Entrepreneurship can feel like an uphill battle. This guide for first-time company founders pitching venture capitalists will make it a little easier. We asked experts — entrepreneurs and investors — to share their most practical and least obvious tips for pitching a VC. For example, have two versions of your deck and communicate how you're different from your direct competitors.
Every small business is different, and not every entrepreneur will want to grow their company by raising capital. But if it's something you're considering, you should go in prepared. Just because you've binge-watched "Shark Tank" doesn't mean you know what it takes to deliver a successful pitch to investors. Persuading a venture capitalist to support your business is both an art and a science — and few first-time founders get it exactly right. Still, you'll want to avoid the most common mistakes and most egregious turnoffs. To that end, we asked experts in entrepreneurship to distill their years of experience into concrete advice. Read more: Top VCs reveal what they want to hear in a startup pitch — and what you should avoid saying David Rose runs Gust, a digital platform for early-stage entrepreneurs and investors, and Rose Tech Ventures, an angel investment fund and incubator. Liz Wessel is the cofounder and CEO of WayUp, a jobs platform for early-career professionals. And Patrick McGinnis is the managing director of the investment and advisory firm Dirigo Advisors. Read on for a series of practical (and nonobvious) tips on pitching a VC. Before you pitch
Determine whether the business is appropriate for investment in the first place If you're bringing in a maximum of $1 million a year in revenue, "it may be a great, wonderful, much-needed business," Rose said. "You may enjoy it and support your family." But he emphasized, "the economics are just such that there is no way that you can get an investment from me at any reasonable number for that to make economic sense." This is because outside investors expect outsize returns on their money, often a large multiple of what they put in. And if there's a low-millions ceiling on the revenue your startup can generate or eventual exit price, there's not much incentive for a venture capitalist to write you a check. In other words, your company may be a "lifestyle startup," which doesn't require venture capital and probably won't ever be worth $1 billion. Raise capital as late as possible, after you've gotten proof of concept An entrepreneur's pitch is a "combination of science and faith," said McGinnis — but you want to stay more on the side of science than faith. McGinnis often sees founders who don't have any proof their idea is viable. You'd be wise to keep your day job and acquire customers and data before you ask a VC for money. Read more: A former Googler who left after 2 years to build her own startup explains how to know it's time to quit your job Remember that the VC wants to invest VCs wouldn't be hearing your pitch if they didn't want to invest in your business, Rose said. They're just hoping you'll give them a compelling argument for why they should partner with you. Have two versions of your deck One version is for your presentation, and the other is the one you send via email, Wessel said. The difference is how much detail you go into in each slide. The version that you're presenting shouldn't be able to be understood without narration, meaning it should have as little text as possible. Otherwise investors may spend all their time focused on trying to read the screen, rather than on listening to your vision. Have a high-quality deck There should be a detail-heavy version, though, which you can use for follow-up discussions. According to McGinnis, "If you can't make a decent-looking pitch deck" (without typos and with correct info), "how can I believe that you can build an app or a product that will be excellent?" Making a solid first impression is important, McGinnis added, because even if the investor doesn't want to invest in this particular company, the investor may be able to introduce you to other people. Or, the person may invest in your company in the future. Never meet the investors you're really targeting first Start with the "B team," McGinnis said, i.e., the VCs who would be nice to have but aren't your first choice. Get feedback from them so you're more than prepared when you meet the VCs you're really targeting. During the pitch
Don't ask for a valuation that's absurdly high Unless you've already founded a company that has sold for millions of dollars, "it's hard to prove that you alone are worth that much," Wessel said. What it does show is that you're neither self-aware nor realistic. Know your numbers Simply put, show that you've done your research, Wessel said. Show that you are the best person in the world to solve this problem Wessel advised demonstrating to the VCs what you've already done to understand your customers or to take a stab at solving the problem. McGinnis recommended flaunting your industry expertise. "Loving something is necessary but not sufficient" for starting a company, he said. Above all, Rose said, remember that you're pitching yourself — not just your business plan. "You bet on the jockey, not the horse." Read more: A former Y Combinator partner realized the most successful founders don't always look good on paper — there's a much more reliable sign they're destined for greatness Know and communicate how you're different from your direct competitors If the VC knows something