bi-weekly newsletter The Rundown here, or by reaching out directly to [email protected].
Alpaca VC Investment Management LLC is a U.S. Securities and Exchange Commission-registered investment adviser. Alpaca VC Investment Management LLC is committed to diversity and inclusion in the workplace. We prohibit discrimination and harassment of any kind based on race, color, sex, religion, sexual orientation, national origin, disability, genetic information, pregnancy, or any other protected characteristic as outlined by federal, state, or local laws.