How to pitch in a venture capital meeting

How to pitch in a venture capital meeting

Tl;dr: How to pitch investors. Be normal, be credible. Just read it

You want money, I want money, everyone wants money. If you want money you need to go get it. In venture capital fundraising land, you need to ‘pitch’. But then you know that. What you probably don’t know is how to do it right; what to do and what to avoid like the plague. I’m going to run you through it all in detail. About 5k words of detail.

The devil is in the details. The basics are the most important things that people do not  pay attention to. When you read this, don’t gloss over it. You might know what I’m saying, but I bet you have not internalised it and so do not live it in person. Once you know your business etc, you need to know how to raise your EQ and pitch. This is 80% of what you need to know.

I’m going to start with how you should start pitching investors and then my narrative is going to end up in a melange of general advice.

Start with getting their attention and don’t lose it

The clock starts the moment you meet and you have 15 minutes to get their attention, get them excited and get them to care about you to spend more time. If you start off badly, it’s unlikely that things will improve. It is all about building rapport quickly, establishing credibility and trust in what you claim, to the point where the investor starts thinking they might write you a check if it is all kosher.

You get investors’ attention initially when you can show the intensity and passion you have for your startup. You use that intensity to communicate that what you are solving is interesting, important and big enough that it is worth backing. It’s better to come off a little insane with what you want to achieve then unambitious. You want VCs to think “holy crap that is cool… if only they can pull it off“. Of course, there are a lot of boring industries, but it’s your job to make the mundane magical. That gets you their attention and then their money.

Start with traction so they can benchmark you… if you have it

The less traction you have the more you need to tell a story. Naturally, the earlier stage your company is, the more you are telling a story. If you are larger, you have proven a lot of things and what matters are the numbers. The story helps sell that you can get far larger.

If you have a lot of traction (relative to your stage) then lead with it. “So as you know, my name is John and I’m the CEO of SaaS company. I founded this with my cofounder a year ago and we’ve already scaled to $1.5m ARR.” Boom. You have their attention.

A lot of people will not have super stellar traction, so they need to tell a story to argue they will be meaningful and that they can execute. You are going to have to ground your intro with an insight which grabs their attention. The market size and depth of problem are a great are to focus on. “So as you know, my name is John and I’m the CEO of SaaS company. I founded this with my cofounder a year ago after we realised there are 5 billion people who want to reunite with their high school friends and can’t.” Ok, that’s a cruddy example, but think Facebook.

Start the meeting like a normal person

When you meet a friend, get on a sales call, the first thing you do is talk about the weather and other mundane things like “was the office easy to find?“. It’s weird if you don’t unless you are German, of course. Investors are investing in you and your team, so they need to like you before they fall in love with you. Small talk puts you in the friend zone (That’s actually good ;)) rather than the salesman zone. If they like you they will be more receptive to what you say.

Scott Friend, managing director at Bain Capital Ventures, says ‘be authentic.’ When he hears a pitch, he is trying to figure out if this persona is a rockstar. To evaluate founders, he asks two questions:

  • How good of an evangelist is this person going to be for their company?
  • Is this someone I would want to go to work for?

These come down to your character. If you are brash and have low EQ, then you are unlikely someone he would want to work for. Don’t talk too much though, cut to the chase at the right moment.

Sell well, ask questions

Knowledge is power when you are selling. The top 3% of salesmen do one thing differently. They talk less and ask more questions to understand what a customer’s pain points are and what they value. The same applies when you are selling yourself.

Once you have done 2-5 minutes of small talk, take the initiative to ask the first question and the opportunity to know how to pitch right. Ask them what the most important things that you need to cover are. If they say market and team, then ensure you focus on those, whilst also touching on other things like traction. If they say they care about market and you gloss over it, they are going to wonder about your intelligence though. A good phrasing is “How much time do you have, and how would you like us to use it?”

Ask the investor about what it is they invest in and why. Specifics show that you have done your homework. Rather than saying, ‘What do you invest in?‘, you can say ‘I notice you invested in Uber recently, what compelled you to invest in them?‘ Listen to what they say as they are telling you what they are looking for. You should then augment your pitch so that you can frame what you are selling in the context of what they are looking to buy.