you don't about the competitors in this space, "you're in real trouble," Rose said. (Also remember that if there are no competitors, that's a bad sign, suggesting that no one else has thought this idea was worth pursuing.) Convey enthusiasm and passion Investors want to know that you'll stick with this business through the ups and downs, Wessel said. Read more: At the start of every semester, a business-school professor asks his students a question, and most everyone gets the answer dead wrong Polish your public speaking skills Ginger Siegel is the North America small business lead at Mastercard and frequent pitch-competition judge. She previously told Business Insider that she looks for "executive presence," or confidence in the way an entrepreneur makes eye contact, answers quickly, and carries themselves — even through the nerves. "How people present is very often indicative of how they lead," Siegel said. If you usually get nervous when presenting, there are a couple ways to conquer your fear. Simon Sinek is a leadership expert with one of the most-watched TEDx talks of all time. He told Entrepreneur that a public speaker should never talk as they walk out on stage. "That communicates a little bit of insecurity and fear," he said. The same concept applies if you're in a board room of investors. Sinek suggests waiting a few seconds and taking a deep breath before you begin. "It shows the audience you're totally confident and in charge of the situation," he said. Mitch Grasso, CEO and founder of the presentation software company Beautiful.AI, previously told Business Insider that giving up on perfection will help you relax before presenting. "Remember that you are an expert on your story and you have prepared for this moment," he said. Read more: The 5 best ways to start a presentation and command a room without looking awkward After the pitch
Write down VCs' questions See if there are any trends, Wessel said, and then figure out how to address those gaps in your pitch. Suggest an action plan in a thank-you note Always follow up with a thank-you note, McGinnis said. "Try to offer new positive information" that you may not have mentioned during the pitch. Wessel recommended reminding the investors of specific topics you enjoyed discussing with them. Just as important, McGinnis added, "propose concrete next steps for them to react to — amorphous communication conveys amorphous management." Reiterate specifically what you're asking for, and ask whether there are other people you should meet who the investors can introduce you to. Create FOMO Once you've gotten an offer from one VC, don't hesitate to let the others know. The idea, McGinnis said, is to communicate urgency: "The train is leaving the station. Are you in or are you out?" Ready to make your first pitch deck? Here's a great template to follow, from an entrepreneur who raised a $6 million seed round from all-star founders behind Dropbox, Yammer, and Yelp.SEE ALSO: The first-time founder's ultimate guide to building a winning pitch deck Join the conversation about this story » NOW WATCH: Tax Day is now July 15 — this is what it's like to do your own taxes for the very first time
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Investors and founders reveal how to know if venture capital is the best way to fund your startup, and what paths to take if it clearly isn't
Summary List Placement Successful entrepreneurship is about knowing the best way to fund your business. Raising...Summary List Placement Successful entrepreneurship is about knowing the best way to fund your business. Raising venture capital isn't always the answer. Venture capitalists say the most important factor to consider is market size: How big could your company get? Ultimately, venture capitalists want a big return on their initial investment. Click here for more BI Prime stories. If you're thinking about raising venture money for your startup, you should start by asking yourself one question: Is this business appropriate for a venture capitalist's investment? Too many founders answer "yes" (if they bother questioning the wisdom of raising venture capital at all). It's part of how high-profile companies like Amazon and Google achieved success, the thinking goes, so it must be advisable for every startup. And yet, in blindly pursuing venture capital, these entrepreneurs are setting themselves up for a series of rejections (or a difficult partnership with an investor down the road). That's because venture capitalists look first and foremost at a company's potential market size. If yours isn't large enough, they won't want to work with you. The economics have to make sense for a VC to invest in your company David Rose, who runs Gust, a digital platform for early-stage entrepreneurs and investors, previously told Business Insider that a venture capitalist's decision comes down to numbers. If, say, you're bringing in a maximum of $1 million a year in revenue, "it may be a great, wonderful, much-needed business," Rose said. "You may be doing the world a favor, or you may enjoy it and support your family. You may be able to make a fortune yourself and take vacations." But, Rose emphasized, the economics of a business that brings in $1 million a year in revenue "are just such that there is no way that you can get an investment from me at any reasonable number for that to make economic sense." Rose's approach to investing is hardly unique: Investors expect outsize returns on their money. Sometimes it's even a large multiple