You have made a great pitch deck for your early-stage startup, with all the necessary details of strategy, product, defensibility, market sizing and more. You meet many potential investors, angels and VCs alike, but somehow everyone nods politely in agreement but remains uncommitted to funding you.
So what was it in the deck that made them disinterested? Maybe it is time to recognise the deck is not the only thing investors look out for.
Being a VC at TRIVE for years now, I have seen numerous pitches across judging competitions, demo days, advisories, classroom settings and direct pitching for funding. Because of these experiences, I am already well-aware of the statistics, how a particular industry works, competitors and unit economics.
In my mind, whether a startup idea or business model works has already been established within the first few minutes. So why am I bothering to ask the founder to continue the pitch regardless?
Pitching is an art, on top of being a science
Pitching your startup is no different than sales. You are convincing people to buy into your startup via investing.
So while you are telling me about your startup, I am not fully listening to the details of the deck, but rather observing the founder’s body language, the tone, the confidence as well as assessing the founder’s traits. Fellow investors shared the same thoughts that they too were also spending a portion of their mindspace assessing the founder, whether consciously or not.
Startup founders need to recognise that pitching is an art. You may have the most perfect pitch deck and the best business case, but if you cannot pitch, you have lost. The delivery of the pitch must accentuate the traits that VCs want to see before they are interested in investing their funds into you.
“You may have the most perfect pitch deck and the best business case, but if you cannot pitch, you have lost.”
But what are the traits that investors want to see in startup founders? Below is a list of some that I feel are important to me.
1. Focused and Committed
Here in Southeast Asia, it is quite commonplace for serial entrepreneurs to own and run multiple businesses. People generally form businesses out of opportunistic intent.
But when it comes to venture investing, VCs want financial returns on the investments they make. Would investors not want the startup founder of that investment to be focused and committed to making the returns?
Case-in-point: TRIVE was keen to invest in a particular startup which had a good business model, along with a vibrant team. But somehow, we sensed that the founder was unable to show a detailed execution plan. When probed further, he sounded unsure of his plans and how he could see growth in this startup.
It turned that the founder had multiple businesses. A further check on social media showed him involved in the activities of the other businesses he ran. It made us concerned as to whether he had the bandwidth to lead the startup we wanted to invest in.
Suffice to say, we dropped this investment. A year on, it is a pity that we found out the startup is progressing very slowly as compared to its competitors.
Founders must recognize when they are pitching, they must portray giving their all to the startup they are building.
I sometimes like to ask this question: “Why are you doing this startup?” The answer will be said from the heart. Entrepreneurs will have their reasons for doing a startup, but the worst answers would be, “I want to stop living a corporate life and start a life of freedom,” or “I think doing a startup is cool so that I get to be my own boss.” So please don’t do that, otherwise you have just lost the game.
To repeat an observation I have made, Asians are generally opportunistic when it comes to making money. In recent months, we can all hear this overplayed phrase which sends eyeballs rolling, “I am doing an ICO.”
To be fair, ICOs are all not the scams and deviousness that news media reports. When a startup founder comes to me and starts pitching to me about an ICO he is raising, I would ask the intent behind it and whether the business model that they have brought up is truly relevant to the use of Blockchain technology.
If he is just doing an ICO without any clear justification and credibility of the business model, it speaks clear he is just for the quick money. He would not be concern if the ICO fails thereafter, and you the investor holding the valueless tokens.
Founders need to show their personal conviction in why they are building this startup. This is important to give confidence that founders are here for the long run. If they share their personal dreams and goals being aligned with the startup ideals, that will increase the confidence to invest.
3. Credibility / Qualifications
It is quite challenging for startup founders with limited experience and understanding of a particular industry to succeed. In every industry, there are many intangible nuances, key connections and knowledge to acquire first.
For example, it would be hard for an investor to believe that startup founders can develop an autonomous electric vehicle if they are not even from engineering backgrounds or have even had the experience of developing any electronic or mechanical items.
When pitching, founders should show the relevant skills and experience in relation to the startup idea.
As a founder, when you have bootstrapped for a period of time now, it becomes a mindblown thing when you successful raised your seed or Series A funding. Suddenly, there is a big chunk of money in your startup’s bank account. Mindset shifts from survival and thrifty savings to spending hard to get the results.
In the course of scaling with speed, the temptation becomes high to relax and spend more, even beyond the point of spending on oneself rather than the business.
You might be saying, “Nah, that won’t happen for me as a founder. You can trust me. I will still be the same person as before and not recklessly spend on myself with this newfound funding.”
One might recall in 2016, a reckless entrepreneur Daniel Ishag of Karhoo that raised a reported US$250m, took fundraised money for his personal use of a reckless lavish lifestyle. Eventually the company shut down, with reports that staff went unpaid for months as there was no money in the company.
While this may be an extreme case, investors are concerned that the moment they put in the money for investment, the funds get depleted for the wrong reasons.
I recalled a case of a startup founder asking TRIVE for US$300K for investment, but the funniest thing was him driving a Mercedes sports car that cost US$200K in Singapore. It was not exactly very convincing that he would be bootstrapping his startup with the new investment.
I like sharing this anecdote of a recent judging that I did. It was a business plan competition. A number of contestants presented really good plans, with proven deep-technology MVPs. Then came Mr A, one contestant, who was a solo founder, who presented an idea which I felt was barely innovative. But he was eloquent in his speech and told his pitch like a story which mesmerised the judges. He showed clarity in his thought, and was able to handle the FAQs with grace and humility.
As the judges debated on who the winner should be, I was voting for other teams because they truly had better products and business plans. But somehow the judges felt this Mr A was the best in selling his idea and I saw smiles of approval, realising the winner was already selected.
Have you ever thought of how important the CEO is the face of the company? You think of Elon Musk, Tan Sri Tony Fernandes, Jack Ma and realize what they say moves investors and stakeholders.
To an investor, the founder is the face of the startup. And when there is charisma or charm in the pitch, the mood changes and the potential investor will be more inclined in listening.
As I end off, I usually give a word of advice to founders. The world is very small and likely investors will be able to get references on your character and past actions. While I was impressed with a particular founder whom I was hoping to invest in, I discovered from my sources that he was not upfront about his past actions in previous startups he worked in.
So ensure that if you want to be funded, be consistent in your character and eschew good traits to draw the right investors to supporting you.
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