Tell them a story

The best way to get and keep attention is to tell a compelling story. Everyone loves a good story. A story provides a framework wherein everything you talk about has context. It creates congruency. A good story enables investors to connect with you and relate to the problem you are solving. Investors may not be able to relate to the issues of farmers, but if you weave in a story about how your father lost the farm because of the problem you are solving they can empathise. That story answers ‘why’ you are motivated, why the problem is worth solving and if there are a lot of farmers so that there is a big market who would buy your solution.

I share this story a lot. It’s from Fred Destin when he was at Accel, and refers to a pitch from TJ Parker at Pillpack, which sold to Amazon for dolla dolla bills.

If TJ had come into my office and said: “I’m building an online pharmacy,” it would have been a short conversation. But he comes in and he says: “I’m helping people with complex conditions live better, I’m giving them back their lives because they don’t have to do pill boxes … I’m making sure they medicate properly, and I’m all about life, I’m all about enjoying life, my mission is to help people live better lives through better pharmacy,” that to me is a narrative that I can relate to because I am thinking: “I can hire people against that narrative, I can build partnerships against that narrative, I can market against that narrative – and, it’s imbued with a sense of purpose.

Share the good and the bad

The best pitch I have ever heard came from Alexis, founder of zen.ly. He started out talking about how they almost failed, pivoted, what went wrong. He was open but also shared what they learned and how the experience made them stronger. It was only after that he started talking about the great things that they were doing.  This left me feeling that I don’t really get the product as I don’t get it, but whatever happened, these guys would figure it out. I’d take a bet on them.

Investors are taking a bet on you. You being human, fallible, but a learning machine who isn’t afraid to share builds a strange kind of rapport that is infectious. If you have scars, share them. Don’t hide them. They make you beautiful, sort of like that aweful Christina Aguilera song. They make your pitch so much more fascinating. Startups are all messed up in their own special way, like everyone is apparently ‘beautiful’. Investors know there are skeletons. Showing them builds a lot of trust. Showing you figured out and learned from the things they might be most scared of encourages them positively, that you aren’t going to spend their money to make mistakes.

When Airbnb was raising their seed, Paul Graham emailed Fred Wilson (a lot) to encourage him to invest (he didn’t). Fred was skeptical about how big it could get. Graham told him to focus on the team, saying:

Ideas can morph. Practically every really big startup could say, five years later, “believe it or not, we started out doing ___.

Check out this blog on Private Airbnb email on how a VC missed out on a unicorn if you want to read about this more. It’s pretty interesting. But I’m a nerd…

Benefits not features

We talked about the importance of telling stories as it is far more emotive. When you explain how you solve a problem you need to talk about benefits and not simply features. The best way to explain this is from Job’s pitch on the iPod.

  • Benefits: The iPod puts 1000 songs in your pocket
  • Features: The iPod is a digital music player with 1 GB of storage.

You’ve heard the first, you hear the later from companies like HP and promptly forget it. Talking about benefits makes your solution approachable and relatable as well as making the value obvious.

Benefits are why customers will buy from you and grow your company. That’s what investors care about. Make it sound like your product was hard to develop so competitors can’t copy you easily.

Learn from the investors

Meeting an investor is an opportunity to learn. Every interaction you have when raising is an opportunity to get better. You should pitch better every single time. If you make a pitch a two-way conversation you can gain an ‘outside in‘ perspective you may not have had before around your market, business model and even product features you didn’t consider.

When doing a pitch deck for a founder with Perfect Pitch Deck I was reviewing his strategy and I wasn’t convinced there was enough utility for consumers to download and keep his app. I gave him the idea to add a killer feature. He said if, for no other reason than this one idea, the exercise we did was worth it just for that one idea.

If you are really engaged with investors, you might pick up something valuable. You need to listen and learn though. If you do, investors will notice and categorise you as someone worth investing not only their money in, but their time. If they want to give you their time, getting their money is a cake walk.

Shut up

If you have dinner with someone and you want to come across as a great conversationalist and charming there is a really simple trick. It’s something that would come out of Dale Carnegie’s handbook.

Talk less.

People love to talk and share. Don’t take this away from them. Talking IS a zero-sum game.

If you are talking more than 70% of the time you are doing it wrong. Investors like to talk and will. Let them. If they interrupt… shut up! There is a reason they are cutting you off and it’s typically a sign you aren’t answering their question well enough or fast enough. Embrace those interruptions. They are gold.