of what they put in. If your startup is generating revenue in the low millions, or if the likely exit price is in the low millions, a venture capitalist has minimal incentive to support you. That's especially true because venture capitalists are well aware that most of the companies they back will fail. In fact, they generally make money only from the sliver of portfolio companies that are wildly successful. Market size is the most important factor in a VC's decision to invest Take it from Scott Kupor, a managing partner at Andreessen Horowitz, the venture-capital turned financial-services firm that invested in Facebook, Airbnb, and Lyft. Kupor previously told Business Insider, "For a venture capitalist who knows that they're going to be wrong a lot of the time, they have to figure out what's the likelihood this company could be in that upper-right tail of returns," the small number of companies with the highest return on investment. Kupor went on: "When we're doing an early-stage investment, what we're trying to imagine is the 'what-if' question. 'What if this company worked? What could it look like? How big could it be? How much revenue could it generate? Ultimately, what could the equity value be?'" Then Kupor considers, based on what he knows about the company, "What do I think the likelihood is of that happening?" Read more: Founders and investors reveal the ultimate guide to scaling a startup — and common pitfalls to avoid For entrepreneurs, that translates to one all-important consideration. In his 2019 book, "Secrets of Sand Hill Road," Kupor said anyone raising venture capital should be able to convince themselves and their potential investors that their business is able to bring in several hundreds of millions of dollars a year in revenue over the next seven to 10 years. That means you could reasonably take your company public at a market capitalization of several billions of dollars, Kupor wrote. Which, in turn, means "the returns to the VC on this investment should be meaningful enough to move the needle on the fund's overall economics." A business doesn't have to be a 'unicorn' to be successful Venture capitalists typically invest in companies they believe can be grown aggressively. That may not align with your financial plans or ideology, especially since such bargains frequently give investors a degree of power over the companies they invest in. Samara CEO Salima Visram previously told Business Insider that she decided her sustainable fashion brand, which makes small batches of clothing and accessories out of environmentally friendly materials like apples, would clash with the expansionist goals of venture capital and be better off bootstrapped. She was prompted by several friends in the startup world who told her horror stories about how they lost control of their companies after investment deals. Read more: How a founder bootstrapped her fashion startup to a profitable $2 million in revenue with bags made of apples and no investors "A lot of it is growth-at-all-costs," Visram said. "For us, we want to be conscious." Visram's smaller brand may not have the vast resources of a venture-backed early-stage startup, but keeping costs down has made Samara profitable "since day one," Visram said. To reiterate what Rose said, if you aren't positioned to become the next Google or Facebook, that doesn't necessarily mean you're not building a successful business. It means your company may be a "lifestyle startup," which doesn't require venture capital and probably won't ever be a "unicorn" worth $1 billion. Read more: The founder of a billion-dollar startup says you need to nail 'message-market fit' if you want to raise millions from investors In the book, Kupor mentions smaller venture capital funds and debt financing from banks as two paths to raising capital without traditional venture-capital money. (You can also bootstrap your business, using personal funds and money from friends and family.) Perhaps the most important takeaway here is to clarify your personal definition of success. You don't have to build a unicorn to get there. Angela Lee, the founder of the venture-capital firm 37Angels and a professor of professional practice at Columbia Business School, previously told Business Insider that a lifestyle startup could easily bring in $10 million a year. And, Lee said, "since when did making $10 million a year become a failure?"SEE ALSO: How to know it's the right time to launch your business, according to a former Amazon VP who just raised $4 million for her skin tone-matching beauty startup SEE ALSO: How a 32-year-old first-time founder raised a $3 million seed round by asking investors about their sex lives Join the conversation about this story » NOW WATCH: Here's what it's like to travel during the coronavirus outbreak
A Mastercard exec gives 6 signals she looks for in a killer business pitch and the questions she asks that often catch entrepreneurs off guard
Summary List Placement Giving a persuasive pitch is an essential part of owning a business —...Summary List Placement Giving a persuasive pitch is an essential part of owning a business — whether you're seeking investors, marketing for new customers, or applying for a loan. The Mastercard executive Ginger Siegel is a frequent speaker and panelist at business events, including pitch competitions. She looks for six major elements in a pitch that indicate to her whether an entrepreneur will successfully grow their business. She says how people present is just as important as what they present. Click here for more BI Prime content. Giving a persuasive pitch is an essential part of owning a business. Whether you're seeking investors, marketing for new customers, or applying for a loan, you'll have to master your technique to hit many major milestones. Pitch competitions can be a great way to hone your skills — and maybe win some funding while you're at it. Winnings typically go from $5,000 to $200,000, depending on the competition. But if the company or investing firm hosting the competition is going to give out that much cash, oftentimes without requiring equity, the judges need to be certain the winning business will see significant growth. Ginger Siegel was one of the judges at Mastercard and Bank of America's Grow Your Biz pitch competition. She's the North America small business lead at Mastercard and a frequent panelist at business competitions and events. She has a few go-to questions for entrepreneurs, and their answers signify to her whether they are truly ready to grow their businesses. Siegel told Business Insider that an entrepreneur needs to show they've thought through everything from beginning to end. "Something that starts as just a good idea is never enough," she said. Here are the five major questions Siegel asks entrepreneurs and her tips for how you can impress judges and investors. Revenue: Do you know your business? Pitch-competition judges are going ask about your numbers, so be prepared to give your annual revenue, how much capital you started with, the return on investment on any capital put into the business so far, the cost of operations, and customer-acquisition costs — just to name a few points. "A lot of new business owners really don't focus on the financial pieces," Siegel said. She added that it didn't matter which type of business you own, whether you're baking cookies or consulting, you have to know your financials for a panel to believe you'll put the money to good use. Even a hesitation or uncertain ballpark answer can be a red flag that you don't know your business as well as you should. Risk assessment: What could go wrong? Deidre Mathis won the Grow Your Biz grand prize, making it her 12th pitch-competition victory in two years. She owns and operates Wanderstay, a hostel in Houston that offers shared dorms and private rooms for $35 to $60 per night. After Mathis' pitch, Siegel asked her how she manages the security risk of guests coming in and out of her hostel. Mathis promptly explained the security system she installed, which gives each guest a unique PIN to enter the front gate and building. Siegel said business owners have to do a risk assessment and think about all threats. "One bad issue can take a company down," she said. Oftentimes, this means a business has insurance coverage and implements safety protocol. For a food or health company, panelists would want to ensure the business has met all necessary certifications and compliance. "Hope is not a strategy. You want to be ready and have a plan," Siegel said. Scalability: What's next? Successful business owners know that a business concept is only as good as its execution. Neither panelists nor investors will consider a business if it doesn't show promising scalability. For example, if a snack company lands its first grocery-store placement, the owner needs to ensure they can keep up with a rapid increase in orders. "So it's great to have an idea, but then how are you going to scale it to the point where it's a real business?" Siegel said. This requires thinking ahead to the best-case scenarios. "I think it's really important that they think through, 'What if I'm not successful, but what if I am?'" she said. Consistency: Can you maintain your brand? As a business scales, the owner risks losing the brand they worked so hard to build. Scaling can mean hiring more employees, opening more locations, or taking on more inventory, which results in having more to manage and keep consistent. "What do you do if you're not the person doing it anymore?" Siegel said. She uses McDonald's as an example of a company that has maintained a consistent brand, despite having thousands of locations across the globe. "You could be in China and order a McDonald's hamburger, and it's going to taste the same as a McDonald's in New York," she said. Losing your brand could then jeopardize your customer base. "No matter what it is, people want to know that their experience is going to be good and consistent," Siegel said. Sustainability: Will it last? Siegel also considers a business owner's plan and vision for the money they're vying for. To her, it's important they not only use the money but also are able to continue raising money in the future. "Many businesses go out of business in the first couple years because they don't have a sustainable ability to raise money and raise capital," Siegel said. She looks for entrepreneurs who believe in themselves and can stand out to venture capitalists. Leadership: Do you have an 'executive presence'? Presentation can make up just as much of a pitch as knowledge. Judges will pay attention to your gestures and demeanor. "It's only maybe 50% what you say and 50% how you say it," Siegel said. She looks for "executive presence," or confidence in the way an entrepreneur makes eye contact, answers quickly, and carries themselves — even through the nerves. "It's how you exude on the outside," she said. A business pitch is often the first, if not only, impression an entrepreneur gets to show their leadership capability. "How people present is very often indicative of how they lead," Siegel said. And that confidence she looks for can make or break more than a pitch. "True leaders don't tell people to follow. True leaders make people want to follow them," Siegel said.SEE ALSO: A 33-year-old entrepreneur has won a dozen pitch competitions in 2 years and raked in $75,000 along the way. Here's how she uses stats to craft a winning pitch. DON'T MISS: Successful founders match their funding to their revenue. Here are 12 options to consider, from early days to venture. Join the conversation about this story » NOW WATCH: How dummy pedestrians help test car safety systems
