Fundraising. It’s the one word that gets brought up the most during my conversations with technology entrepreneurs. It’s hard, it’s time consuming and it could potentially hold the key to a company’s success or its demise.
Investors are busy people, typically difficult to get hold of (unless it’s through a warm introduction), and often hard to impress.
With this in mind, we reached out to some of the UK’s most well-known venture capital funds to find out what tech entrepreneurs should avoid doing during a pitch.
Don’t go overboard
First up, Simon Menashy, a Partner at MMC Ventures, told UKTN: “Entrepreneurs shouldn’t bring a 50-page opus to a pitch. Come with 10-12 high-impact slides that tell the story and provide key information, and have a conversation with us. We’re likely to take you off on a tangent with questions anyway. It’s a good idea to have some back-up slides in an appendix to address common questions, though.
“Name-dropping. We don’t care that you’re good mates with some other founder, or about all the other VCs who have taken a meeting with you. The best-connected entrepreneurs we know are careful and respectful of their network.
“Arrogance. We expect to see confidence and conviction, but don’t cross on to the wrong side of this line. We love founders who bring strong views but learn from people around them, and who show willing to change their opinion when presented with different data.”
Don’t drown in the detail
Up next, Tim Mills, investment director at the Angel CoFund, went to comment: “In a pitch, investors are looking for two things: a strong business opportunity and, equally as important, a team that can deliver it. What they do want is a demonstration of experience and expertise – have you done your homework, do you understand the sector you are talking about, and ultimately do they believe you are the right person to bring to life this particular business in this particular sector.
“What they don’t want is masses of detail on the business idea that doesn’t articulate the commercial opportunity behind it. It is crucial to not only conceptually set out what it is you are trying to achieve with your business, but also be clear about the value it will bring to customers and investors – and this is where you have to have the numbers. Everyone has a good idea in their head, but data and insights really substantiate the business opportunity and can cut through the noise and assertions.
“On the team side, the last thing an investor wants to see is someone being disingenuous. Investors are looking for experience but they are also looking to partner with people they can trust. It is very hard to fake expertise and a false persona will definitely show through, so be honest about who you are and what you are presenting as investors will ultimately back integrity.”
Karen McCormick, chief investment officer at Beringea, commented on the fact that some founders don’t portray a realistic overview of their operating market: “A problem we often see during pitches is entrepreneurs claiming to have no competitors. Even if there’s not an identical product or service, there have almost certainly been other people finding ways to solve the problem you’re addressing. It’s better to prove that you’re well-informed about what else is out there and be clear about how you are different.
“Being unable to accurately articulate market size and dynamics for a product is also a problem. In a pitch, entrepreneurs should share any examples of companies that have previously tried and succeeded (or failed) to do what they’re doing. Rather than stating that they ‘just’ need to capture X per cent of the market, they should be able to justify their numbers from the bottom up and top down. Have there been other similar companies that grew at the same pace, and how did they do it? If they’re struggling to find examples, the numbers are probably unrealistic.”
Don’t lose sight of the numbers
McCormick’s colleague Eyal Malinger, an investment director at Beringea, added: “Entrepreneurs need to prove that they have a realistic business plan. There’s nothing worse in a pitch than when the entrepreneur hasn’t properly thought out their route to market, and how their product will actually sell. How will they go from selling no units to a million? Is the itch they’re scratching for their customers irritating enough to make these customers pay to have the itch scratched? And even if so, would the profit from these customers be high enough to cover acquisition costs? Do they have an innovative way to bring that cost down? Can they show that their product will keep customers coming back for more? And crucially, how will they protect their product and innovation to keep the competition at bay? Failing to having thought and planned around these crucial next steps is a huge turn-off when being pitched.
“Rather than taking a one-size-fits-all approach to pitching VCs, entrepreneurs need to do their homework on who they’re pitching to before coming in. Showing that you’ve done your research can be invaluable in the initial meeting!”
Don’t forget to spark a conversation
Kerry Baldwin, managing partner and co-founder at IQ Capital, reminded entrepreneurs to keep in mind that a pitch should be a two-way conversation.
“Don’t talk at me, this should be a conversation. Choice of VC is a hugely important decision for founders, it can be as important as your internal team, so let us see how you think, listen and embrace ideas. When it clicks at that point, we will all look forward to the next meet and meeting the wider team.”
Don’t make generalist claims
Max Bautin, managing partner and co-founder, also at IQ Capital, touched on the complexity of interpersonal relationships and the potential impact – whether good or bad – on the business.
“Don’t tell me that you are married to, or in a romantic relationship with, your co-founder. This will have a bearing on the business (impossible to know if it is positive or negative!), so it is a problem.
“Don’t make woolly generalist claims, or if you can’t have much impact on the outcome. This includes telling me that “the exit will be a trade sale or IPO in 3-5 years” (be specific!) or that “I only need this tiny seed investment, and you can expect a unicorn in a few years” (be realistic!). Unfounded ambition doesn’t impress, but causes concern – the ‘how’ is often the key question. I don’t want to think I’m talking to a car salesman trying to convince me to buy, but an intelligent founder with a serious business prospect.
“Be 100% committed, I don’t want to hear how many other businesses you’re running as a serial entrepreneur and the “main” job you’ll be retaining for now.
“Don’t focus on my tax benefits of investing. These are not relevant to many, and in any case we are backing a business, not tax breaks. Additionally this has nothing to do with your achievements and should not be your main selling point. You should have so much to tell me about the credentials of your business and yourself that you barely have time for anything else. We are buying content, not the pretty wrapper (tax or otherwise),” he concluded.
So, there you have it. Some of the advice may seem like common sense, but I can’t tell you how often VCs tell me founders lose sight of the simple stuff when pitching, which is understandable given it’s typically a nerve-wracking experience.
In conclusion, be focused and provide a realistic view of your operating market and business if you want to pique an investor’s interest.