If you are in the room you need to talk

Unless you are at growth stage and have a heavy hitting CFO, President or someone whose job it is to lead fundraising (e.g. Grab hired a chap from Softbank that does the heavy lifting and leads initial discussions), the CEO needs to be leading fundraising. The CEO should ideally be the only person in the first meeting or call with investors. It’s their job to be persuasive. Some investor will get annoyed if they get on a call and the CEO isn’t present.

Pitching investors is a huge waste of time and not something ‘glamorous’ where people stuck in the office are missing out. If you are reading this and aren’t the CEO, get over it. You aren’t missing anything!

Everyone who goes to pitch is blowing time they could otherwise spend executing. People should only go to meetings if they add value (And I do not mean moral support). It’s really weird to have someone in the room who doesn’t say anything. Why the hell are they there? When I’ve been pitched by teams and there is more than one person (The CEO) and it’s only one person talking, I’m wondering why the hell they are there?

Too many founders in a meeting send a message to investors which isn’t positive. They are going to be wondering if the team is desperate for money (Who isn’t though!), they aren’t busy and possibly that they may not totally trust the CEO. It’s only a small signal, but it all adds up when investors are figuring out if they want to back you. Since you haven’t mastered mind control, you don’t have the opportunity to refute these thoughts- so don’t create them.

At the first pitch, you only need one person and that is the CEO. You bring other people to meetings because it gives investors more confidence that there really is a ‘team’ and to get into really detailed questions such as your sales pipeline or tech architecture. If the CEO can answer everything why do you need other people?

Let’s face it, the CEO can’t always answer everything! When I’ve been pitching investors and they get into the weeds on things like tech or sales, I am upfront and say ‘I only know the top metrics, I’m not the VP of sales. I’m happy to org a meeting with Sandra and get her to walk you through our current pipeline.’ And do you know what, they are always cool with that. Why? Because it makes sense. If the VC wants to get their nerd on our architecture, why would I not org a meet with the lead engineer, or product head?

Chill. Just be upfront and trust me, investors are just people. They get it. But they appreciate if you don’t BS, respect their intelligence (They aren’t idiots)  and waste their time. You aren’t superhuman.

This all applies to the initial pitch and the series of follow-on meetings you will have with a fund. Before you get the green light you will have to turn up to a partnership meeting. At this meeting, people you might not have met yet will ask you questions. It is a good idea to have up to three people to ensure you can answer all the questions you will get asked, just to be safe. So think if as the CEO there are any areas you won’t be able to cover adequately? If so, bring someone.

You aren’t going to get super technical here, so the CTO isn’t necessary. If you are very sales or marketing orientated then the CMO or VP of Sales could be a good call. The CFO, unless very commercial in your company, or you are later stage, isn’t needed either as the CEO needs to be able to spill out their financials verbatim. If founders are very ‘equal’ it’s fine for the CFO (which is more of a nominal title) to cover this stuff though. I almost invested in a company like this (they are doing well and my friends invested in them).

The main questions are going to be around competition, defensibility, business model and market sizing. Clearly, this is something the CEO is going to have to cover.

Don’t be late!

Act like a teacher, not a student

You are not a student trying to pass an exam. Each question is not a pass and fail you need to answer perfectly. There are no perfect answers and this attitude will lead to failure.

You need to act like you are a teacher. Investors expect you to be the expert on your industry and business model. They are investing in you to execute the business; they don’t intend doing all the work themselves. When they ask a question it is because they don’t understand. They want to know the answers. So be a good private tutor and teach them the answer to their question with empathy.

You need to educate, inform and do it with a bit of panache so the experience is less boring and little more entertaining.

Whilst answering questions you are building a relationship.

Have an objective. Control time and don’t let questions take up 20 mins

In almost every meeting you have, it is unlikely that they will ever be more than an hour long. You have an hour to deal with whatever the topic is. It is critical at the earlier stages to be very cognizant of time and how you use it. Always think about your objective in the meeting and seek to ensure the points you need to communicate to achieve that objective are communicated.

The objective of the first meeting is simply to get another meeting. You don’t have time to get into every detail, so don’t try to! Keep it higher level. If you have 10 points to make, say the 3 most important ones. Subsequent meetings will get more focused on particular topics, but again, your objective is to keep getting meetings till you get wired cash.

Let’s say you are in your initial pitch. If you get asked a question about your financial forecasts and it’s taking up time and you haven’t covered the problem, showed a demo, got into the market size yet, then you need to interject. Say ‘Jim, I’m more than happy to get into the details of our financial model but I’m aware this is our first meeting and we only have 20 minutes left before I have to head to my next meeting. I’d love to cover the problem and our market size as I know they are key to you. If we proceed with the deal, we can organise a session and just cover financials. Is that ok?

