Pitching your startup to a venture capitalist (VC) is like putting your dreams for display and asking people to judge it. In other words, it could be devastating! Sandwiched between a rock and a hard place, entrepreneurs struggle to pitch the best stories and raise funds. What could really help here is a little insight from the venture capitalist’s side. This could very well prove to be the leverage they were looking for.
Having worked as the head of VC investments across two ventures, I began raising money for Tribe Theory, confident that my network of investors would buy in to my dream. However, the entire experience proved to be humbling. After speaking to a hundred investors out of which 98 rejected our proposal, I realized how hard it was to be an entrepreneur, despite having one foot in the door. I can only imagine how much more difficult it must be for entrepreneurs who do not have the advantage of a network of investors like I did. The dual advantage of working for venture capitalists and building multiple startups has placed me in a vantage point to observe both sides. This two-part series aims to share the perspectives I discovered through my own experiences with suggestions and tips that are hopefully invaluable to entrepreneurs. And who knows, maybe the trial by fire wouldn’t be so bad after all!
At the end of the day, the relationship between the venture capitalists and entrepreneurs is built on mutual respect.
1. Entrepreneurs hold the bargaining chips
Entrepreneurs are the people who create value with their ideas. They take risks, innovate and make the effort to build stuff. With enough capital to go around in the world, the only thing lacking is new innovative ideas with enterprising people driving them. So, entrepreneurs should pitch with confidence and realize that they have more bargaining power. At the end of the day, the relationship between the venture capitalists and entrepreneurs is a partnership. And one built on mutual respect. So always remember, there is more capital that’s chasing good ideas than there are good ideas.
2. Find the centers of influence and focus your efforts.
An entrepreneur can’t really chase all the VC’s all the time. So, it makes sense to identify the people who are the centers of influence in your category of work. They can then make the right introductions and help you find investors who have a track record of investing in your area of expertise. While it may seem easier to spray your efforts across by sending every investor a pitch deck, it may not be fruitful. But when you strategize and distill your potential investor list to the five or ten key players, you are bound to achieve success.
3. Look beyond the home ground
While home equates to comfort zone, it need not necessarily be the best playground to raise funds. Sometimes, people in your region may be limited by trends, outlooks or biases. And the people elsewhere may be fostering startups in your space. So, it is wise to extend your pitching to VCs outside home. Remember, this may not always work and may raise awkward questions. But at the end of the day, it is better to find an investor genuinely interested in your space rather than wasting efforts in disinterested investors in the neighbourhood.
4. Vision matters
Vision drives execution, strategy and profitability. While most startups spend considerable efforts in creating an minimum viable product (MVP), prototype or business model, they lack a greater vision. If you don’t have a plan for your company beyond the one-year trajectory, then it is time to contemplate on a greater vision for yourself and your company. This is basic storytelling to ensure that people clearly see a beginning, middle and the victorious finale of your idea. And as we all know, stories have always kindled the human imagination since the beginning of time!
5. Don’t pitch to investors. Build a human connection
Most startups are guilty of pitching to investors from the get go. While this may seem like a sensible idea at the outset, this is not good practice. Investors get pitched all the time. So, you need a different approach. When you encounter an investor at a networking event or conference, build a human connection instead of pitching right off the bat. This way, they are keen to get to know you, understand your values and motivations and are primarily “invested in you.” Once you build that relationship, they are more likely to help you out. Opportunities to pitch will automatically and organically emerge. So, remember to make friends!
This was part one of the list of essential tips to mull over before you pitch your dream ideas to potential investors. More food for thought coming next week. Till then, we highly recommend you bring on the vision board and start planning for the future of your business.