11 Tips on Pitching to Venture Capitalists
Every couple of months at NEST we have pitch day. For 15 minutes the founders of different companies have the opportunity to pitch their business idea for the chance to join the NEST incubator and to receive seed capital.
These are my top 11 tips for how to pitch to a startup incubator or a venture capitalist:
1. Be 100% Committed
One of the greatest reasons companies fail is because their leaders don’t follow through. Starting a business is extremely stressful and challenging and it’s only natural for founders to consider throwing their business in the “too hard basket”. So put your money where your mouth is. Tell the investors that you’re not just considering leaving your existing job or university course, tell them that you are definitely going to leave, or even better, tell them that you already have left!
2. Be Energised
No one likes a boring presentation. Investors want to see enthusiasm and passion, so make sure you fill the room with infectious positivity. Don’t slump and don’t sound like you’re tired and frustrated. Sound like you’re excited and keen to build an incredible business.
3. Don’t talk about the exit
Investors will typically seek an exit opportunity at some stage after they have invested in a company. However, what they’re looking for in a founder is passion and dedication, not someone with a view to escape the company in a couple of years. So if you must talk about an exit strategy in your pitch, talk about it in terms of how the investor could potentially make an exit, not how you would.
After your pitch, try to really listen to what the investors are saying. Do not speak over them. Investors are keen to find founders who are willing to learn and listen, make sure you demonstrate this to them. Bring a notepad and pen. This is a really simple one but at the end of your pitch the investors will almost always ask questions and give you feedback. Write everything down, it will help you to form a more comprehensive answer and assist you in your next pitch (if you have to do one).
5. Know the people in the room before you’ve even met them
I recently sat through a pitch where the company founder addressed all seven people in the room individually by their name. He had taken the time to learn each of our faces from the company website and it showed dedication and intelligence. A simple but impressive trick.
6. Make us feel special
Be sure to explain to the VC or Incubator why you specifically chose them. This is particularly true for incubators where they’re not just offering capital but mentorship too. Highlight the fit between your company and the type of other companies in their portfolio. Flatter the investors, highlight their skills, experience and education and say why you think it would help your company.
7. Talk about scalability
Investors are generally interested in companies with the potential for rapid scalability. Be sure to get this word into your pitch, it will tick a big box in the minds of the investors.
8. Protect your business
Be ready to discuss copyright issues, trademarks and patents. If you haven’t already patented your product or trademarked your product and company name, be sure to have a clear reason why.
9. Don’t Prevaricate
If you are asked a yes or no question, begin your answer with a yes or no. There is nothing worse than having to repeatedly ask the same question to a founder when they’re clearly trying to evade the question. Be honest; admit if you haven’t considered a point yet. The ideal answer is “no, I haven’t done that but it’s a very good point and I will look into it immediately after this meeting. Thank you for bringing it up”.
10. Get market validation
If you haven’t read The Lean Startup yet, make sure to do so as soon as possible, the techniques are changing the way people start businesses. Try and build a minimum viable product as soon as possible and do as many tests as you can to get market validation. Run surveys, set-up a stall in a market, create a Facebook page and try to demonstrate that there is a real need for your product or service before you launch it. Investors love numbers so back everything up with statistics.
11. Keep it simple
Don’t overload your PowerPoint with text, no one will read it. Ever. Keep slides to a minimum (10 is good) and make them as visual as possible. Don’t hand out reading material at the beginning of the pitch either, otherwise the investors will spend the time reading, rather than listening to your pitch. You should be able to give an overview of what your business does in just a couple of sentences. A good trick is to use analogies e.g. “the LinkedIn for the food industry”.
Finally, remember that investors will often try and find a way to help you where possible, so always be gracious, even if they don’t immediately offer investment.