Ensure you are succinct and keep a measured pace to the meeting. Remember why you are with the investor. Good time management with the investor illustrates that you are a good at managing a company.

Focus should be on you not paper

You are not going to be giving a twenty-minute presentation without interruption. In fact, you are unlikely to talk for more than 2 minutes before an investor will interject.

If VCs aren’t engaging that’s a terrible sign and you won’t be meeting again. So don’t plan to stand up and present your deck. Not happening.  The best pitches are interactive discussions. Discussions happen between people and not the investor and the pretty pieces of paper you printed.

I’ve personally never been in a meeting where a founder ‘presented’ but that’s not to say it never happens. If you know your pitch, this shouldn’t be an issue for you.

Writing a pitch deck is a great exercise as it helps you organise your thoughts, and have a compelling and structured narrative. What you wrote should be similar to what you say (off by heart). If you totally own your pitch deck you will be able to be ‘present’ in the interaction and not be phased by the constant stream of interruptions and tell if your audience is losing interest and you need to take a new tack.

Don’t rely on your pitch deck. I always send a deck to an investor before I have a call. This saves everyone time. I have blogged about this in detail. Why I want a pitch deck before a pitch in a fundraising process. If the investor has already seen your deck, then it’s time to add all the context and detail that you didn’t write down. If you really want to prove a point with numbers, direct them to paper, but otherwise keep the focus on you. You want to build rapport.

The human connection is critical. Investors invest in people that they ‘fall in love with’; it’s an emotional act of committing to wanting to be in business. They will do due diligence on your traction, your market size etc if they start falling in love with you.

I think slides are a crutch. Half the time if you close the slide deck and you focus on and really present to the person in front of you – you will do a much better job. – Fred Destin, Accel

Be super high energy

You go to a party and there is a group of people having a lot of fun, who do you want to hang out with? Yeah, the fun people. Investors want to invest in passionate people. They also want to spend time with people that they actually like; life is too short for assholes.

I was doing a fundraise and the founder raised 3x what she wanted. Investors loved her. She is a lot of fun.

At some point you want to say something that sounds like “Here’s why my company’s service is personally important to me.”

Doug Evans, founder of the totally ridiculous and failed juice company Juicero said:

If you cut me, I bleed juice. It’s all I know. It’s all I ever want to do.

I highly recommend not being super tired going into meetings. Drink Redbull, sleep more, bring your a-game. Be the motha fricking Energiser Bunny. Your energy levels really matter. Pace yourself. I’m really serious.

Understand each investor is different, but each investor is the same

All venture capital investors want to make money, this doesn’t change. Their approach to making money is very different though. Every investor will have a particular approach and type of question that they want answers to-.

Some investors will place a lot of emphasis on measuring you as a person, how you think and how you act. Others may be more obsessed with collecting data points like a rabid librarian. And to complicate things more, their approach may change over time. They may want to initially ‘fact find’ quickly to see if this is a business for them and they want to know if you are their right personality as a team. Others may focus on you as a founder and then want to get more data. You need to listen to the style of communication the investor has and respond to it.

Some investors will be super friendly and casual, whilst others may be hard as nails. You don’t know. Learn to adapt to all manners of personality. This is fundamentally what I call ‘mind fricking.’ Understanding people and then communicating with them in a manner to get what you want. Key to this is listening to and learning from the questions they make, the comments they chuck in and watching their body language. If they look bored, either you are talking to slow, or what you are saying isn’t answering their question.

Don’t hide anything

If it seems you are covering up something they will wonder what else you are hiding. Since investors don’t care till they invest, or till they have put in a lot of time evaluating the deal, seeming a bit shady is a “feck this shizzle, I have other deals

Pace the crazy though. You can share more over time as you escalate commitment. If your cap table is a bit iffy, then share that on the third date, not the first one.

You are going to get found out at some point and it is going to be before you exit. What is the point of playing big boy only to get caught out? You don’t get paid that much in salary, the money is at an exit.

Don’t overshare

VCs will ask who you are talking to (investors) and how far along in the fundraising process you are.  You want to be moderately deceptive here!

Never say the names of the firms and the partners you are talking to. Investors know each other. Whilst it is unlikely they would ever collude, why take a risk? If you say you are talking to tier-3 investors then you aren’t as sexy anymore. Investors thrive on FOMO and want to think they are going to get a hot deal to the detriment of top investors.