See the pitch deck this first-time CEO used to raise Series A funding remotely during the pandemic just 60 days after she joined the company
Jen Grant joined no-code software startup Turbo Systems in February as a first-time CEO, and on...Jen Grant joined no-code software startup Turbo Systems in February as a first-time CEO, and on Thursday the company announced $3.45 million in Series A extension funding. The former CMO at Looker rushed to put together a pitch deck once she realized there was an opportunity to raise extension funding from existing investor Mayfield and possibly other interested VCs. Grant said that the remote fundraising process was probably faster than it would have been if she'd had to meet with new and existing investors in person, because of the travel and logistics it would have involved to get everyone in the same room. Grant worked closely with founder and CTO Hari Subramanian to create the deck so that it remained consistent with what he had shared in the past but also included updates based on Grant's vision for the business. See the full deck below. Click here for more BI Prime stories. Jen Grant had already prepared a 60-day plan when she joined no-code software startup Turbo Systems as CEO. She was a first-time chief executive, and she wanted to make an impact early on at the 3-year-old company once she officially joined in February. Then the pandemic hit. Instead of prioritizing growth and doubling down on enterprise sales, Grant was meeting her team through Zoom and calculating just how long the startup could last on its available funding if the company operated conservatively. Luckily, she told Business Insider, Turbo Systems was in a stable financial position before she joined, and she had the luxury of at least two years' worth of runway. But after her first board meeting 30 days into her new job, an existing investor advised her to scrap the newest set of conservative plans, and prioritize growth. That could involve raising more money during a pandemic. "I asked [Mayfield partner Rajeev Batra] to slow down," Grant told Business Insider. "I had only been here for 30 days, so let's slow down. I waited another 30 days, and then I said we should pitch the Mayfield team as, okay, let's talk about it." It worked. On Thursday, Turbo Systems announced it had raised $3.45 million in Series A extension funding led by Mayfield. The startup had previously raised $8 million in Series A funding, also from Mayfield, back in 2018. Turbo Systems offers no-code software that, it says, enables any staffer to custom-design a mobile app and deploy it quickly. As its pitch deck outlines, the company is focusing first on helping its customers to organize field services visits for equipment such as medical devices. The company says the apps can be tailored to manage work orders and keep track of details like signatures, and confirmations that workers are using the appropriate protective equipment, or PPE. Grant said her revised 60-day plan included completely revamping the team's pitch deck, which had been created by founder and CTO Hari Subramanian. She didn't want to erase his vision, she told Business Insider, but she also felt that the new deck would be a stake in the ground by which existing and potential investors could evaluate her as the new CEO. "When you have a founder and then bring in a new CEO, I have to embrace the big message that Hari has been pitching but I also have to make up my own while deeply understanding what the vision is and owning that," Grant said. She said the team, along with Batra as an advisor, was able to work out a business story that felt natural and cohesive, while still remaining aggressive about growth. But running slides and practicing the pitch remotely had its own challenges, Grant said. Timing and picking who spoke when was tricky, as was incorporating revisions from multiple parties. Ultimately, she says she was happy with the remote pitching process, though it might not work well for every company to bypass in-person meetings. Grant says she recognized that Turbo Systems' successful raise was largely a function of the relationships she and Subramanian built prior to the pandemic. "I think it actually goes a little faster when everything's remote because getting everyone in person is more difficult, but with remote it's just, do you have time on your calendar and let's schedule something," Grant said. "I imagine the advantage that I had when pitching these folks was that I had some sort of relationship with or Hari had a relationship with or Rajeev from Mayfield had a relationship." See Turbo Systems' Series A pitch deck that combined the founder's and the new CEO's company visions and brought investors on board remotely.SEE ALSO: These 25 investors are hunting for the next big fintech unicorn. Here's what founders should know before pitching them.