Written by our partner Dave Rosenberg at Oracle NetSuite and originally published in Startups Magazine. Dave has featured as lead investor on our Pitch Nights across 2021.
Global VC funding broke new ground in the first half of 2021, with a staggering $288bn invested worldwide.
Record numbers of new unicorns and a rapidly increasing investment pace are positive news for entrepreneurs and the start-up community. But it also means competition for funding is at an all-time high.
The initial fundraising process is essential to a startup’s success — an entrepreneur’s opportunity to capture the hearts and wallets of potential investors and set their business on the best possible trajectory.
It puts a lot of pressure on a half-hour meeting wherein you are expected to quickly and concisely tell a story that defines your product, the addressable market size, and your business model.
It’s no wonder that many entrepreneurs struggle under the pressure. Every successful entrepreneur and VC has tales of nightmare pitches, so what can you do to enhance your chances of success?
Plan your approach
Before starting your pitch for investment, pick your targets and generate demand. Choose your VCs wisely and then build a bank of knowledge about their experience, processes, and existing investments. Keeping it ‘local’ to where you’re based can often help, even in our online world.
From there, prioritise your targets. Arrange meetings with a handful of lower-level investors first, to help hone your pitching skills and gain insight into the questions you’ll be asked. This will give you some useful feedback with relatively low risk — ensuring you are suitably prepared for larger investors.
Also, aim to book your pitches over just a week or two. Delivering pitches thick and fast can be stressful but it keeps the investment opportunity hot and builds a sense of scarcity and urgency. Longer funding rounds typically mean harder work and lower valuations, so avoid these if possible.
Tell your story and back it up
Communicating a compelling story behind your brand is key to selling it to investors. One of the best ways to open a pitch is a quick three-minute tale of your organisation’s journey to really engage the investors and ignite a conversation.
However, a great story is worth nothing unless you can back it up. Know key financial information, operational data, and your KPIs by heart. You’ll need to have all the necessary facts to hand immediately to convince VCs your idea is worthy of their time and investment.
Avoid the red flags
Every VC will have a list of pet peeves and red flags that immediately switches them off in a pitch. While everyone is different, there are some key points that should never be in an initial presentation.
Always avoid incorrect or vague market estimates. The majority of VCs will immediately presume your revenue estimations are wrong, but metrics are readily available for market sizing for clarity. Incorrect metrics will make investors think you haven’t done your due diligence or that you are attempting to manipulate them.
Exit scenarios are also a red flag. VCs will think you aren’t serious or committed if you are already planning your exit during your first pitch. While you may have predictions about who will acquire you, it’s best to keep them to yourself as they are almost definitely wrong.
First impressions count. You are asking a VC to invest their time in listening to your pitch and business idea, so make their first meeting with you as positive as it can be.
Arrive in good time and make an effort in your appearance. Take printed copies of your presentation and PDF versions on USB sticks, and pre-empt the technicalities of connecting to a display by taking every adaptor imaginable (I guarantee you’ll need at least one of them).
Even things as simple as page numbers on slides, choosing universally used fonts, and putting your business name in the ppt file name will give a professional impression and gain investor confidence.
It’s easier said than done but try to relax. Launching a startup and battling for funding can be a hard and stressful process and you’ll probably feel like you’re losing your mind at some point so find an outlet to blow off steam. Regular exercise or a hobby that isn’t work can be a great way to unwind.
For most people, investor pitches will always be nerve-wracking, but the more you do the easier it gets. Experience is key and practise makes perfect — there’s no better way to learn than by doing.
The competition and pressure of VC funding can be immense, yet the rewards can be fantastic.