There is a real reason for wanting to know where you are in the process; investors don’t want to waste time. If you are a day away from getting a term sheet then you are too far in the process for it to make sense for them to put in the time. What’s the point?

If you have been raising a long time, then why hasn’t snapped you up? You have been overshopped.

But being in the right stage of a process and having early interest creates urgency to get involved and that is positive. You want to communicate that you are far enough in a process that they want to get involved, but not so late that there is no point.

Yes, there are some VCs that can write a check in 24 hours, but this is not the norm. I heard a top tier VC say to a seed VC at an investor event ‘I can write a check in 24 hours if I need to get the deal.’ It was for a hot company in Indonesia and we are talking double-digit millions. This happens for later stage companies though. No one is going to care to do that for an angel round.

The way to deal with questions on this topic is to say ‘We are talking to some top firms. I’m sure you know who they are. We’ve had some first stage meetings and with three we have had 2 meetings. We only recently started the process.” There isn’t much more to it than that.

If you are later in the process, I would say something like ‘We’ve done a lot of work for some investors, including modeling. We already have the data room set up etc. You are a little late to the party, but the work we have done would get you up to speed rapidly.

This is stuff I have actually said to investors, and yes, it worked.

Have options and ask questions

I’m sure you have a top-5 list of investors you would love to have. Celebrity names with a brand that guarantees a TechCrunch article on your raise. You want network access and all the ‘value add’. So, what is it that you want from an investor and why?

Do you think that celebrity founders take money from anyone? No, they pick. They are in demand. You should act similarly. You have options and you want to pick the best investor.

Ask the investor questions that you want to have answers to, legitimately. This communicates that you have options and are being thoughtful and picky.

A question to ask is “Beyond capital, here’s what we’re looking for from our ideal investor….”

Be genuine

Investors are marrying you, for potentially ten years. If investors find you aggressive and defensive and they can’t ask questions to get to know you, then the process will stop. The pitch is the honeymoon period. It will only get worse. Startup sucks. There will be dark times and if you can’t compose yourself in an authentic manned in the good times, the bad times are going to suck major balls. Life is too short.

Investors invest in companies, not products (which will change)

Yes, you are in a sales meeting when you are pitching investors. You are selling you and your company. You are not trying to get the investor to buy an annual subscription to your carrot delivery company. Make sure you aren’t pitching like you would a prospect in a sales meeting. Investors care about the quality of the team, the size of the market, where you fit in the world with competition and the like, and can you make them rich.

Talk about business stuff, not product stuff. One of the most annoying things helping founders with Perfect Pitch Deck is founders constantly talking about the wrong things. I know your day job is product and sales, but when it comes to fundraising, only the business stuff matters.

Focus on the commericals.

Finish strong

Every meeting has a time limit. You know the investor (and you) are booked for say an hour. Buy a watch, track time.

When you know you have only ten minutes left you need to start moving the conversation to a close. Yes, you are being asked questions and you feel you need to make more points, but this is a marathon, not a sprint. You need to find a moment to break things off and address elephants in the room and next steps.

When you have five minutes left you need to break the conversation and be direct. A US Governor used to ask his constituents ‘So, how am I doing?‘ Do the same, ask ‘What did you think?’ You should be asking a follow up question like ‘is there any reason you don’t want to go ahead with this deal?’ to triage what investors are thinking. That’s a great question as you can elicit a specific response or look to try progress to close.

Whilst it is a bit salesy, you do want to finish strong. The last fleeting moments should be a summary of what you talked about and why you think you are a compelling deal (in a logical manner), as well as any concerns that have been addressed to you, to show that you have been listening to them. 30 seconds at the end with a nice summary shows you listened to and highlights the points you want to get across.

Your final act should be to find out what additional information you can provide them. If they don’t ask for any, you know how it went (Read this to know how your pitch to investors went). Most of the time you will get a nebulous answer. If you get a detailed list, act on it the same day or the next one to show you are responsive. Asking what info to provide them creates a new touch point to follow up as well as clarity on where you stand.

If you would like to improve how you run your fundraising process, deal with tough questions from investors etc, I can help you. I am flexible to your needs and can help run extensive investor Q&A to build skills and increase investor confidence. You’ll find that working with me is a small investment that delivers amazingly high returns. Get in touch at [email protected]

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