You must remember — VC’s are in it to win it. Talk to them with
numbers. They have to be able to see the huge market potential and you
have to be able to draw an accurate picture.
It’s not just TAM/SAM/SOM – you must be able to tell the market size
and your share of it. If it’s small, show them that it’s set to grow and
back it up with proof. They want to be excited by the overall
opportunity.
And, if you are part of a fast evolving market – what will keep you unique in the value chain when competition strikes?
One More Thing:
I’ve been saying for years that this is the silver bullet of your pitch
– and now these investors backed me up: Tell them Why now? Why is your
product/solution/technology something that’s time has come? What’s the
enabling factor? What are the trends pointing towards it? And if you
didn’t exist – what trend would still be happening? What is the bigger
trend that you are absolutely hooked into?
Understand Their Needs and How You Solve Them
You need to set the stage so they understand your customer, their needs
and how your product benefits their needs. In other words, this is the
classic problem/solution storytelling, but on a very sophisticated
level.
First, draw a picture of the problem and the audience suffering from it
– give a few use cases that exemplify why you are needed? Show that you
have an in-depth understanding of your customers.
Having a product demo is super important – especially if it’s a great
looking product. But you don’t have to explain every point on your
product – walk them through the demo from a user perspective with their
unique needs and constraints in mind, show off some cool features
briefly and mainly focus on the assets and benefits you provide.
One More Thing:
If you are in an emerging or highly regulated market where things are
still “up in the air” like drones, or “at risk” like InsuraTech, make
sure to talk about the regulatory issues, show that you’re familiar with
them and what you are doing to address them?
From Concept Fit to Market Fit.
This section was the most eye opening to me – and the most important piece of this article!
According to this group, all early stage VC’s are always imagining your
next round – as you’re talking, they’re thinking through the next 18
months and when you’re ready to raise again.
One
of the investors said: “Once I write a check – I’m on the hook to help
you raise your next Round. Having clarity on what you’re going to
achieve in the next 18 months is super important for me to see how
you’ll raise your next round and how I’ll onboard the best investors for
you.”
If you don’t have recurring revenue, you aren’t VC investable. It
doesn’t mean that you aren’t a great company, but VC’s want to see
products that have a repeatability of income, something that keeps the
money flowing in – not a one time purchase.
Talk about your raise and your metrics: What’s your “proxy for revenue”
– meaning what are the numbers for your current DAU, WAU and MAU
(Daily, Weekly and Monthly Active Users) and how will that continue to
grow and bring in revenues after you raise? And if you have absolute
numbers of growth, users, revenues – show them a breakdown, a timeline
of how you got there.
What are your allocations for the money you are raising this Round?
What’s the pipeline of the product and the marketing strategy? How far
will you be when you need to raise your next Round? You don’t have to
detail the entire monthly burn rate, but give them an idea of how you
will be using the money so they know you’re raising enough to keep you
covered till you hit your round objective.
One More Thing:
While you don’t necessarily want to spell it out on a slide, you must
have a well thought out Exit Strategy. The same investor went on to say:
“I need to be able to envision the Act 1, Act 2, Act 3 – where are you
going? Even if you fail will you be a nice Exit by then?”
What’s a Show and a No Show?
They said it bores them because everyone has it and it always looks the
same, with your company at the top right. One of the VC’s actually said
that a company that was pitching them tries to “shake things up” and
put their company on the bottom left – and everyone got mad at them.
(This to me proves that people think in schemas and the 2X2 actually
has some merit if done right.) If you are going to have it, make sure
that the X and the Y are meaningful – not just something like –
“affordability and availability.”
When I asked them what alternatives they suggested to show as a visual, there were a few great suggestions:
