Pitch to VC investor needs to be in strike zone
To strike just the right note means developing a strong business model, building a talented team and doing enough research to harmonize the technology, product or service with the interests of the investors.
With more investors available online, initial contact is easier than ever, making the harmony between the pitcher and the investor more important.
“That has changed completely in the 12 years I’ve been in venture capital,” said Seth Levine, managing director at Boulder-based Foundry Group. “That gives the entrepreneur the chance to craft their pitch, to be very specific to what their investors’ goals are.”
Foundry Group focuses investments in long-term technology trends across a number of different “themes,” such as middleware software development and human computer interaction. Foundry Group receives 5,000 business plans a year, Levine said, but may only meet with 400 of those in person and select seven to 10 for investment. Levine responds to every plan he receives, he said, with one exception.
“I stopped responding to the ones that start with ‘To Whom It May Concern’ or ‘Dear VC,’ ”Levine said.
That’s the double-edged sword of investor Internet availability, he said. “There’s an expectation that you’ve at least done your homework.”
Knowing a firm’s funding interest is important, but so is getting to know the investor.
“The typical entrepreneur wants to jump into the pitch as fast as they can,” said David Gold, managing director at Westminster-based Access Venture Partners, which invests in a diverse range of mostly Colorado-based companies.
“The smart entrepreneur knows that the first thing they should do is ask a lot of questions,” Gold said, as many as the investor will permit. This allows the entrepreneur to tailor the pitch, playing up strengths and addressing weakness. Knowing an investor’s background — both prior investments and biography — boosts a prospective company’s case.
“Any correlation or similarity you can draw between your company and one that’s already invested in, or a touch point in your background with the investor’s background,” can create a connection, Gold said. The presentation deck itself should be concise, Gold said.
“If you can’t tell your story in 10 to 15 slides, then you don’t know your story,” Gold said. Be prepared to sell yourself, your talent and your team, too, he said, adding that CEOs who don’t like selling should find a different line of work.
For Robert Fenwick-Smith, founder and managing director of Aravaipa Ventures, it’s not so much the polish on the presentation as the solid foundation beneath.
“Over-sophistication, all the over preparation of a pitch, is a great way for consultants to earn money … but it doesn’t really change the underlying technology or service,” Fenwick-Smith said. Aravaipa invests only in efficiency technology.
“If it meets that simple screen,” he said, “then, after that, do they have a business model with which they can earn a lot of money?”
Technology and people are part of the package, too, but looking at what problem the technology solves for the customer is essential. Fenwick-Smith said he also looks for easily adoptable technology and accessible channels to the customer. For instance, power plants may be interested in adopting new technology but may take too long to do it for him. One of Aravaipa’s portfolio companies recently won the Best Venture Award at the National Renewable Energy Laboratory’s 25th annual Industry Growth Forum.
Silver Bullet Water Treatment LLC won with a technology that helps commercial buildings treat water for cooling systems in a greener, more efficient and less expensive fashion. NREL’s project manager for innovation and entrepreneurship, Kate Cheesbrough, said the Silver Bullet CEO’s style and a strong idea paved the way for the win.
“His presentation was very smooth and more so the technology. It made sense to investors,” she said. “They saw how it could easily grow in scale and there was great market potential.”
Pitching with confidence is important, Cheesbrough said, but so is learning from failures, fine-tuning presentations and persistence.
“It’s always important to incorporate that feedback for future pitches,” she said, and lack of interest from one investor doesn’t mean a company should throw in the towel. It’s something with which Levine agrees.
“I’m a huge champion of entrepreneurship and entrepreneurs,” he said. “When people are passionate about an idea, I think they should go for it.”