What are your odds of getting funded by a VC?
One VC firm I spoke with quoted receiving around 1,000 pitch decks annually. Out of this:
- 100 founders had the opportunity to pitch their companies in person
- 20 companies were presented to their Investment Committee
- 10 term sheets given, out of which only
- 5-6 startups ended up closing.
This converts to a mere 0.05% success rate!
Here are 5 things to think through before your pitch meetings:
- Be Careful of Micro-lies
I’m sure it’s tempting to sugar coat things here and there, but don’t assume the investor will not notice. When an investor picks up something that does not quite resonate with their truth, they are likely to question what other information presented is questionable, putting you on the backfoot. So don’t shy away from negative conversations, instead preparing well for those discussions shows you have thought about it and that you have a full-handle on the situation.
The key is to talk confidently and honestly, being specific about what you know, what you still have to learn, what the challenges are and most importantly, how you will solve them. It shows your ability to identify potential future challenges and how you plan to overcome them.
Founders often find it surprising to hear that they shouldn’t worry if their company seems a little broken. It turns out that nearly every startup has deep, fundamental issues, even those that will end up being billion dollar companies. Success is not determined by whether you are broken at the beginning, but rather what the founders do about the inevitable problems. Your job as a founder is continuously righting a capsized ship. This is normal, so no point pretending otherwise.
- Be upfront about progress and traction
Some investors have commented that it is not till they get half way through the meeting they realise the product hasn’t been built or the company doesn’t yet have traction. So if you are raising pre-traction, or at MVP stage, it’s important to say upfront what stage you are at, what you have learnt and what you still have to unlock. Also more importantly, ensure you are targeting the right investor for your stage of the business.
- How to talk about your team
The key concern from a VC perspective when it comes to your team is not necessarily whether you have all the key roles already filled (this applies to seed stage), but more about understanding the gaps. They are asking ‘does this person understand the kind of team they need to put together?’ Therefore it’s good to show the type of people you are looking to hire and in which roles and what time-lines.
The other question investors will be asking is your capability to hire well; ‘‘Is this person able to hire the right team?. Are they able to convince top calibre people to leave their job to join them on this journey?’. You will need to show how you plan to attract top talent to your organisation.
- How to talk about the competition
Heard of the well known saying ‘Companies don’t die by homicide, companies die by Suicide’?
There will come a time when competitive dynamics are intensely important to the success or failure of your company, but it is highly unlikely to be true in the first year or two.
Regarding competition, dispel the myth of projecting invincibility. Acknowledge competition, explain why you’re in a competitive space, and detail how you plan to outperform peers.
This doesn’t need to be a lengthy section, but it is always good to have a couple of backup slides that can go into further detail if conversations go that way.
- Who to bring to the meeting?
The co-founding team’s presence is crucial, but be cautious about bringing too many people, as it can hinder the meeting’s flow. The CEO should be the primary representative, with clear reasons for including others.
Should you bring other investors to the meeting? The CEO has to be the voice and face of the company. So you have to have a very clear rationale for bringing an investor along. You want to avoid the risk of confusion about who holds decision-making power.
Navigate your pitch meetings with transparency, balancing strengths and challenges, articulating your vision, and showcasing your capabilities.
Success lies not in a flawless beginning but in effectively addressing inevitable challenges. Let me know if I can help! Good luck!