A must read before making any venture capitalist pitch
Five venture capitalists: Dave McClure, Mark Hsu, Phil Morle, Vincent Lauria, Leslie Loh share what they look for in startup pitches.By Jacky Yap 25 Jul, 2012
A successful business usually requires a good marketer. A good marketer can sell the vision of the company to new partners, to potential customers, as well as to potential investors. However, there might be times when being a good marketer is not enough, especially when you are pitching to raise fundings from venture capitalists. People often talk about venture capitalist as sharks and will capitalize any sign of weaknesses. Luckily, there are certain Do’s and Don’ts when pitching to VCs, and we managed to speak to five reputable venture capitalist who has been at the other side of the table on their thoughts:
Dave McClure, 500 Startups – Avoid the future tense.
Dave McClure is known for running 500 Startups, an accelerator program which spawned quite a large amount of successful companies such as TaskRabbit, Twilio, SendGrid and Udemy. On pitching to VCs, Dave says, “The more you use the future tense, the less interested I am in your startup. In other words, talk about past accomplishments and progress, current customers as well as metrics, less about “what we’re going to do in future”.
Mark Hsu, TMI Ventures – Avoid overusing buzz words.
Mark is the cofounder of Sinanet, the predecessor company to Sina.com, and currently runs a fund/accelerator program based in Taiwan, TMI Ventures. TMI Ventures invests in startups focusing in the education, services and new media or the internet industry. According to Mark, some of the few things that startup founders should avoid is overusing buzz words. “A few years ago I had a person tell me he was “eBay + Amazon + Google”. I still, for the life of me, cannot figure what that is and needless to say, the company went nowhere. I guess I am buzz word out.” Mark also advises founders to use figures and valuations appropriately. When addressing potential market, be more specific rather than throwing random big numbers like this is a X trillion market globally. “In terms of valuation, I absolutely hate it when a team says, we are worth this valuation (some crazy amount) because a similar company in the Valley was funded at some amount. The fact of the matter is that we are in Asia and Asia is just a different market in terms of size, revenue potential & most important, exits.”
Phil Morle, Pollenizer – Understand the mechanics of your business
Phil runs Pollenizer, a cofounder of startup web businesses in Australia. They partner with strong founders and take equity stakes at a concept stage on consumer and SaaS businesses. To Phil, the most important thing for a startup founder is to understand the business inside out. “I invest in a founder primarily because ideas are in constant flux. I look for signs in a pitch that they understand the mechanics of the business. Founders that understand their business really well can articulate it simply and quickly. I like to see a big vision up front followed by what has been learned so far then what will be achieved with this round of investment. Great founders pitch a business from the first moment of an idea because it helps them to understand what the business needs to be as they observe how people react.”
Vincent Lauria, Golden Gate Ventures – Pitch me on your team
Vinnie is the founding partner of Golden Gate Ventures. He moved to Singapore after the successful exit of his company Lefora. Golden Gate Ventures invests in people. According to Vinnie, he says: “We’re interested in helping to build great teams, and ultimately, great products. We love teams that are technical, and have a working history together. We look for people that are open to new directions and want to iterate in the market quickly. For companies outside the valley, please do your homework first: know who your competitors are, know similar services in the valley, and know who you’re pitching to. Keep your pitch short and to the point. If you can’t pitch your service in less than a minute, you lost me. Don’t blindly compare your valuations to a company in the valley that has been started by serial entrepreneurs with multiple successes behind them.”
Vinnie adds on with some Dos and Donts: “A few other items: Don’t ask me to sign an NDA, I’m not going to go steal your idea, and most likely, I’ve heard it pitched many times before. Don’t pitch me as a one man team. If you can’t convince somebody else on your crazy idea (or personality), you’re not going to convince me. And don’t pitch me the next group buying or discounts service, that’s a very very saturated market. Do pitch me on unique Southeast Asian plays, your team’s unique advantage. Do pitch me on mobile payments. Do pitch me on disruption! Do pitch me big ideas.”
Leslie Loh, Red Dot Ventures: Target the right business industry.
Leslie Loh runs Red Dot Ventures, and has three successful exits under his belt. To Leslie, “Unless your idea or product deliver significantly BETTER value propositions than the leading competitor in your space, you will NOT win. Even if you have a great product, you will not get your investment “Exit” if your niche market is not sufficiently profitable and large enough to deliver a scalable business.”
Bottom line, understand your business thoroughly and be honest with the VCs when you pitch to them, because they will become your business partner. Do not overpromise and be undeniably good. As Anthony Volodkin, founder of The Hype Machine puts it: Be undeniably good. No marketing effort or social media buzzword can be a substitute for that.