For entrepreneurs, raising money for their business is often a long and tedious process. But what if you could somehow sneak to the other side of the table to know what VCs are really looking for when they invest? Well, now you can.
As a serial entrepreneur-turned-investor myself, here are a few of my tips for successfully approaching VCs to raise capital for your business.
BIP Capital VP Cres Ferrell
#1: Tell Me About the Problem and How You’ll Solve It
When I’m looking to invest in a company, I want to know immediately about the problem at hand, how you discovered it and how your solution resolves it. Is the problem a real one? Is the pain high enough that buyers will pay for your solution? If so, how much will they be willing to pay? How is it different from similar solutions? And lastly, will the solution increase a company’s revenue, reduce expenses or both? These are the things I really have to know as a VC before making an investment decision. Your presentation needs to tell me that you’ve done your homework.
#2: Show Me Your Tenacity, Resiliency and Drive
You’re the kind of entrepreneur I want to hear from if you have made it your business to know your industry inside and out. You may have encountered roadblocks but you’ve rolled up your sleeves and remained in the trenches until you found a working solution to a real, significant problem. And while you know that past success is often indicative of future success, that doesn’t mean that you’ve never failed. If you have experienced failure, you extracted every single lesson you could from it to help you create future successes. I’m interested in entrepreneurs who make me believe that they can make a difference in their industry. In fact, I need you to make me so excited about what you’re doing that I absolutely have to be a part of it.
#3: Tell Me About Your Customers
While I want to know about your core team, I also want to know about your customers—the early ones, especially. Are they friends turned customers who would simply just support anything you do? Or are they customers who genuinely believe that you have the solution they’ve been looking for and decided to take a chance on you? Will they refer you to others? This latter type of customer speaks volumes about the viability of your business, and I want to know how your solution has made things better for them.
#4: Be Prepared to Invest Time in Building a Relationship
Entering into a relationship with a VC can in some ways be like a marriage. In other words, can we live, grow and work together during the good times and the bad? And here’s the truth (99 percent of the time, at least): No VC worth his or her salt is going to invest in you right on the spot. Usually, it takes some time to evaluate compatibility, ask the in-depth questions and get clarifications. Stay focused on building the relationship. And don’t forget that VCs are busy just like you are. We hear pitches from a lot of entrepreneurs. If you haven’t heard back after a few days following a meeting, a polite and casual reach-out is fine. This might be in the form of a quick email that says something like, “Hey, I just wanted to touch base since I haven’t heard from you in a while.” Such a message often jogs my memory and can lead to reopened discussions. If I seemed excited at the pitch, remind me what I was excited about in the email. However, if a VC is taking more than one or two weeks to get back to you post-pitch, he or she has either forgotten about you or simply just isn’t interested.
#5: Curate Your Pitch Deck
Be mindful of what you do and don’t add to a pitch deck. Don’t include more than an eighteen-month projection for a startup, for instance. Also, skip the part about the “collective experience” of the team—it’s useless. When you create your presentation, don’t just take a PowerPoint template, add some SmartArt and call it a day. Invest in your deck. Be creative. Show that you’ve given consideration to the personality of your brand and its voice. What you say should engage and stimulate further conversation, not just be a regurgitation of dry data from spreadsheets.
If you’re looking for hundreds of thousands of dollars—or even millions—in an investment, your presentation should be of a caliber that deserves that kind of funds. It should look polished and professional and make the data come to life. You should be enthusiastic about it, but not too salesy. Have confidence but be authentic. Most of all, you should clearly lay out why your solution is going to be successful and how you’re making a special company.
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