enture capital firms typically look at hundreds, if not thousands of deals every year and multiple deals every single day. But they only have a limited amount of dollars to invest, so as a startup the odds of getting funded are probably lower than the admissions rate at Harvard. Because of the sheer amount of deals VCs are seeing every day they often have a pretty good idea of what they are looking for.
So, while there’s no one-size-fits-all approach to pitching investors, you’ll definitely want to put your best foot forward if you do happen to catch the eye of a VC fund. Here are six things VCs wish you included in your pitch.
You need to be crystal clear about what your startup actually does. Believe it or not too many startup founders are overly vague when discussing their startup and the business model. Imagine if you tell a VC firm that your startup is a payments platform for small- and medium-sized businesses internationally.
Well, that may sound cool but the VC firm is still going to have very little idea about what your company really does. But if you instead tell them your platform leverages blockchain technology to help merchants in developing countries send real-time payments internationally so they can conduct cross-border transactions more efficiently, now we’re getting somewhere. Without knowing exactly what your company does, there’s no way a VC firm would even consider investing.
While no startup’s pitch deck is the same there is more data now on how VCs are digesting this material. Previous research from DocSend indicates that VCs used to spend about 3 ½ minutes going through a pitch deck. But in late 2020 that number actually fell below 3 minutes and who knows what it is now with such erratic conditions in the public and private markets.
DocSend also found that VCs typically expect decks to be around 20 pages and that VCs prefer each slide to have between 35 and 50 words, except the slide showcasing the experience of your team, which can go up to 80 words. This means your deck should be clear, concise, and to the point, starting with a problem, detailing a solution, and then getting further into the actual product or service and business model.
3. Show Your Work
Whether in a pitch deck or even a cold email, there’s a good chance you will include the market opportunity of the sector or industry your startup operates in. It’s pretty natural for VCs to be skeptical over numbers just thrown out there because startups don’t have huge track records. That’s why it’s important to show your work. Not only should you do this to help guide VCs through your numbers but it’s an opportunity to show your critical thinking and analytical skills. The more you show your work the more likely it is that the VC firm would believe you or at least be on the same page regarding the opportunity.
Talk is cheap and VCs want to know that you’ve got skin in the game if they are going to invest hundreds of thousands or even millions in your startup. While you likely won’t have that amount of capital to invest along side them you do have sweat equity. You need to do your best to show VCs that you are all in and are completely dedicated to your startup.
The easiest way to do this is to quit whatever other job you might have and tell investors you are planning to make your startup your full-time job and more. If you get to pitch the founders on Zoom or in person you also need to exude passion in your pitch. This should be easy and come naturally if it’s genuine, which it really should be if you are going all in on the idea.
5. Your Customer
One thing that doesn’t always make it into startup pitches is the customer that the startup is targeting. Sure, you might say our solution is for consumers or small businesses or hospitals or the government.
But VCs want to see so much more. Don’t just tell them broadly but explain exactly who the business is, the exact problem you are solving for that business, how much money you are saving them, and why that customer might use your product again or represents annual recurring revenue. The better you know your customer the easier it will be to create personas and it also probably helps if you have some actual customers as well.
6. What’s Your Unfair Competitive Advantage?
This is another detail that can get VCs really excited if it’s obvious. VCs don’t just want to see that you have a good idea they want to know that your idea can beat the competition in your space. Now, your unfair competitive advantage can be as simple as the founder themselves. Let’s say a startup is working on a new drug to treat Alzheimers and the founder has already won national awards for their Alzheimers research and has two Ph.Ds in related fields.
There’s a good chance that this founder has a better chance of finding a solution to Alzheimers than most. Another unfair competitive advantage could be the technology, especially if there are good patents in place protecting it. VCs really want to know that you have an edge that makes you more likely to win in the space than everybody else.
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