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Tag: pitch

Advice VCs Want to Give but Rarely Do to Entrepreneurs Pitching Their Startups

I thought I’d re-post a response I wrote a while ago to a question on Quora as someone recently asked me the question: “What advice do you wish you could give but usually don’t to a startup pitching you?”

  • Person X on your team reflects poorly on your company – This is tough advice to give as its virtually impossible during the course of a pitch to build enough rapport and get a deep enough understanding of the inter-personal dynamics of the team to give that advice without it unnecessarily hurting feelings or sounding incredibly arrogant / meddlesome.
  • Your slides look awful – This is difficult to say in a pitch because it just sounds petty for an investor to complain about the packaging rather than the substance.
  • Be careful when using my portfolio companies as examples – While its good to build rapport / common ground with your VC audience, using their portfolio companies as examples has an unnecessarily high chance of backfiring. It is highly unlikely that you will know more than an inside investor who is attending board meetings and in direct contact with management, so any errors you make (i.e., assuming a company is doing well when it isn’t or assuming a company is doing poorly when it is doing well / is about to turn the corner) are readily caught and immediately make you seem foolish.
  • You should pitch someone who’s more passionate about what you’re doing – Because VCs have to risk their reputation within their firms / to the outside world for the deals they sign up to do, they have to be very selective about which companies they choose to get involved with. As a result, even if there’s nothing wrong with a business model / idea, some VCs will choose not to invest due simply to lack of passion. As the entrepreneur is probably deeply passionate about and personally invested in the market / problem, giving this advice can feel tantamount to insulting the entrepreneur’s child or spouse.

Hopefully this gives some of the hard-working entrepreneurs out there some context on why a pitch didn’t go as well as they had hoped and maybe some pointers on who and how to approach an investor for their next pitch.

(Image credit – Someecard)

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Pitching a VC is a Romantic Affair

processI swear the title has nothing to do with Valentine’s Day :-).

One question that comes up often when people find out that I work at a venture capital firm is “how do venture capital firms decide what they invest in?” How is it that the same firms that pick wildly successful companies like Google and Facebook can also pick the “what were they thinking” duds?

People are oftentimes surprised to hear my answer. The truth is that while there is a general perception that there is some kind of a secret formula with objective criteria and analysis, the idea that the VC decision process is a purely objective and analytical affair is plain wrong.

The analogy I like to give is that getting an investment from a venture capital firm is a lot like marriage. Yes, there are obviously objective criteria which inform the decision – is the potential spouse/founding team trustworthy? Do we share the same goals in life (i.e. kids vs no-kids or size of outcome/industry)? Are we at the right stage (i.e. ready for commitment or point in lifecycle of the startup)? What do friends/industry experts/customers say? Can both parties add meaningful value to both sides?

But, like with marriage, there is a significant emotional component to the decision as well which can’t be ignored. Things like personal chemistry or whether or not the investors involved are enchanted/charmed by the founding team and the business idea play an enormous role. An investor who doesn’t have a specific qualm about a startup but who just isn’t feeling “the love” will not push a deal forward, no matter how great of a business case is being made. Why? The business model of most venture capital firms forces individual investors to only commit to a handful of companies that they truly can commit to and stick with through thick and through thin (and, rest assured, all companies have bad times they have to survive through).

Of course, let it be clear: any decent investor who “falls in love” with a startup and later uncovers objective reasons to not go forward will fall rapidly out of love with a company – lest someone reading this gets the idea that its all about the emotions. But the lesson to take away here for entrepreneurs is that while its absolutely critical to nail the objective criteria (things like business model, team composition, market size, go-to-market strategy, product/service quality, technology, etc) – that is, after all, the bread and butter of any good startup – don’t forget that, just as with most sales/business deals, the VC process has a huge emotional piece. So:

    • Have high EQ when you approach a conversation with a VC you are interested in: fit the message to the person and if you see the interest/reaction start to go the wrong way, shift gears and adapt the message (although I should remind people to not lie – that never ends well for either party)
    • Know the VCs you are presenting to: its impossible to precisely predict what combination of things will really click with a person, but you can get hints of that by doing your research. At the minimum, it means reading the backgrounds/profiles of the individuals you will be meeting with to understand what they are interested in and what sorts of themes they tend to look for. But, keep in mind to also pay attention to what things might turn them off (i.e. if they were involved with a bad eCommerce deal and you are trying to pitch a eCommerce company, make sure your story/pitch is *very* different).
    • Talk with a lot of VCs and expect to do this for every round of financing: as with romance, you can’t expect to click with everyone, not to mention, as with romance, things can always change the second or third time around. There are definitely cases where entrepreneurs have had very successful relationships with investors they never expected in their first set of pitches as well as VCs who have passed on earlier rounds of investment (no chemistry the first time) only to eagerly participate in follow-on investments.

(Image credit – 3Forward)

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