Being on the receiving end of the number of investment pitches as we have means we’ve virtually seen (and heard) it all: from great pitches, to ones that fall flat on their face. The truth is great entrepreneurs may each bring something different to the table when they pitch a VC. Here are five things that can help get my attention.
VC Pitch Tips: 5 Things Great Entrepreneurs Do
1) They Use Simple English
In every industry, buzzwords and jargon abound, and tech is infamous for its fondness of overused lingo. But what sounds clever and “in” to some entrepreneurs can fail miserably during a pitch. Not to mention it can result in a colossal waste of time for both sides.
The last thing investors or entrepreneurs should want is for that first phone call with a new company to end, only to find out the investor still can’t articulate exactly what the company does.
Great entrepreneurs know the best approach is to present what they do in the simplest way possible, covering who their customers are, what pain point they’re addressing, and how their product solves that problem.
They know the best way to demonstrate the value of their solution is to use specific examples like case studies and before-and-after customer experiences. They also know if we want to go deeper and get more technical, we’ll certainly ask.
At the end of the day, I should be able to go home and give my 10 year-old son a quick overview of what the business does.
2) They Know Their Numbers — Really Know Their Numbers
You might be surprised how often we get fuzzy or incomplete answers when we ask a company for past and forecasted numbers. “Well,” they’ll say. “We did $X last year.” But then, digging in, $X turns out to be incorrect. Maybe they were stretching the truth, or more likely, they just didn’t have a great handle on the numbers. Or maybe the CEO isn’t 100% sure what their sales team is projecting for the next quarter and has to get back to us.
Great entrepreneurs know their numbers. They can tell me during a meeting what they did last year, in every quarter, and what’s budgeted for in the next two quarters.
A great entrepreneur understands the key drivers behind their business. He or she can succinctly explain their company’s economic model, how they acquire customers, how much it costs to acquire them, the typical lifetime of their customers, and why and how they leave.
The should also demonstrate a strong understanding of their cash position, burn and cash out point—these are critical elements to their hiring, budgeting, and fundraising plans.
3) They Demonstrate an Understanding of Their Market and Competitors
Too often, companies will say something along the lines of, “We don’t have a direct competitor.” That’s usually not accurate, and truthfully, the answer is usually a bit more nuanced than that.
A competitor might not look like a competitor because their solution is different, but are they attacking the same problem as you? Competing for the same share of wallet? Is there an internal, build-your-own threat? In my view, these are all competitive forces to be very aware of. Great entrepreneurs know who else is in their space. They’re realistic. They know who and what their company is up against, and they’re proactive in their approach to the competition. But not only do they know the other guy, and their win rate against them, they also know why they lose out to them.
Honestly, I don’t care so much about an entrepreneur’s take on why they win. What I want to know is why they lose.
That tells me more about where the company is, what the team needs to do, and it highlights gaps in their product or business model. This leads to the next thing great entrepreneurs do.
4) They Highlight Their Weaknesses and Gaps
Unfortunately, many CEOs appear to run their business with blinders on — not being honest with themselves or their organization about what’s actually going on. Focus is great, but not at the expense of reality. When a CEO tells me their team is the “best in the industry” and that they have a perfect product, that usually tells me they haven’t looked hard enough or with a critical enough eye.
Great entrepreneurs have great self-awareness. They know their company’s weaknesses. In fact, they highlight those weaknesses. “This feature is the best within our product, but we fall short on analytics compared to our competitors,” they’ll tell me. I much prefer working with an entrepreneur who will proactively admit there’s an issue (or something that may eventually become an issue), because that tells me they’re aware of it, willing to work on it, and open to ideas to fix it.
What’s even better? When I hear, “Here’s where we need help.” That shows that the top priority is doing what’s best for the company, and it opens the door for a healthy, constructive conversation. It’s better to get used to those conversations now, because they’re exactly the type you’ll be having regularly with your board.
5) They Talk About What the Funding Will Help Them Accomplish
When I ask entrepreneurs what they’re looking for in a partner and the response I get is “money,” that’s the first sign it may not be a great match. If money is all you’re after, there are lots of places to get it, as long as you’ve got a solid business. After all, every dollar is green, no matter where it comes from.
Great entrepreneurs are crystal clear about what they want, be it a solid team, industry experience, a network, a partnership, or value add services. They use a meeting to go beyond dollar signs and look at the bigger picture of where they want to take the business and how they want to get there. Money is usually an important part of that journey, but shouldn’t be everything.
While I try and give every entrepreneur my full, undivided attention, if an entrepreneur can attack these five points, it usually sets the stage for a very productive pitch.
I hope these tips will help you in getting prepared for your investment pitches. As always, if you have any questions, I’d love to answer them in the comments below.